At first glance, the state of industry in Andhra Pradesh’s industry does not seem to be a cause of major concern. If one looks at proposals and promises of investment in industry, it is among the top few States. However, if one goes by completion of projects or new industrial ventures, it is not among the most happening. Studies done by different chambers confirm this scenario, especially in the last two years.
After more than a decade of high economic and industrial growth, the State seems to have entered a slowdown phase.
EMERGING CHALLENGES
The Assocham’s latest analysis on investments outstanding for the year 2011-12 place AP in eleventh position (tied with Maharashtra and Punjab). Of the total outstanding investments worth over Rs 46 lakh crore across the State, projects worth only Rs 26,000 crore were completed during the year.
On the other hand, a study by the same apex chamber shows that AP is among the top three States as far as foreign direct investment proposals are concerned. It is second only to the mineral-rich Odisha (Rs 49,527 crore) and is followed by Gujarat (Rs 20,258 crore), the most active State as far as industrial activity is concerned. In 2011-12, AP received a total of 70 proposals with investment promise of Rs 33,936 crore (which is 19 per cent of the total investment proposals in India).
More recently, the CII-AP Government partnership summit in January saw a record 5.46 lakh crore investment proposals being inked with industry — public, private and foreign firms. A critical look at the translation of these proposals into concrete projects on the ground shows that they are a virtual non-starter. The Government is in the process of firming up nodal committees to follow-up on the MoUs.
Industrial growth in Andhra Pradesh stands challenged on multiple counts. In the most industrialised Hyderabad and its surrounding region, the simmering Telangana movement has had a visible impact. This, in combination with issues of land shortage and power crisis, has compounded problems, especially since 2010-11. In the coastal region, which sits on the promise of its industrial growth being driven by the resources of gas and oil from the Krishna-Godavari basin, new challenges have emerged - environmental issues, industrial accidents and row over the access to gas resources.
Being agriculture-rich, the availability of land for industrial growth is limited in most districts, except the north coast districts of Srikakulam, Vizianagaram and Visakhapatnam. In these regions, a series of environmental issues have put the brakes on projects, especially power- and mineral- based ones.
Power shortage
Shortage of power has emerged as the single biggest hurdle to industry. According to the Federation of Andhra Pradesh Chambers of Commerce and Industry (FAPCCI), power cuts today amount to 70 per cent in the industrial sector, on a weekly basis. This includes a three-day power holiday. The tariff has also been hiked after several years.
The poor monsoon has virtually deprived the State of hydel power. Gas availability has been scarce, starving gas-based power projects. Solar contributes very little and nuclear is non-existent. On the other hand, the demand from both industry and domestic far outstrips supply, forcing the Government to buy from neighbouring States at high cost and pass it on to industry consumers at high tariff.
The worst-hit are the large number of small and medium enterprises, cement plants, the clusters making fans, components and ancillary units. The FAPCCI, the CII and the association of small industries have urged the State to come to their rescue. Thousands of small industries will be forced to close down, unless the situation improves, say industry bodies.
industrial corridor
In the coastal districts, the gas finds in the Krishna-Godavari basin were expected to spur industrial growth. The Government also created the PCPIR (Petroleum, Chemicals and Petrochemicals Investment Region), demarcating huge tracts of lands across the districts of Visakhapatnam and East Godavari. There are proposals worth over Rs 70,000 by the anchor investors, led by Hindustan Petroleum and GMR. But acceleration in project implementation is awaited.
Power projects were proposed in Srikakulam district, this time by corporates such as Nagarjuna Construction Company and East Coast Power. The Department of Atomic Energy also indicated that a ‘greenfield site’ for locating the most advanced reactors from US’ GE would be identified in Parvada in the district. In addition, there are mineral-based projects such as alumina plants and bauxite-based industries, from both domestic and international investors, on the cards. However, all these mega investment projects have got enmeshed with issues of ecology, tribals rights and displacement. It now turns out to be long drawn battle - getting approvals, going through public hearings and finally sorting out R&R issues. Strong environmental groups are giving the corporates a tough time to convince people about the overall benefits vis-à-vis people and ecology.
The net result is a slowdown in project implementation and slackening of new proposals.
Telangana Issue
The continued suspense over separate Statehood for the Telangana region, comprising 10 out of the 23 districts, is having its impact on Hyderabad as a favoured destination for industry.
Though, in terms of proposals and intent, it continues to be among the top cities, when seen against new ventures being grounded or major expansions of existing firms, there is clear shift. The IT sector, which was the star performer driving the growth of the city, continues to show robust results, because most of the committed investments are continuing; proponents of a separate Statehood such as the Telangana Rastra Samithi have realised that this is one sector that cannot be antagonised, as it will draw investments in the long run.
However, other sectors like drugs and pharmaceuticals, seed industry, manufacturing and retail, which were buoyant, show tardy growth. Concerns over land and power are forcing industry to look for alternatives like Baddi in Himachal Pradesh, and Nanded and Bidar in neighbouring Maharashtra and Karnataka, especially in the case of the chemicals and pharma companies. For the retail industry, Hyderabad no longer is the favourite city to launch new ventures or products.
It may be argued that there is a general slowdown in investments across the country, and Andhra Pradesh is no exception. Nevertheless, State-specific roadblocks need to be handled well, so that Andhra Pradesh remains at the forefront of industrialisation, given its human and natural resources.