It’s taken a Swiss challenge to get Andhra Pradesh’s warring Opposition to unite on one issue. The Jaganmohan Reddy-led YSR Congress, the Congress and Left parties have joined hands to protest against a method chosen by the state government to award contracts to develop Amaravati, Andhra Pradesh’s ambitious new capital city.
The Swiss challenge is a bidding process whereby an interested private player first hands in an unsolicited bid for a public project. This bid is then made public and more players are invited to better the original bid. In many cases, the firm that made the original bid, outdoes its initial bid and ends up bagging the contract.
The Opposition has objected to the use of the Swiss challenge method, saying that the Capital Region Development Authority – the regulatory and planning authority for the new capital region – chose this model despite objections raised by the state’s administrators.
A brand new capital
When Telangana was carved out of united Andhra Pradesh in 2014, the capital Hyderabad went with the new state. However, according to the terms of the Andhra Pradesh Reorganisation Act, Hyderabad would be the shared capital of the two states till 2024.
Andhra Pradesh Chief Minister Chandrababu Naidu then decided that the state would build a new capital almost from scratch, and Amaravati, a village nestled between Vijayawada and Guntur, was chosen as the new city’s location.
In December 2014, the governments of Singapore and Andhra Pradesh signed an agreement to collaborate on the planning and development of this new city, and the master plan, prepared by Singapore-based consultants, was released the following March. And Prime Minister Narendra Modi laid the city’s foundation stone on October 22.
According to the plan, the capital region will be spread over 7,420 sq km of which the capital city would occupy 217 sq km. The plan envisages an area of 6.84 sq km or 1,691 acres to be the first to be developed. This core area will contain within it the Assembly, Secretariat, Raj Bhavan and High Court buildings.
A consortium comprising Ascendas-Singbridge and Sembcorp Development, both based in Singapore and wholly owned by that country’s government, submitted a proposal to be the master developer of the city last October and were nominated by the Andhra Pradesh government as the master developer to construct the main structures in the Seed Capital area.
The state Cabinet approved the proposal in June after a committee headed by Finance Minister Yanamala Ramakrishnudu scrutinised it. And on July 18, as per the provisions of the Swiss challenge, the Naidu government announced e-bids for competing counter proposals from other interested parties for the first phase of development of the new city. The e-bids of the other interested companies will be opened on September 15.
Opposition speaks up
At a media interaction the Andhra Pradesh Congress Committee chief N Raghuveera Reddy said that the Swiss challenge model was being followed to ensure that the Singapore consortium won the bid.
He said: “The TDP and Chandrababu Naidu want to give the works to the (Singapore) consortium companies and the Swiss Challenge proposal is just a substitute for the nomination procedure followed earlier in a unilateral fashion.”
In its proposal, the consortium has offered a 42% stake to the Amaravati Development Company, a special purpose vehicle floated by the state government for the capital city project. The consortium and the Amaravati Development Company will jointly form the Amaravati Development Partner, which will develop the first 1,691 acres in three phases.
Speaking after the Cabinet meeting in which the consortium’s proposal was cleared, Naidu said: “We will give 50 acres at a nominal price. The Singapore consortium offered Rs 4 crore per acre for 200 acres to be developed in the first phase.”
As per the state government’s plan, 40% of the core of the proposed capital city (1,691 acres) will be developed using the Swiss Challenge process. The development of the remaining 60% of the capital’s core area that includes public utilities like hospitals, educational institutions, shopping malls, entertainment areas, cinema halls and residential quarters, will be done through regular government tenders.
The Kelkar report
Opposition leaders draw their strength from the Kelkar Panel report endorsed by the Supreme Court, which recommended that the Swiss Challenge process should be discouraged.
In his December 2015 report on Revisiting and Revitalising the PPP model of infrastructure development, former finance secretary Vijay Kelkar said: “Unsolicited Proposals (‘Swiss Challenge’) may be actively discouraged as they bring information asymmetries into the procurement process and result in lack of transparency and fair and equal treatment of potential bidders in the procurement process.”
Opposition leader YS Jaganmohan Reddy said that the Swiss challenge model was a ruse to ensure that the Singapore consortium would become the principal builder of the new city. “This is the worst deal for the people of Amaravati where private builders go away with loot and people (government) are left with huge debts,” said Reddy.
Andhra Pradesh Congress chief Raghuveera Reddy accused Naidu of bringing in a “Singapore culture of casinos and discos” through infrastructure operated by foreigners.
He said: “Besides a 58% stake in the CRDA [Capital Region Development Authority] and outright grant of over 200 acres, the consortium also got a huge parcel of land in the capital area on a 99-year lease for its commercial exploitation – hotels, spa, entertainment area, public utilities like shopping malls and business centres.”
Other Opposition parties took shots at the state government’s plan to allow the usual tendering process to develop the remaining 60% of the core area of the city. “Clearly the mischief of benefiting the ruling party real estate operators is visible in this deal,” said a Communist Party of India (Marxist) leader.
However, a state administrative services officer said that using the Swiss Challenge process would enhance the image of Andhra Pradesh. “It will be the best window to showcase transparency,” said the official, who did not wish to be identified.
Chief Minister Naidu isn’t pleased with the opposition to his plans. He said that the state chose the Swiss challenge model to meet the challenges of finance, technology and transparency, and that it would bring multi-fold development in Amaravati by 2024. “There is no free lunch anywhere,” said a visibly annoyed Naidu while speaking to reporters last week. “All the mud throwing by YSRC and others can only delay the capital building but not stall it.”