Andhra Pradesh was in for a rude shock when the Centre cut down by half the quantum of loan that the state wanted to secure from the World Bank for the construction of its new capital Amaravati.
After initially giving in principle approval for $1 billion loan in March, the Department of Economic Affairs (DEA) under the Union Ministry of Finance has now reduced the loan amount to $500 million only.
"The DEA had given in principle approval for $1 billion loan but subsequently realised that rules did not permit the quantum in a single tranche. Accordingly, the loan proposal was cut down by half," a top official overseeing the issue said.
A World Bank official confirmed that they have received a request from the Government of India for a $500 million loan for the first phase development of Amaravati.
The World Bank is yet to approve the loan as it is "currently working with the AP government and the Capital Region Development Authority (CRDA) to prepare the project," the official said.
Though there was no specific comment from the World Bank on this, there is a talk that it has kept the loan proposal on hold, if not rejected, as the capital construction is faced with litigation before the National Green Tribunal (NGT).
The World Bank team, led by its head Raghu Kesavan, visited the Amaravati region a couple of times in the past few months to assess the project. It is due for another visit here shortly.
CRDA officials fear the World Bank might not clear the loan proposal till the NGT gave the green signal for the capital construction.
"We have explained our position on various environmental issues related to the project. They have also conducted field visits and we are negotiating with them for early sanction of loan," a CRDA official said.
If the loan is delayed or rejected, it could jeopardise AP’s plan to develop the first phase of a "world-class" capital by 2018-19.