HYDERABAD, LIKE BANGALORE, EXPANDS JURISDICTION TO MANAGE

UNCLAS SECTION 01 OF 02 CHENNAI 000411

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E.O. 12958: N/A
TAGS: ECON EINT EINV PGOV IN

SUBJECT: HYDERABAD, LIKE BANGALORE, EXPANDS JURISDICTION TO MANAGE
GROWTH

REF: CHENNAI 0288


1. (U) SUMMARY: Andhra Pradesh recently announced a plan to expand
the limits of the state's capital Hyderabad with eye towards
improving management of the city's rapid development. The primary
purpose of the project, known as Greater Hyderabad, is to mitigate
uneven infrastructure development by equally distributing funds for
infrastructure projects. The undertaking will rely on additional
funding from the India's central government, as well as loans from
international institutions. Prospects for the project are
substantially better than those of Greater Bangalore (reftel),as
the Congress party, the major partner in the ruling UPA coalition in
New Delhi, also is firmly in place in Andhra Pradesh. END SUMMARY.


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EXPANSION AIMED AT IMPROVING INFRASTRUCTURE
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2. (U) In April 2007, the Government of Andhra Pradesh announced the
creation of the Greater Hyderabad Municipal Corporation, merging
together twelve existing municipalities. The new municipal
corporation's population is 6.5 million, an increase of almost two
million. It expands the city's boundaries from 172 to 625 square
kilometers, making it India's second largest city in terms of area,
behind only New Delhi. Mr. C.V.S.K. Sarma, the Special Officer for
the Greater Hyderabad Project, told post that Andhra Pradesh formed
Greater Hyderabad to better develop the city's roads, water supply,
sewer system, and transportation systems. The infrastructure
projects will require $10 billion in investment.


3. (U) A study by the Hyderabad-based Administrative Staff College
of India (ASCI) said the lack of coordination between the Municipal
Corporation of Hyderabad and the surrounding municipalities has
resulted in uneven development and expansion of slums. The
surrounding municipalities, though part of the Hyderabad
metropolitan area, lack adequate infrastructure. "This problem will
be rectified once Greater Hyderabad becomes a reality because funds
will be equally distributed to all areas," said the director of
ASCI's Department of Urban Infrastructure.

4. (U) Andhra Pradesh expects that the estimated $10 billion cost of
the project will be met partly by support from the central
government and partly through loans from international institutions.
Sarma, responsible for Greater Hyderabad, said there will be no tax
increases to fund the project. "We would rather focus on improving
tax collection such as by offering incentives for timely payment of
taxes," he said. The ambitious list of on-going development
activities includes a metro rail project, the 162-kilometer Outer
Ring Road, an underground sewerage system, an elevated express
highway, a special development package for the Old City. Sarma said
"The state government will opt for commercial borrowings, and partly
provide sub-sovereign guarantee for loans from international
agencies."

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POLITICS, AS ALWAYS, PLAY A ROLE
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5. (SBU) The project is controversial because formation of Greater
Hyderabad changes the state's internal political dynamic. Hyderabad
is part of Andhra Pradesh's otherwise economically backward
Telangana region, which is home to a separatist movement calling for
statehood for the region. Political analysts say that Chief
Minister YSR Reddy has shrewdly advanced the Greater Hyderabad
project to sever the city, the principal source of Andhra Pradesh's
economic growth, from the Telangana region and Telangana supporters'
calls for its separation from Andhra Pradesh. At the same time, the
Majlis-e-Ittehaddul-Muslimeen party, which derives its strength from
its dominant numbers inside the old Municipal Corporation of
Hyderabad, opposes the project as its numbers are diluted in Greater
Hyderabad.

6. (U) Greater Hyderabad also reflects an element of interstate
rivalry between Andhra Pradesh and neighboring Karnataka. Andhra
Pradesh announced the Greater Hyderabad project only weeks after
Karnataka had announced a similar plan for Bangalore. Central
government support, in terms of loans, clearances, and sovereign
guarantees, will be critical to both projects.

7. (SBU) COMMENT: Andhra Pradesh, governed by the Congress party,
which is the major partner in the ruling UPA coalition in New Delhi,
enjoys a significant advantage in relations with India's central
government over Karnataka's Janata-Dal(S)/BJP coalition government.
In a competition for resources between the two, Andhra Pradesh and
Greater Hyderabad have a strong chance of winning out. Many locals

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are skeptical of the plan, however. Some for political reasons:
Telangana separatism and Muslim bloc voting; others for practical
reasons: governing a larger city is all the more difficult. But if
consolidation improves coordination and results in a more rational
distribution of infrastructure development funds, Hyderabad will be
a better place to live and an even more inviting place to do
business.
HOPPER