Towards Growth

Andhra Pradesh offers lucrative investment opportunities

Andhra Pradesh, the country’s eighth largest state, has been growing at the rate of over 11 per cent in the past two years, which is far higher than the national average of 7.6 per cent. During the next two decades, it is expected to grow at a compound annual growth rate of over 12 per cent. The state is an ideal destination for investors who are looking to invest in the infrastructure sector. It offers a lot of opportunities for the implementation of public-private partnership (PPP) projects. It has performed well on key parameters such as growth, development, economic stability, investor friendliness and ease of doing business. Further, there is a single desk portal for all approvals for setting up any industry in the state.

The Andhra Pradesh Economic Development Board (APEDB), modelled along the lines of the Singapore Economic Development Board, was constituted in 2016 as a single-point of contact for investors in the state. APEDB simplifies procedures and coordination with various departments to ensure ease of doing business for investors. The Andhra Pradesh government has taken the lead by creating a real-time dashboard which measures the effectiveness of the services delivered. “Real-time governance” is a new institutional framework devised by the state government for real-time grievance redressal and project monitoring by leveraging tools of e-governance, technology and electronic communication.

Focus on land and power

Infrastructure is the backbone of development in Andhra Pradesh. It is the first state in south India to provide 24×7 power. The government’s main focus is on power capacity augmentation through the development of a smart grid. Since it is a power-surplus state, the government allows companies to generate power and then bank it so that they can reverse-sell it. Further, there is a lot of emphasis on renewable energy – the state has both solar and wind power policies in place.

Meanwhile, the state government has addressed the issue of land acquisition as well. It has proactively acquired about 300,000 acres of land which is readily available for allotment. There is a geographic information system-enabled online land bank information system too. Land is given on a lease of 99 years.

Moreover, there is scope for developing industrial parks on a PPP model in the state. A major industrial park has been developed in Sri City, and similar industrial parks are planned to be set up as well.

Industrial development

A number of major industries have come up in the past three years while many have plans to enter Andhra Pradesh. Kia Motors, for instance, set up a plant in the state, the first car from which was rolled out in February 2019 – it took only 19 months from the allotment of the land to the rolling out of the first car, a definite success story for the state. Similarly, Foxconn and others have already established their footprint. Acclaimed as the biggest foreign direct investment in a greenfield project in the country, Indonesia’s Asia Pulp and Paper Group is setting up the world’s largest paper mill at a single site in Andhra Pradesh’s Prakasam district. The $2.3 billion project will have a 5 million tonne  per annum capacity.

Improving connectivity

In terms of connectivity, the government is focusing on port-based development in the state. While six ports are already operational, another three are under development and five are under planning. The existing ports have a capacity of 180 million tonnes (mt) and handle 120 mt of traffic. Of the upcoming ports, three are non-major greenfield ports at Bhavanapadu, Narsapur and Ramayapatnam, all of which will be developed on a PPP basis. Besides, Andhra Pradesh has a huge potential for inland water transport, which is fuel efficient, environment friendly and economical. National Waterway (NW)-4 stretches from Kakinada to Puducherry over 1,095 km, of which 888 km is in Andhra Pradesh. Development work for Phase I (dredging from Vijayawada to Muktyala) of NW-4 at a cost of Rs 960 million has already commenced.

The state is well connected through six operational airports, including two international ones. In addition, six airports are being planned, including the Bhogapuram aeropolis and two no-frills greenfield airports. The mega aeropolis being planned at Bhogapuram will have facilities for research and development, car handling, maintenance, repair and overhaul services, and personnel training. The aeropolis, intended to be a gateway to the Asia-Pacific, will be developed on a 2,700 acre land parcel. Of the two no-frills greenfield airports, Dagadarthi airport will be taken up on a PPP basis while Orvakal airport will be developed on an engineering, procurement and construction basis. Phase I of the projects is estimated to cost $20 million each. Interestingly, the location of Orvakal airport has significant potential for solar and wind energy generation. Meanwhile, one of the country’s largest private ports at Krishnapatnam is located close to the upcoming Dagadarthi airport. The area falls under the proposed Visakhapatnam-Chennai and Bengaluru-Chennai industrial corridors.

Andhra Pradesh’s civil aviation policy aims to increase the state’s share in the country’s air traffic – passenger traffic is targeted to be increased from 1 per cent to 7 per cent by 2022 and cargo traffic from 0.1 per cent to 5 per cent by 2022. Some of the incentives being offered under the policy include viability gap funding for underwriting seats on airlines for underserved sectors, assistance with land acquisition and pooling for airport development.

 

Getting smarter

There are 14 smart cities coming up in Andhra Pradesh. Of these, three major cities (Vijayawada, Visakhapatnam and Tirupathi) will be developed by the central government while the remaining 11 will be taken up by the state government. There will be emphasis on digital connectivity, IT infrastructure, start-ups and development of electronic manufacturing hubs. Andhra Pradesh is the first state in the country to formulate a start-up policy and has inaugurated the Sunrise Startup Village. A start-up innovation fund has also been set up with a $20 million contribution from the state government.

The Amaravati capital city project is the country’s largest greenfield venture. Nine economic themes have been identified for the development of the city – government, finance, tourism, health, electronics, knowledge, justice, media and sports. Capital expenditure for the infrastructure projects in Amaravati is close to $8 billion.

Outlook

The construction sector will get a major push from key infrastructure projects being planned in the state. These projects include three industrial corridors – Visakhapatnam-Chennai, Bengaluru-Chennai and Kurnool-Bengaluru; the Amaravati greenfield capital city; the Amaravati outer ring road spanning 186 km; seven economic cities; two coastal employment zones; three mega smart cities; six new airports; and eight proposed ports. In addition, a number of projects are being planned on a PPP basis, so there is significant opportunity for investors as well. w

Based on a presentation by Bhavna Saxena, Special Commissioner, APEDB, at the India Infrastructure Forum 2019

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