The estimated cost for the project for the 960-bed institute is Rs 1,618 crore.
Andhra Pradesh Chief Minister N Chandrababu Naidu and Union Ministers M Venkaiah Naidu and P Ashok Gajapathi Raju were present on the occasion.
Nadda said that to bridge the wide gap between the requirement of beds at hospitals and the actual availability of the same, the Centre has decided to set up one AIIMS in every state.
The process has started for establishing 11 new AIIMS in addition to the existing six, he added.
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Nadda further said that each AIIMS would consist of facilities like a teaching block, administrative block, AYUSH block, auditorium, nursing college and night shelter, among others.
He also said that super specialty blocks are being set up in 70 medical colleges and 58 district hospitals are being upgraded to the status of medical colleges.
"20 cancer institutes and 50 tertiary cancer care centres are being set up. The National Cancer Institute, Jhajjar, (with bed capacity of 710) and second campus of Chittaranjan National Cancer Institute, Kolkata, are also being established," he said.