The new industrial policy of Andhra Pradesh government invited attention from around the spectrum. The Jagan Mohan Reddy headed YSRCP government for the first time after coming to power rolled out its industrial policy. The new Chief Minister and his men were under tremendous criticism after the State witnessed massive investment withdrawals.
Under the previous CM Chandrababu Naidu, Andhra Pradesh’s ease of doing business ranking improved to stand at Number One amongst all Indian states. The State had a policy for industrial approvals within 21-days in order to allow industries to flourish and bring prosperity to the State. The lax and wanting policies of the YSRCP Government have left the business and trade environment in the State is in shambles pushing companies to shift their bases or not invest in the State.
In last one year, several big names have withdrawn their investments from the State. In July 2019, the World Bank withdrew $300 million of funding for new capital in Andhra Pradesh after the central government dropped support for the project. In November 2019, the consortium of Singapore-based companies, Ascendas-Singbridge and Sembcorp, has decided to pull out of the Amaravati Capital City Startup Area project after the YS Jaganmohan Reddy cancelled it through a government order, stating the newly elected government of Andhra Pradesh has decided not to proceed with the start-up area given its other priorities for the State. The start-up area, once developed, was expected to contribute 1.15 lakh crore to the State’s gross domestic product and generate revenue of Rs 8,000 Crore to Rs 10,000 crore to the government in different taxes.
The YSRCP Government has cancelled the allotment of land to Lulu group resulting in loss of employment and development. In November 2019, the Lulu group issued a statement saying it has decided not to invest in any new projects in the State of Andhra Pradesh. On the other hand, the Adani’s investment in solar-powered data centres in Visakhapatnam is reduced from 70000 Crore to 3000 Crore.
The streak followed with ambiguity in investments of Franklin Templeton, Indonesia’s Asia Pulp & Paper (APP), uncertainty on Rs 15,000 Cr Reliance Electronic Manufacturing project at Renigunta and Krishnapatnam Infratech’s SEZ. To note, all of the above mentioned MoUs and projects were signed under the previous TDP government.
Andhra Pradesh Industrial Policy 2020-23 focuses on de-risking investments. The government has launched YSR-AP-One, which acts as one-stop resource and support centre for business, providing plug, and play facilities at upfront cost. Among the incentives, the government also reserved 10% of the water to Industries in the existing and upcoming projects, making it more feasible for industries with less upfront payment. The policy allows them to buy land after ten years of successful operation; accordingly, the changes are brought in the industrial lease policy.
However, the present regime again chose to lean more towards the MSMEs than the big investments, claiming for balanced growth of regions and help weaker sections socio-economically. Ten sectors for special thrust include toys and furniture, footwear and leather, machinery and precision equipment, aerospace and defence, pharma, textiles, automobile, electronics and petrochemicals. The policy included setting up of 30 skill development centres and two skill development universities.
The industrial policy brought in new definitions of the MSMEs and also incentives:
- Micro : Investment less than 1 Crores, turnover less than 5 Crores
- Small : Investment less than 10 Crores, turnover less than 50 Crores
- Medium : Investment less than 50 Crores, turnover less 250 Crores
- Large : Thrice the investments of Medium
- Mega : Employment generation of more than 2000
All the industrial land in the State from now on will be environmentally zoned by APIIC accordingly with the environmental management plan. The type of industries allowed will be notified accordingly. The government through the current industrial policy, also made it clear that there are exceptions to the above mentioned for industries with special requirements of standalone locations, proximity to certain sources important to the public and government interest. The provision leaves a wide array of possibilities, as well stands a loophole for selective appraisal. The policy also calls for industrial parks to be developed, with the common facilities needed for the dedicated industries under PPP mode. The AP government henceforth will set up a central helpline, to ensure on-ground implementation of the approvals.
The government has also doled out incentives for the MSMEs. Incentives to micro and small enterprises included 15 % investment subsidy up to 20 lakhs whichever is lower, released only after three years of continuous operation with 80% efficiency in all operations. 3% interest subsidy on fixed capital investment by micro and small enterprises. The government gave various SGST reimbursement provisions based on the scope of employment and livelihood generation.