The World Bank has dropped the loan for the Amaravati Sustainable Capital City 'Development Project.

Highlights Proposed loan dropped after Centre reportedly withdrew the application

New YSR Congress government, however, does not see this as a setback

They say they have the option of applying afresh for a loan

A proposed loan worth $300 million or about Rs 2,000 crore for Andhra Pradesh's new capital Amaravati has been dropped by the World Bank after the central government reportedly withdrew the application.

World Bank spokesperson Sudip Mozumder told NDTV that the World Bank's Board of Executive Directors has been informed that the proposed project is no longer under preparation following the government's decision.

"The project was only being prepared, it was in the initial stage," he said, but refused to comment on why the government had taken the decision to withdraw its application. "That is for the government to say."

The World Bank had reportedly sought permission from the centre to conduct an independent investigation into complaints of irregularities like forced land acquisition. But the government reportedly did not want to allow that and instead withdrew its application.

Building the new capital at Amaravati for Andhra Pradesh, following the bifurcation of Telangana, was a dream project of then chief minister Chandrababu Naidu. The project was expected to cost more than Rs 1 lakh crore.

The new YSR Congress government however does not see this as a setback as they say they have the option of applying afresh for a loan. Rajya Sabha member and the government's special representative in Delhi, Vijaysai Reddy told NDTV that any sovereign country would not want a probe by a foreign agency.

"If we deem it necessary, we ourselves will order a probe by an appropriate authority, as we also believe there were largescale irregularities. But we don't want an international agency to do it," Mr Reddy said.

Jaganmohan Reddy's YSR Congress has been alleging irregularities and corruption even while they were in the opposition. After taking over as the new chief minister last month, Mr Reddy ordered a cabinet sub-committee to conduct a probe and submit its report in 45 days.

Civil society groups like the National Alliance of People's Movements (NAPM) and the Working Group on International Financial Institutions say there have been many violations and they have welcomed the withdrawal of the loan proposal

World Bank-appointed teams had studied the environment impact report submitted by Andhra Pradesh Capital Region Development Authority (APCRDA) and had submitted its own report to the lending agency.

After the bifurcation of the erstwhile state of Andhra Pradesh in June 2014, both the new states of Telangana and Andhra Pradesh decided to share Hyderabad as capital for 10 years. In September 2014, N Chandrababu Naidu, the former Chief Minister of Andhra Pradesh announced Amaravati as the proposed capital city, to be developed over many years. The World Bank and Asian Infrastructure Investment Bank (AIIB) were under consideration to finance the $715 million project.

The project was criticised for building the city on the floodplains of river Krishna, diverting fertile farmlands and forests, displacing around 20,000 families, forcefully acquiring lands, and favouring certain contractors.

A complaint with the inspection panel of the World Bank was filed by the affected communities in 2017 to investigate the project for violation of its safeguard policies.