Hyderabad: The Andhra Pradesh government allocated Rs 6,000 crore for the Amaravati Capital City Project and another Rs 6,705 crore for the under-construction Polavaram multi-purpose irrigation project on the Godavari river—the two ‘A and P’ projects that Chief Minister Chandrababu Naidu has said define his vision for AP.
On Friday, Andhra Pradesh Finance Minister FM Payyavula Keshav presented the state Budget for 2025-2026 in the assembly, with an expenditure outlay of Rs 3,22,359 crore.
“With the support of PM Narendra Modi garu, we have put the Polavaram Irrigation Project and Amaravati Capital City Project back on track,” said Keshav in his speech.
The Naidu government is ready to restart the Amaravati project “on a grand scale”, he said.
In 2019, soon after assuming power, former CM Jagan Mohan Reddy had shelved the project, bringing all the construction activity to a grinding halt. The government said, at the time, that the state would have three capitals—Amaravati, Visakhapatnam and Kurnool as its legislative, executive, and judicial headquarters, respectively.
The FM said their aim is to transform Amaravati, with support from the Centre, into an economic powerhouse with world-class infrastructure, investments and employment opportunities, like Hyderabad and Mumbai.
“I have to remind this House that the previous government said that the three capitals decision was because the government could not fund Amaravati. However, our government, without providing directly from state resources, is restarting the capital city project.”
He said the financing was secured from the Centre through World Bank, Asian Development Bank and Housing and Urban Development Corporation (HUDCO). The Centre, in the 2024-2025 Union Budget, announced Rs 15,000 crore for Amaravati through multilateral development agencies, with additional amounts in future years.
Keshav said the Polavaram project will transform the lives of AP citizens and has inter-generational benefits. It will also change the fortunes of the Rayalaseema and North Coastal districts.
“It has the power to shape the future, protect agriculture and make Andhra Pradesh a water-secure and drought-free state. Our government has secured Rs.12,157 crore from the central government to support the first phase of the project,” he said, adding that the project has progressed 73 percent so far and is scheduled to be completed by 2027.
In June last year, soon after the National Democratic Alliance swept the polls, Naidu visited the stalled construction sites of the projects and said he was giving a new definition to the state’s initials—A for Amaravati and P for Polavaram. “Had the projects continued during YSRCP regime they would have by now become state’s pride and growth engines.”
Also Read: In limbo since 2019, AP’s Polavaram dam project back in motion after Centre’s Rs 2,300 crore advance
Other budget allocations
To overcome the resource constraints, the FM said they have planned to take up large capital expenditure projects. He announced an innovative Viability Gap Funding Scheme for Public Private Partnership (PPP) projects for up to 20 percent of the project cost to any department, beyond the existing budgetary allocation. A corpus of Rs 2,000 crore was proposed for the VGF scheme.
The budget allocated Rs 4,220 crore to road development and Rs 605 crore to ports at Machilipatnam, Bhavanapadu, Krishnapatnam, and Ramayapatnam and airports in Bhogapuram and Vijayawada, among others.
The Visakhapatnam-Chennai, Chennai-Bengaluru, and Hyderabad-Bengaluru industrial corridors got Rs 837 crore.
While Rs 1,400 crore was allocated to industries, Micro, Small, and Medium Enterprises (MSMEs) and food processing units, Rs 300 crore was earmarked for incentives to Information Technology and electronics industries and organisations.
The finance minister said that the total 2025-2026 revenue expenditure was estimated to be Rs 2,51,162 crore, and capital expenditure was estimated to be Rs 40,635 crore.
The estimated revenue deficit is around Rs 33,185 crore—1.82 percent of the Gross State Domestic Product (GSDP)—and the fiscal deficit is around Rs 79,926 crore (4.38 percent of GSDP).
Revised estimates for 2024-2025—when the Telugu Desam Party and its NDA allies took charge of the state—show that the revenue deficit was at 3.01 percent and the fiscal deficit at 4.57 percent of GSDP.
Drawing comparisons with previous government
Drawing comparison with the last financial year (2023-2024) under previous YSRCP government, Keshav said the “finance accounts finalised by the Accountant General of Andhra Pradesh show a revenue deficit of Rs 38,682 crore, and a fiscal deficit of Rs 62,719 crore, which was 2.72 percent and 4.41 percent of the GSDP respectively.”
In July last year, nearly two months after coming to power, the Chandrababu Naidu government took the vote-on-account budget route for the state’s expenditure for the next four months, prompting the opposition YSR Congress Party (YSRCP) to accuse the ruling TDP of hoodwinking the public with its tall election promises.
However, the 2024-2025 AP budget was later presented in November by Keshav, set at Rs 2.94 lakh crore, focused on reviving the state’s finances.
On Friday, Keshav, a TDP veteran, began his second budget speech by accusing Jagan’s government on “the financial mismanagement” during its five years in power.
“We are presenting this budget against the backdrop of the financial destruction caused by the previous regime. This is a highly complex task, because the previous regime created financial chaos in every department.”
He added, “As a result, a great deal of effort was required to understand the scale of mismanagement of finances and set things right.”
Keshav said that the NITI Aayog, in a report, said that Andhra Pradesh’s debt sustainability had reached zero. “This means that ours was the only state which was no longer in a position to take on any more loans.”
Claiming that the NDA government is correcting the blunders of the previous government, “which only knew to borrow but not repay”, Keshav said that they have cleared liabilities of Rs 23,556 crore that had been pending as of 12 June 2024, when Naidu took charge.
The FM said that 93 Centre-sponsored schemes were stopped by the previous government.
After the Naidu government took charge, 74 schemes, including NREGS, AMRUT, Jal Jeevan Mission, and Samagra Siksha, were restarted by clearing liabilities of Rs 9,371 crore. This has triggered further releases from the Centre.
Bills of Rs 12,735 crore relating to irrigation, roads, and other works have been cleared to revive economic activity, he said. The Centre also released Rs 2,793 crore in Finance Commission grants to strengthen the panchayats and municipalities.
Keshav also claimed that AP’s economic growth was back on track. “As per the First Advance Estimates for 2024-25, GSDP has grown at a rate of 12.94 percent. All key sectors have registered a strong performance—agriculture and allied activities have grown at 15.86 percent, industries at 6.71 percent, and services at 11.70 percent.”
(Edited by Sanya Mathur)
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