World Bank pulls out of Amaravati construction project

The Bank, which was to lend $300 million to the project has said it will no longer be involved, given the project’s non-compliance of its policies

By Jitendra
Published: Thursday 18 July 2019
Unfinished buildings in Amaravati. Photo:
Unfinished buildings in Amaravati. Photo: Unfinished buildings in Amaravati. Photo:

The World Bank, among the biggest lenders financing the construction of Amaravati, the proposed new capital of Andhra Pradesh, has pulled out, citing non-compliance of its policies, especially those related to settlements with affected parties.

On July 18, 2019, the website of the World Bank showed the status of the Amaravati Sustainable Infrastructure and Institutional Development Project as ‘dropped’.

The total cost of the project is estimated at $715 million or Rs 4,922 crore, out of which, the World Bank had committed to lend $300 million or Rs 2,066 crore.

“The decision was taken on July 17, which came as a relief for petitioners who have been challenging the decision to construct the new capital,” says Tani Alex, researcher at the Centre for Financial Accountability, a New Delhi-based organisation which advocates financial accountability within India.

In the beginning

After the bifurcation of the erstwhile united Andhra Pradesh in June 2014, both the new states of Telangana and the rump Andhra Pradesh decided to share Hyderabad as their joint capital for 10 years. This was till the time Amaravati came up.

In September 2014, N Chandrababu Naidu, the former chief minister of the newly-formed rump Andhra Pradesh, announced that Amaravati was 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 Amaravati Capital City Project intended to build a planned, modern city on the floodplains of the Krishna river.

From the start, the project ran into rough weather.

Environmental experts, civil society organisations and grassroots movements expressed their anguish over the grave violations of social and environmental laws, financial unviability, massive land-grabbing of fertile land in the garb of voluntary land-pooling, open threats to the complainants by none other than Naidu, along with concerns of losing fertile farmlands and livelihoods.

An affected land owners’ group, Capital Region Farmers Federation, filed a complaint with the World Bank’s Inspection Panel on May 25, 2017. The group requested them to inspect the alleged violations which were against the policy of the World Bank.

They alleged harm from a land pooling scheme (LPS) being used to assemble the land required for the city, as well as from other project activities. The complaint was registered on June 12, 2017.

A Panel team visited India on September 12-15, 2017, and met with the complainants and other potentially-affected community members, farmers who supported the LPS and their representatives.

They also met with representatives of the World Bank Country Office, officials from the state government’s Ministry of Finance and from the Andhra Pradesh Capital Region Development Authority, the agency responsible for developing the city, as well as civil society representatives.

On September 27, 2017, the panel submitted its Report and Recommendation to the World Bank Board of Executive Directors. It recommended a thorough investigation into alleged issues of harm and related potential non-compliance with the Bank’s policies, especially relating to involuntary resettlement.

Decision hailed

The Working Group on International Financial Institutions (WGonIFI), a collective of financial experts and civil societies and the communities affected by the Amaravati Capital City Project, welcomed the decision.

WGonIFI has demanded the immediate scrapping of the unconstitutional Land Pooling Act, which violates the centrally-passed The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

It also demanded a judicial inquiry against violations during land pooling and proper compensations of affected parties, especially Dalits.   

Other civil society activists also hailed the decision.

“We are happy that the World Bank took cognisance of the gross violations involved in the Amaravati Capital City project, threatening the livelihood of people and fragile environment. After Narmada and Tata Mundra, this is the third major victory against the World Bank Group,” Medha Patkar, senior activist of Narmada Bachao Andolan and National Alliance of People's Movements, told Down To Earth.

She added: “We are happy that the Inspection Panel, which was created due to the struggle of Narmada Bachao Andolan, played a critical role here. While we celebrate this victory of the people who stood up to the intimidation and terror of the state, we warn the government and financial institutions not to push their agenda without the consent of the people.”

Even as the World Bank has pulled out, confusion remains over the co-donor, the AIIB.

Since December 2015, AIIB has projected itself as a ‘Post-Paris Bank’, signalling its commitment to tackle climate emergency.

While the Amaravati project is still listed under consideration in AIIB’s official documents, since AIIB had stated it would be adhering to the World Bank’s policies, its status is now unclear.

“For a change, good sense has prevailed upon the World Bank to withdraw from the disastrous programme. This also vindicates our stance that despite its rhetoric of being a Post-Paris Bank, the AIIB can no longer hide behind the World Bank, which it has been doing as a co-financier,” said Sreedhar R, chair, International Committee, NGO Forum on ADB and director, Environics Trust.

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