Finance Minister Buggana Rajendernath said the project involved huge investment which was not matching the proposed development.
The minister and the Singapore Consortium and the state government mutually agreed to call it off.
Claiming that the decision was taken in the best interest of the state, he said there was no meaning of developing 1,700 acres as business district without developing the entire capital city of Amaravati over one lakh acres.
Stating that startup Project could never have been completed in five years, the ministers said it would have taken decades, and that neither the time nor the finances were permitting this.
He said the new government realized that the state has other priorities such as infrastructure development, health, industries, employment to youth and the holistic development of all 13 districts.
"During the deliberations, it was realized that it requires about Rs 2 lakh crore of money to develop that one lakh acres which is the size of state's annual budget. Unless that amount is spent and the whole area is developed, there is no meaning of having a business district in it," he said.
He pointed out that Start-up Area Project was proposed to be developed by a company called Amaravati Development Partners Limited, comprising Singapore companies Ascendas Singbridge and Sembcorp Development Ltd and Amaravati Development Corporation belonging to Andhra Pradesh government.
"The huge city along with the area around it which comprises the Capital Region Development Authority (CRDA), is about 217 sq.km, which is roughly about twice the size of Mumbai, including Navi Mumbai and suburbs."
The agreement with the Singapore Consortium was signed in 2017 when Telugu Desam Party (TDP) headed by N. Chandrababu Naidu was in power. Amaravati was the brainchild of Naidu, who lost power to YSR Congress Party (YSRCP) in May this year.
The TDP chief slammed Chief Minister Y.S. Jagan Mohan Reddy for terminating the project. The leader of Opposition alleged that Jagan Mohan Reddy is not only destroying Andhra Pradesh with his foolish decisions, but also hurting India's brand equity as an investment destination.
"AP was brimming with hope when the Singaporean government signed up with us to co-participate in building Amaravati. The dream lies shattered today with them pulling out. Hope is lost. Investments are gone. Trust has disappeared. Andhra Pradesh is on the path of devastation," Naidu tweeted.
Former Infosys CFO Mohandas Pai said that Andhra Pradesh cancelling the project and Singapore firms pulling out is very bad news for Andhra.
"Hara-Kiri by @ysjagan Single handedly destroyed investor trust in AP; jobs will be hurt; growth down; Why will investors invest? Sad!," tweeted Mohandas Pai.
( With inputs from IANS )