andhra pradesh

INDIAN STATESEconomy and Business

Andhra Pradesh

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INDIAN STATESEconomy and Business

Andhra Pradesh

www.ibef.org

ANDHRA PRADESH PAGE 3

CONTENTS

Executive Summary 5

Economic Snapshot 7

The State Economy 9

Infrastructure 11Social infrastructure 11Access infrastructure 11Industrial infrastructure 12

State Policy 14Industrial policy 14Infrastructure policy 14SEZ policy 14Technology upgradation 15Export promotion 15Incentives 15Intellectual Property Rights 15Fostering industry clusters 16e-Governance 16IT policy 16Biotech policy 16Agro policy 16

Business Opportunities 17Key industries 18Exports 20Investment 21Potential hubs for investment 21

Key Players 23

Doing Business in Andhra Pradesh 26Indicative list of approvals and clearances 26Cost of setting up business 27Contact for information 28

A report by KPMG for IBEF


Executive Summary

The state has a state-of-the-art telecom infrastructure,ensuring good connectivity to global destinations.

Andhra Pradesh is endowed with fertile land andbountiful mineral resources. The state is one of thelargest producers of rice. The state is one of theleading producers of major commercial crops andrich minerals. The affluence of agriculture has spurredthe growth of allied industry like warehousing, cold storage and packaging etc.

Mineral based industries in the state mainly includecement and steel industries. Andhra Pradesh is one of the leading exporters of software products fromthe country. The state is the largest exporter of bulkdrugs and pharmaceuticals contributing about 33.3 per cent of the total exports from the country.In addition, leather and textile industries have showna promising growth over the years.

The state with its proactive policies ensures goodinvestment climate for the investors. The state is thefirst to have a comprehensive ITES/BPO policy andalso the first to have data protection and consumeract in the country. In order to ensure all roundprogress, the state has formulated food policy,pharmaceutical policy and FDI policy extending a supportive hand to the investors.

Andhra Pradesh is the fifth largest economy in thecountry. Agriculture is the mainstay of the stateseconomy. Although 70 per cent of the populationworks in agriculture, the services sector has shown a significant growth in the past decade. Mineral basedindustry is another important source of income in the state.

A politically stable and vibrant state, Andhra Pradeshprovides skilled IT manpower, pleasant climate, goodtechnical and social infrastructure and pro-activepolicies. The government of Andhra Pradesh hasestablished several world-class academic institutions in collaboration with reputed organisationsworldwide. The state has been proactive inestablishing various dedicated research organisationsin different sectors. In addition to the institutions setup by the government, the state has been persuasive in welcoming the corporates to establish their R&D facilities.

The state is a key player in the countrys powersector with the highest hydel power generation. Hi-Tech city, an IT park of the state, is the largest IT facility in the country. Speciality parks for thebiotech sector have been proposed and are underprogress. The state has two Special Economic Zones (SEZs) and growth centres in addition to the industrial parks set up by the government.

Industrial Centres in Andhra Pradesh


An Economic Snapshot

Area (sq km) 275,000

Population (Census 2001, million) 76.2

Literacy Rate (%) 60.5

NSDP (US$ billion) (2002-03) 30.63

Sex Ratio (per 1000 males) 978

Length of Coastline (km) 974

National Highway Length (km) 4,104

Domestic Airports Hyderabad, Visakhapatnam, Vijayawada, Tirupathi

International Airport Hyderabad

Major Ports Visakhapatnam

Key Industries Agro-based Mineral-basedLeatherTextilesEngineeringITPharmaceuticals R&D

Industries with Growth Potential Biotech Tourism

Advantage Andhra Pradesh

Hyderabad is ranked No. 1 Indian ITES destination by NASSCOM

Ranks second in the number of industrial estates in the country

Only state with abundant energy

Several world-class academic institutions with foreign collaborations

Accounts for about 23 per cent of the software professionals in India

Second largest storehouse of minerals in the country

Largest producer of rice in the south

Largest producer of minerals in value

Largest exporter of bulk drugs

First to have a comprehensive ITES/BPO policy

First to launch world class training programme for ITES/BPO

First to develop a data protection and consumer act

and jute etc. The state produces some of the finestvarieties of fruits in the country. Andhra Pradesh is the only state with abundant energy. Availability of long coast enabled the marine industry to flourishin the state. The prosperity of agriculture in the stateenabled the growth of the allied industries includingagro-processing, cold storage, warehousing, fertilisersand packaging.

Andhra Pradesh has a well-developed traditionalindustry due to the availability of wide range of natural resources.

Andhra Pradesh is the second largest storehouse of mineral resources in India. The availability of abundant limestone reserves spurred the growthof cement industry in the state. In addition, the statehas performed well in the engineering sector. The pharmaceutical and bulk drug industry of thestate has a significant global presence with many state based companies having established theirfacilities abroad. The state accounts for the highestpharmaceutical based exports in the country.

The services sector in the state has shown a promising growth over the years. The contributionof the services sector to the state GDP has beenconsistently over 50 per cent during 1993-00. The number of software companies in the state has risen from 26 units in 1992-93 to 1,200 (2001).


Andhra Pradesh is the fifth largest economy in thecountry and second largest in the south.

Endowed with fertile land, water and supportive agro-climatic conditions, Andhra Pradesh is a prosperous agricultural state. It is one of theleading producers of various cash crops like tobacco,dry chilly, groundnut, turmeric, oilseeds, cotton, sugar

THE STATE ECONOMY

Growth of exports from the state (US$ million)

1750

2866

1427

1996-97 1999-00 2002-03

3000

2000

1000

0

Source: Government website

Andhra Pradesh - Sectoral contribution to GDP(at constant prices 1993-94) 2000

Source: www.ap.nic.in

Agriculture

Manufacturing

Services

18.8%

55.4%

25.8%


INFRASTRUCTURE

in Semi-arid Agriculture Technologies (ICRISAT),Indian Institute of Chemical Technology (IICT),Centre for Cellular and Molecular Biology etc. The state has introduced various biotech courses in the universities at all levels and plans to set up the Indian Institute of Life Sciences.

Access infrastructure

Andhra Pradesh is well linked internally as well as to the rest of the world. All the airports have been upgraded to Boeing landing facilities. The state is active in encouraging the private sector to improvethe port infrastructure. Three ports have beenprivatised in the state.

Highest number of landing centres in the countryat 508 in 2002-03

Port infrastructure includes 13 major and minor ports

With a cargo handling capacity of 44.6 MT,Visakhapatnam port is the second largest in the country

Railway network of 5,107 mt, 620 stations and handling capacity of 35 MT annually

Road network of 194,523 km including 4,104 kmof National Highways

Modern airports at Hyderabad, Visakhapatnam,Vijayawada, Tirupati and Putaparthi with Boeinglanding facilities

The state has one major port at Visakhapatnam, which handles largest tonnage among all Indian portsand minor ports at Kakinada, Krishnapatnam,Vadarevu and Gangavaram.

To provide suitable atmosphere for setting up assetmanagement, venture capital companies, insurancecompanies, commercial banks, a Financial District is being set-up in Hyderabad. With the establishment

Social Infrastructure

Andhra Pradesh offers a large pool of skilledmanpower. Every year, 350,000 skilled graduates pass out from universities and 81,000 engineeringgraduates from engineering schools, another 10,078 management students graduate frommanagement institutions every year. About 23 per cent of Indias software professionals withinand outside the country are from Andhra Pradesh.

The state has about 226 engineering colleges of which 30 per cent of the total capacity is allottedfor Information Technology. The state has dedicatedinstitutions for biotechnology, ITES/BPO and otherindustries. The government has set up a number of institutions in collaboration with prestigiousinstitutions to reach world-class standards in education. Some of these include:

International Institute of Information Technologyestablished by IBM, Motorola, Signal Tree, Oracleand Satyam

Indian School of Business with The WhartonSchool and the Kellogg School of Management and London School of Business

Master of Science in IT Programme (MSIT) incollaboration with the Carnegie Mellon University

Andhra Pradesh is the first to launch world-classtraining programme for ITES/BPO

National Academy for Construction and theKnowledge Park

The state provides better and advanced health carefacilities with a presence of Super Speciality Hospitals.Hyderabad, the capital of Andhra Pradesh, has beenrecognised as the Health Capital of the country.

The state plans to start a large number of researchinstitutions like International Centre for Research

underground powerhouse in the south Pochampad Hydroelectric Scheme is the first

to use microprocessor controls in thepowerhouse in the country

One of the leading producers of thermal power in the country

Thermal plants achieved top three positions in PLF rankings in India in 2003

Industrial infrastructure

At 272, the state ranks second in industrial estatesand is in the top quartile in the number of enterprisesin the country. The state has four growth centres at Bobbili, Jadcherla, Hindupur and Ongole. The statehas two Special Economic Zones at Visakhapatnamand Kakinada facilitating good environment forexports and investment. The state ranks third in worker population and fourth in the total number of factories.

Specialised parksApparel export park

Andhra Pradesh Industrial Infrastructure Corporation(APIIC) is a pioneer in promoting and developingindustrial estates and industrial development areas. With this background, the Government of Andhra Pradesh has entrusted APIIC with the task of developing a product-specific industrialarea as Apparel Export Park for garmentmanufactures and exporters.

Genome valley

The State Government has declared an area of 600 sq km in Ranga Reddy District as the Genome Valley in which biotech activities will be encouraged and promoted.

A Knowledge Park has been set up by the StateGovernment in collaboration with the IndustrialCredit and Investment Corporation of India (ICICI) at Turkapally Village, Shameerpet Mandal, Ranga Reddy District. The ICICI Knowledge Park is a 200 acre facility, which provides organisations

of Insurance Regulatory and Development Authorityheadquarters in Hyderabad, the State has beenrecognised as the Insurance Capital.

PowerAndhra Pradesh is the third largest power utility in the country with a total power generation of 10,273 MW (2004), the second highest in thecountry and many projects are under implementationto generate 4,715 MW by 2009. Among all Indianstates, Andhra Pradesh has progressed well inreforming its energy sector (privatisation, separationof generation from transmission and distribution).

Vast natural gas reserves found in Krishna-Godavaribasin with 47 million standard cubic metres per dayhave opened up immense possibilities forenvironment-friendly industrial and socio-economicdevelopment in Andhra Pradesh.

Highest PLF of 88.9 per cent in the country Hydel installed capacity in the state is the highest

in India with 14 plants Srisailam complex is the largest hydro power

station with an installed capacity 1,670 MW in the country

Srisailam complex is the first complete

Installed capacity of state power(in MW) 2003

34.6%

62.9%

1.0%1.5%

Thermal

Hydel

wind

NuclearSource: www.indiastat.com


Export Promotion Industrial Park (EPIP)

The Export Promotion Industrial Park is located at Pashamylaram and is well connected by road, railand air. Spanning an area of 160 acres, it is equippedwith all the essential facilities. It is ideal for export-oriented units such as hardware, gems and jewellery,telecom, leather products and garments.

Gems & Jewellery park

The Gems & jewellery park is a joint venture of Andhra Pradesh State Trading Corporation Ltd(APSTC) and IOI Corporation of Malaysia. The jointventure heralds a new era of gems and jewellerytrade in Andhra Pradesh. The project will be a freeprocessing zone, which proposes to work on the lines of a Special Economic Zone (SEZ) with allincentives and features.

Special economic zone

The Government of India has formulated a policy for setting up SEZs in the country. They are specially delineated as duty free enclaves for industry,trade and service. Accordingly, the Government of Andhra Pradesh has proposed the establishment of a SEZ at Visakhapatnam.

IT infrastructureAndhra Pradesh is connected to all the globaldestinations through international gateways in Mumbai, Chennai and Kochi. The state developed a number of IT parks offering incentives to theinvestors. The state is in the top quartile in internetsubscribers at 219,000 (2003).

Two phases of Hi-Tech city, the largest of its kind in the country

Optical fibre cable (OFC) of length 27,000 km laid by BSNL

Offers up to five levels of telecom redundancy Bandwidth 365 Mbps out of Hyderabad and

100 Mbps out of other cities Satellite earth station - Ku band network Postal infrastructure include 16,213 offices and

118 telegraph offices

with ready to occupy research and developmentlaboratories. The Park also provides infrastructure to small and medium-scale enterprises at affordable costs.

Adjacent to the ICICI Knowledge Park, a BiotechPark has been established to create a world classR&D centre for biotech industries and comprises of technology incubation for commercialisation of viable research projects.

Marine biotech park

A marine biotechnology park that will act as a hub for biotech companies developing products usingmarine organisms is being set up at Parwada nearVisakhapatnam in association with APIIC. The park will house a marine biotech complex with drylaboratories, library and incubator facilities to enableresearch by companies. So far 218 acres of land hasbeen earmarked for the park while land-leveling andwater supply installation and electrification work is in progress. In a run up to the ambitious project,the Government is supporting the development of a Centre of Excellence in Marine BiotechResources Development at the Andhra University,Visakhapatnam.

Agri-biotech park

The agri-biotech park provides an opportunity to tap ICRISATs upstream research expertise and use its world-class infrastructure. It bringstogether the expertise available at ICRISAT, the State Government and other renowned private sector companies.

Pharma park

The pharma park is the result of a need felt to meetthe increasing demand for bulk drug manufactures. A large part of Indias pharmaceutical activities will be taking place in Andhra Pradesh. The APIIC having in its possession about 2000 acres at Parawada hastaken up the responsibility of the establishment of the Pharma City. This is a very unique concept and the first of its kind.

STATE POLICY

Industrial Infrastructure Development Fund of US$ 37.23 million has been created to provideinfrastructure to industry.

Infrastructure policy

Development of quality infrastructure for industrialgrowth has been given highest priority throughprivate participation. In line with this objective, thegovernment has constituted Infrastructure Authority(IA) for the rapid development of physical and socialinfrastructure in the state and to attract privatesector participation in the designing, financing, construction, operation and maintenance of infrastructural projects.

The government has provided all the recognisedindustrial areas with facilities such as roads, electricity, water, drainage etc. in addition to alliedinfrastructure such as uninterrupted power supply,telecommunication facilities including internetconnectivity and information kiosks, transportationlinks from industrial areas to towns.

The government besides creating quality infrastructureis laying emphasis on creation and maintenance of critical infrastructure required in the industrialestates. Ongoing schemes like Industrial InfrastructureDevelopment Fund (IIDF) and Critical InfrastructureBalancing Fund (CIBF) are to be continued.

Special Economic Zone (SEZ) policy

The Government of India is enacting a SpecialEconomic Zone Act for streamlining the developmentof SEZs in the Country. The State Government would leverage the Act for the advantage ofpromoting SEZs in various parts of the state for balanced trade and commerce with liberal tax,fiscal and administrative regime.

The governments liberalisation and economicreforms programme aims at rapid and substantialeconomic growth and integration with the globaleconomy in a harmonised manner.

The Andhra Pradesh Industrial Policy, 2005-10 is aimed at promoting industrialisation in the state.Incentives are being given to attract investment in thissector. The policy promises 100 per cent stamp dutyand transfer duty reimbursement. Giving in to thelong standing demands of the industry about highpower cost, the state has decided that power costwould also be reimbursed at 0.016 cents per unit. Large industries will especially gain as an IndustrialPromotion Fund has been set up to cater to theirspecific problems on a case-to-case basis.

Industrial policy

The objectives of the policy are:

To promote Andhra Pradesh as an attractivedestination for industrial investment

To market Andhra Pradesh as a competitiveinvestment destination for foreign investment

To attract and develop appropriateentrepreneurial leadership, management and HRD systems

To improve infrastructure by facilitating investmentin industrial infrastructure in private sector

To encourage establishment of New Tiny and Small Scale Industries particularly in rural areas to achieve the twin objectives of employmentgeneration and utilisation of local resources

To encourage cluster concept to make theindustries globally competitive

To develop effective regulatory mechanism for entry and operation of firms

To create a market driven environment with theprivate sector being the primary engine of growth


Export industries will be given a 30 per cent grant for ground rent for participation in theinternational trade fairs, subject to a maximumlimit of 9 sq mt

To sensitise exporters, programmes will beconducted with the assistance of EAN India andSISI on bar-coding

Export Awards will be provided to EOUs to recognise best performing units with respect to quality, R&D and performance

Government will set up a state-of-the-art externalinformation centre in collaboration with localchambers of commerce and associations like CII with the assistance of reputed organisations for dissemination of information and assistance to export fraternity of the state

Incentives

In order to address the specific problems of existinglarge industries, the Government may offer a specialpackage of fiscal benefits on a case-to-case basis. Exact fiscal benefits would be decided by StateInvestment Promotion Board (SIPB) from time to time depending on the nature of the project,investment, location, employment etc. An IndustrialPromotion Fund with adequate provision will becreated for the purpose. Guidelines and modalitiesfor operating the fund will be decided by the SIPB.

Intellectual Property Rights

Intellectual property rights like any other propertyrights allow the creator or owner of a patent,trademark or copyright to benefit from his or herown work or investment. To encourage industries to go for innovation in product development, 50 per cent of the expenditure incurred in getting the patent will be reimbursed to enable the industryto protect the invention made by them.

In order to encourage innovation, units having patentsfor products would be given purchase preference in all purchases made by government departments.

Technology upgradation

Technology is the key element, contributing to productivity, quality, competitiveness and marketacceptability of products. In a rapidly changing globalscenario, technology and business incubators haveemerged as useful instruments for innovation.

To provide technology support to the localindustries, the Government of Andhra Pradesh,Confederation of Indian Industry and TechnologyInformation Forecasting & Assessment Council(TIFAC) jointly promoted Andhra PradeshTechnology Development and Promotion Centre(APTDC) for transfer of technologies, providingtechnological know-how, commercialisation of technologies, technology upgradation etc.

In line with this objective, APTDC is in the process of developing T Incubator - a technology incubationprogramme which is an innovative system designed to assist entrepreneurs in the development of newtechnology based firms.

This apart, the Indian School of Business K-hub,was developed to create linkages among the technologyproviders, academicians, incubators and businessdevelopment services. This will help promotedevelopment of high quality entrepreneurship, pool and share international best practices in incubation/mentoring processes.

Export promotion

Export plays major role in the industrial andeconomic development. In order to boost exports,the State Government is offering a special package of incentives to Export Oriented Units (EOUs).

Sales tax exemption on purchase of raw materialsfor EOUs

For EOUs, Andhra Pradesh State FinancialCorporation (APSFC) will extend financialassistance at a concessional rate of interest

Fostering industry clusters

Clusters allow local small producers to make moreeffective use of underutilised resources (such as smallscale savings or family labour) generating incomesthat they cannot otherwise avail of operating in isolation.

The Government of Andhra Pradesh has identified six industrial clusters for development underIndustrial Infrastructure Up-gradation 30 Scheme.Two clusters, namely, Pharma Cluster near Hyderabadand Auto Components Cluster in Vijayawada havealready been approved by the Government of India forassistance and these are in process of development.

The other four clusters, viz. Marine food ProcessingCluster in Bheemavaram, Power loom Cluster in Sircilla, Leather Cluster in Hyderabad and PrecisionEngineering Tools and Components in Ranga Reddyare under consideration by the Government of India.Apart from the above, 14 more clusters are in theprocess of development under DevelopmentCommissioner Small Scale Industry (DCSSI) assistance.

The Government accords highest priority to promotion of clusters in the state. The individualunits in the clusters are eligible for the generalincentives offered by the Government under the policy. This apart, they are also eligible for a special package of incentives for which the StateGovernment has created a fund under clusterdevelopment programme.

To capitalise the natural resources and otheradvantages available in the sub-regions, theGovernment has proposed to develop industrialcorridors in various parts of the state for sustainableand equitable industrial development.

e-Governance

The State has undertaken wide-ranging measures to nurture its industries: simplified, less restrictive

regulations, labour and fiscal reforms, incentives and the like. In line with this objective, the state has enacted a law for single-window clearances. It is the first state in the country to have a law for single-window clearances, which ensures that all clearances to investors are given within a setperiod. The state has been qualified as flexible in its approach to labour regulations and good for its simplification of rules and regulations. Itintroduced the self-certification concept, commonannual returns in place of multiple returns withsimplified registers and zero inspection regimethrough accredited agencies.

IT policy

Andhra Pradeshs pre-eminent role as a globalsoftware provider creates impetus and significantopportunities to catapult the state into the future. In order to capture the potential of the IT sector, the Government has announced an exclusive policyfor the IT sector with an attractive package of incentives.

Biotech policy

A separate Directorate for Biotechnology is beingcreated. The Government is due to enact a newbiotech policy with attractive benefits soon after theannouncement of Bio-tech policy by the Governmentof India to accelerate the growth of biotechindustries in the state.

Agro policy

By 2020, Andhra Pradesh will have a modernised and vibrant agro-industry, bringing organised activity into rural regions. Agro-industry will createhigher incomes, higher export earnings and highemployment in rural areas, thus stemming migration to cities. In addition, the state will have established an unbeatable lead over other Indian states in many agricultural sectors in which it has significant strengths.


BUSINESS OPPORTUNITIES

limestone spurred the growth of cement industryin the state.

Capability: Availability of good quality manpoweris a must for all industries to flourish. High literacyrates and presence of good education andvocational training institutions have ensured thatthe state has well qualified manpower. This hasbeen a major factor enabling the success of AndhraPradesh in sectors like Engineering, IT and ITES.Given its strong base of technical work force,knowledge-intensive industries are gradually takinga lead position in the state.

Based on an assessment of the above factors, some of the industries with potential for investmentand growth in the state of Andhra Pradesh areillustrated below:

There are several factors that affect evolution of an industry in a particular region. The majorfactors impacting evolution are:

Policy proactiveness: The policy that a stategovernment adopts towards a sector directlyaffects its attractiveness for further investment. For example, for the IT Sector, the AndhraPradesh State government has given manyconcessions. This has prompted many IT majors,both domestic like Satyam as well as multinationals like Oracle, to set up softwaredevelopment operations in the state.

Availability of natural resources: Certainindustries like agro-based industries have a highdependence on availability of natural resources. The availability of good natural resources like

Natural ResourcesDriven

Capability Driven

Sector Attractiveness Drivers

Proactive Exclusive Policy Special Incentives Special Infrastructure

(SEZ, STPI, AEZ etc.)

Polic

y Pr

oact

iven

ess

This is the qualitative assessment to highlight relative interest of different sectors. A case by case analysis is necessary before investment is made.

Biotech Infrastructure IT & ITES

Chemicals/Pharma

Mineral-basedIndustry

Food Processing

EngineeringTourismModerate

Generic policy incentives

Source: KPMG analysis

such as coal, limestone, granite, bauxite, and barytes.In fact, the state is estimated to have a third of Indias total mineral wealth. Andhra Pradesh is the only southern state with coal deposits and has 20 per cent of Indias limestone reserves and 27 per cent of its bauxite reserves.The worlds bestgranite, Black Galaxy, is found only in Andhra Pradesh.Andhra Pradesh is the second largest producer of cement in India. Larsen and Toubros plant with a maximum capacity of 6 million tonnes per annum is the largest in Asia. Gujarat Ambuja Cements Ltdplans to set up a plant with US$ 160 million and a capacity of 2 million tonnes per annum.

Leather and Leather Products Andhra Pradesh with a livestock population of morethan 46 million is a major producer of hides and skinsin India. The state contributes about 19 million piecesper annum, that is, 10 per cent of the countrys rawmaterial. The leather industry in Andhra Pradeshproduces a large range of products for the domesticand international markets.

Textiles The state is one of the major exporters of textiles in the country at US$ 90 million in 2003. There areabout 1,050 weaving units with a production capacityof 750 million metres of fabrics in 2003. The stateis one of the leading textile processing centres with over 100 units, with a processing capacity

Key industries

Agro-based The agro-based industry in Andhra Pradesh employsaround 65 per cent of the total state population. The state produces 149.77 lakh metric tonnes of food grains (2004-05). Production of oil seeds,groundnut and cotton stood at 26.05 lakh metrictonnes, 16.60 metric tonnes and 27.39 lakh bales of 170 kg (in lint) respectively.

Andhra Pradesh contributes 25 to 30 per cent to Indias total seafood exports. Andhra Pradeshaccounts for a large chunk of Indias aggregateproduction of rice. It is a leading producer of cottonwith an average production of 2.6 million bales annually and it targets sales of US$ 2553 millionannually by 2010.

The industries in food products contribute 19.36 per cent to total industrial production in thestate. Andhra Pradesh ranks second in the productionof value added food products and beverages, with a 10 per cent share of total value added in the country. Horticulture accounts for 4.01 per cent of agricultural gross state domestic product. At present, 14.94 lakh hectares of land is underhorticulture sector in the state.

Andhra Pradesh ranks first in the country in area andproduction of mango, oil palm, chilies and turmeric. It occupies the second rank in citrus and coriander; third rank in cashew; fourth rank in flowers and fifth rank in grapes, banana, ginger and guava, based on area and production.

The state is keen to improve the researchinfrastructure in the agro sector and has establishedseveral organisations. Several MNCs like Conagra,Krafts foods amongst others have established theirfacilities in the state.

Mineral-based Andhra Pradesh has huge reserves of key minerals

400

Growth of leather exports (in US$ million)

284

458

261

1997-98 1999-00 2001-02 2002-03

0

150

300

450

600

750

Source: Government Website


emerged as one of the leading software exporters in the country. The state aims to capture 30 per centof the market share in IT and ITES by 2009.

MNCs like Microsoft, IBM, Motorola, Oracle, Baan and Wipro have set up their operations inHyderabad. Some of the other major players in thesector are CMC Ltd, DE Shaw, Infotech Enterprises,Intergraph, Mentor Graphics, Metamor, RamInformatics Ltd, Sierra Optima, SQL Star InternationalLtd, Visual Soft amongst others.

PharmaceuticalsHyderabad has emerged as a major drug-manufacturing city of the country with a presence in the global market. Pharma industry in AndhraPradesh contributes more than 1/3rd to the countrysproduction. During 2000-01, the state produced US$ 462 million of bulk drugs and US$ 1,150 millionof formulations against the total production of US$ 1.66 billion and US$ 3.9 billion respectively in the country.

The exports from the state stood at US$ 500 millionin 2002-03 registering an annual growth rate of more than 20 per cent. The sector accounts for about 18 per cent of the total exports from the state.

of 13 million metres of cloth per annum. The averageproduction of medium and superior long staple cottonis 2.6 million bales. There are around 70 spinning millsin the state with a total spindlage of 18.3 million and 9 open end spinning mills with 5716 rotors.

Ranks second in production of raw silk (3.8 million kg in 2000)

Ranks fourth in production of wool(3.4 million kg in 2001-02)

Highest number of handloom development centres(397 in 2000-01)

Ranks fourth in the number of textile mills (98 in 2003)

The growth is attributed to highly suitable soil andother climatic conditions for cultivation of cottoncrop, long traditions of growing cotton and availability of labour at competitive wage rates.

EngineeringAndhra Pradesh has a well-performing engineeringindustry producing a range of intermediate and finalgoods such as foundry and forging items, machinetools, auto components, testing machines, materialhandling equipment and components for defenceproduction. The exports from this sector stood atUS$ 237 million in 2002-03. The state is the largestcompressor-manufacturing centre in the country.Many global players like Tecumseh, BPL andElectrolux amongst others have established theirmanufacturing facilities in the state.

Automobile sector is one of the emerging sectors in the state with more than 20 auto-componentmanufacturing companies. Mahindra & Mahindra has a modern facility at Zaheerabad, with a capacity of over 10,000 units per annum near Hyderabadwhere some of its important products, Jeeps andVoyager vehicles, are being manufactured.

ITWith about 23 per cent of the total softwareprofessionals in the country, Andhra Pradesh has

Growth of software sector(in US$ million)

223

770

28

1996-97 1999-00 2002-03

0

200

400

600

800

1000

Source: Government website

pharmaceutical companies in India, is an R&D drivencompany based in Hyderabad with presence acrossthe world. Dr Reddys laboratories, a leading bulkdrug exporter based in Hyderabad, has a goodpresence in the R&D and spends about 10 per centof the total revenues in drug discovery and R&Dinitiatives. The facility operates with around 300dedicated researchers.

BHEL, one of the countrys leading producers of heavy engineering products has established its R&D facility with wide interests in power, CFD etc.The organisation plans to invest additional US$ 8.9 million into R&D. Auto majors like Skoda are planning to set up their R&D units with thesupport of the government.

Exports

The exports from the state stood at US$ 2.8 billionduring the year 2002-03. Over the years, there hasbeen a significant growth in the exports from theservices sector. The agro-based industry was thesecond largest contributor to exports in 2002-03 and was the largest during 1996-97 to 2001-02.

The exports from the pharmaceutical sector continueto increase and stand at US$ 50 million.

Andhra Pradesh has pioneers in the fields of Medical/Human and Animal Healthcare Biotech like Shanta Biotechnics, Bharat Biotech, KrebsBiotech, Biological E. Ltd, Jupiter Biosciences and Dr. Reddys Laboratories among others. Most of thecompanies have set up their R&D facilities in thestate thus making the state, the pharmaceutical capital of the country.

R&DThe state is keen to encourage the private sectorparticipation in improving R&D infrastructure. Many leading companies have set up their facilitiesparticularly in the pharmaceutical sector because of proactive state policies.

Lucent technologies, the US$ 38 billion telecommajor and the research wing of Bell Labs has set up a facility at Hyderabad focusing on thirdgeneration (3G) wireless software design. The facility started with a workforce of 300 and has increased to 600.

Aurobindo Pharmaceuticals Ltd, among the top five

Research support Indian Institute of Chemical Technology Centre for Cellular and Molecular Biology National Institute of DNA Fingerprinting National Institute of Nutrition, Central University

Hyderabad Bio-Cluster Hyderabad, the capital of Andhra Pradesh hasemerged as an important bio-cluster with CCMB,ICRISAT and Osmania University forming theacademic backbone and companies like ShantaBiotechnics, Bharat Biotech, Biological E and Dr Reddys Laboratories forming the industrialcluster. The presence of a large pharma industry in Hyderabad has caused this bio-cluster to focuslargely on vaccines and bio therapeutics.

Estimates of exports from Andhra Pradesh in 2002-03 by Public Companies and CAGR

Source: CMIE Prowess Database; size of thecircle is indicative of the size of the exports

5 ye

ar C

AG

R (

per

cent

)

Share of exports from AP (US$ million)

60

40

20

00 10 20 30 40 50

Food and Beverages

Metals

Machinery

Chemical

Non-metals


In addition to industry, many projects have beeninitiated in the infrastructure sector like ports, roads, tourism and power. Two major projects with an investment over US$ 200 million are in the pipeline in tourism sector by InternationalManagement Group and Emaar Properties.

Foreign Direct Investment is an important driver of industrial performance. An autonomous body AP Invest has been created for needs assessmentand road mapping of FDI and to give special care in providing timely clearances and assistance for suchunits and also to remove the administrative obstaclesand managerial impediments.

Potential hubs for investment

BiotechAndhra Pradesh is now shifting its focus to one of themost promising industries of the future, biotechnology,which is seen as a high growth potential industry in India. With its vast resources the state can create a good environment for biotech companies. AndhraPradeshs advantage is its vast reservoir of scientific

Investment*

Andhra Pradesh is among the top states in thecountry attracting several international players to invest in the state. The FDI inflow was over US$ 3.6 billion during August 1991 to April 2004. In addition to the implemented projects, many othersare in the pipeline. Petroleum refineries, thermalbased power and irrigation are the industries thataccount for major proportion of the investment.

Among the large projects is a US$ 2.61 billion-petroleum products project being undertaken by Transworld Corporation USA, Inc at Visakhapatnam. Kakinada Indian Oil LNGConsortium** including Malaysian Petronas plans to invest about US$ 1.34 billion for LNG Storage & Distribution. Besicorp-Brooklyn PowerInternational, Pennsylvania Power & Light (BBI) plans to invest a total of US$ 483 million to set up a captive coal-handling jetty at Krishnapatnam port.

Estimate of likely invesment in Andhra Pradesh (US$ million)

4271

1740 1558

205 91

Che

mic

als,

Petr

ochm

and

Phar

ma

Irri

gatio

n

Min

ing

and

Min

eral

s

Engi

neer

ing

and

Har

dwar

e

Agr

o ba

sed

Source: Projects Today, Feb 2004

*Source: Projects Today as of Feb 2004. Projects Today classifies projectsas nascent, planning, partially completed and under execution. For the purposes of the above estimation, nascent and planning stageprojects have been aggregated.**Kakinada Indian Oil LNG Consortium includes Indian Oil Corporation,Cocanada Port and Malaysian Petronas

Software

Agriculture & Agro Based and Forest Products

Drugs & Pharmaceuticals, Chemicals and Allied Products

Leather, Animal & Marine products

Engineering Items

Mineral & Mineral Products

Others

26.9%

22.3%17.8%

14.2%

8.4%

5.4%5.0%

Contribution of various sectors to exports, 2002-03

338 million jobs by the year 2005 with an annualgrowth rate of 4.8 per cent.

Acknowledging this potential, the government is focusing on tourism for generating greateremployment and achieving higher economic growth.The State Government has formulated an exclusiveTourism Policy to translate Andhra Pradeshs tourismpotential into reality, highlight attractive destinationsand make Andhra Pradesh a tourist friendly state.

human resource with reasonable costs, wealth of R&D institutions, centres of academic excellence in biosciences. A vibrant pharmaceutical industryand fast developing clinical capabilities collectivelypoint to a promising biotechnology sector and haveplaced the state favourably in the global market.

TourismThe travel and tourism industry is well on its way to becoming one of the most powerful sectors in thecoming times and is anticipated to generate nearly


PROFILE OF KEY PLAYERS IN ANDHRA PRADESH

Dr Reddys Laboratories Ltd and Cheminor DrugsLtd have world class expertise in the developmentand manufacturing of organic intermediaries, bulkpharmaceuticals, finished dosages, diagnostics andbiotechnology. The company is the first Asia Pacificpharmaceutical company outside Japan, to list on the New York Stock Exchange. These companieshave been the first to sponsor drug research in the Indian pharmaceutical industry under the aegis of Dr Reddys Research Foundation. The revenues of the company stood at US$ 414 million with a netprofit of US$ 51 million during the financial year2003-04.

ElectroluxThe Swedish white goods giant Electrolux hasentered into a joint venture with Voltas tomanufacture state-of-the art refrigerators at theirfactories in Hyderabad and at Nandalur in Cuddapahdistrict. The Electrolux group in India is a marketleader in refrigerator segment with its three brandsElectrolux, Kelvinator and Allwyn. Electroluxs unit has a capacity of 350,000 compressors per annum and operates with workforce of over 3800 and a total turnover of US$ 102 million.

General Electric (GE)General Electric has a diverse portfolio and haspresence across all the business segments in thecountry. GE Capital International Services, a whollyowned subsidiary of General Electric Companylaunched IT-enabled services facility ranging from dataentry to transaction processing to high-end financialand software services in Hyderabad in 2003. GE Indiahas 22,000 employees across various operations in the country and this includes about 5,000 inHyderabad alone. GE India Development Centre(GEIDC) in partnership with Satyam is the largestdevelopment centre outside the US involved in designand development of new products.

Computer Associates (CA)Computer Associates is one of the leading providersof IT management solutions and services. CA in Indiais involved in providing software products andservices with six offices in all the major cities after its inception in 1997. The company recorded a totalturnover of about US$ 64 million during 2003-04. The development centre at Hyderabad is involved in development and supports CA products andtechnologies in collaboration with other global CA development centres.

ConagraConagra, an American company in the food business,(the third largest in the world and second largest in USA) has entered into a joint venture with ITCAgro. Agro Tech Foods Ltd is a US$ 240 millioncompany with a dominant market position in theedible oils and branded foods sector under theflagship brand Sundrop. With an initial investment of US$ 23 million, the company established R&D toadapt the Conagra technologies to Indian conditions.The company has brands like Sundrop, HealthyWorld, ACT II and Rath as part of its portfolio.

D. E. Shaw India SoftwareD. E. Shaw India Software Private Ltd is a member of D. E. Shaw & Co., L.P.s Global InformationTechnology Group. Established in Hyderabad in 1996,D. E. Shaw India is involved in the development of internet-based services that include Juno OnlineServices Inc., the worlds first free e-mail service, and Far Sight Financial Services. D. E. Shaw Indiafocuses on distributed object-oriented computing,quantitative analysis, advanced database programming,web-based computing and network administration.

Dr Reddys LabsDr Reddys Labs is a successful pharmaceuticalorganisation set up in 1984. The group companies -

Krafts foodKrafts Food, a world leader in the manufacture of food products, plans to set up a unit for themanufacture of a sugar-based soft drink with the brand name of Tang with an investment of US$ 18.4 million in 2001. The company has plans to take up an agronomy project with an investment of US$ 74 million.

Microsoft IndiaMicrosoft, the 100 per cent subsidiary of the worlds largest US based software firm MicrosoftCorporation, has been set up in 1990. Microsoftoperates with 4,000 retailers selling the productsacross the country with 100 certified retailers as Microsoft Hardware Stores. Microsoft India has its development centre at Hyderabad orientedtowards product development and plans to developto set up its R&D facility in 42.3 acres of landHyderabad with US$ 35 million.

MotorolaMotorola in India has revenues over US$ 350 millionin 2003-04 employing about 2000 employees acrossits business units. Motorola India Electronics Ltdestablished its first software development facilitydevoted entirely to software development at Hyderabad integrating its subsidiary, AdvancedPlatforms Organization. The Indian Institute of Information Technology (IIIT) at Hyderabad is founded with Motorola as one of thecollaborators. Motorola School of CommunicationTechnology at IIIT has been established in the campus.

Nagarjuna GroupThe Nagarjuna Group founded in 1974 has grown to become one of the largest business houses in Indiawith an asset base of US$ 1 billion and employeestrength of over 10,000. It has a strong presence in sectors like agri-business, power generation,refineries, information technology and financialservices. The group has three companies under its flagship, Nagarjuna Petroleum Corporation Ltd,

GVK groupGVK is a US$ 700 million-business conglomerate witha diversified and transnational presence. The groupcommenced its operations with involvement in theconstruction of the Nagarjuna Sagar dam in 1960s.The group has interests primarily in construction and power and has diversified into hospitality,petrochemicals, manufacturing, finance andinfrastructure projects. It has now ventured into the fields of life sciences, IT infrastructure and non-conventional energy.

HSBCHSBC Group, one of the worlds largest banking and financial services organisation set up its globalback-office operations in Hyderabad in 2000 and has two offices in Hyderabad with a workforce of 4500 against a global strength of 8000. The firstcentre at Hi-tech city processes back-office work for HSBC Group subsidiaries in the UK. The groupplans to invest US$ 11 million in the upcomingVisakhapatnam project.

IBMIBM India Ltd, a subsidiary of IBM Inc. (InternationalBusiness Machines Corporation), was set up in September 1999. IBM is the only company in theworld that offers end-to-end solutions to thecustomers from hardware to software, services and consulting. IBMs presence in Hyderabad includes IBM School of Enterprise Wide Computingopened at Indian Institute of Information Technology (IIIT) in January 1998. The company plans to set up a disaster recovery centre with a data bank at Hyderabad.

Kirby Building SystemsKirby Building Systems, a company based in Kuwait, has set up a unit for the manufacture of pre-engineered steel near Hyderabad at a cost of US$ 12 million with an installed capacity of 40,000million tonnes. The company has developed lightweightsteel structures that are capable of withstanding theseverest combination of seismic and cyclonic forces.


Nagarjuna Fertilizers & Chemicals Ltd and NagarjunaElectric Generation Ltd.

OracleOracle India Private Ltd, a subsidiary of OracleCorporation, the worlds largest enterprise software company was established in August 1993.Shortly afterwards in 1994 it became the first major US software company to establish IndiaDevelopment Centres in Hyderabad and Bangalore to support its product development strategy forglobal markets. The Hyderabad centre is involved in application design and development and application product support.

Sanghi GroupThe Sanghi Group is a leading South Indian industrialgroup with its operations primarily based in AndhraPradesh at Hyderabad, India. The group is a textilemajor looking for future expansion into cement andcaptive power generation. The Sanghi Group hasachieved an asset base of US$ 450 million. The groupoperations are based in Sanghi Nagar, a self containedIndustrial Township, 28 km from Hyderabad. OtherSanghi townships include a cement project at Gujaratand paper project at Assam.

Satyam Technologies LtdSatyam is the top software exporter in the stateamong STP units. Satyam Infoway (P) Ltd, part of the Satyam group of companies, is at the forefront of providing end-to-end electronic commercesolutions. With over workforce of 14,000, thegroups turnover stands at US$ 541 million with a net profit of US$ 11.5 million. Satyams developmentcentres in India, the USA, the UK, the UAE, Canada, Singapore, Malaysia, China, Japan and Australia serve over 300 global companies, including over 101 of the Fortune 500 corporations.

Singareni Collieries Company Ltd (SCCL)Singareni Collieries Company Ltd, incorporatedas a public limited company in 1920 became

a government company in 1956. The company is engaged in coal mining operations in AndhraPradesh. The reserves stretch over 350 sq km of Pranahita Godavari Valley of Andhra Pradesh withproven deposits of 7,944.4 million tonnes in 2004.

TecumsehTecumseh, an American based compressormanufacturing company, entered India throughacquisition of Siel Compressors Ltd-Hyderabad. It has one of its plants in Hyderabad manufacturing400,000 compressors per annum, the first and largest facility in the country. The unit caters to air-conditioning and commercial refrigerationapplications and is ISO 9001 and 14001 certified.

VirtusaVirtusa Corporation, formerly known as eRUNWAY,Inc., is a leading provider of global technologyinnovation services and deploys mission criticalenterprise-class products and solutions. The companystarted its operations in 1996 and has two advancedtechnology centres in Hyderabad. Forty-five per centof the companys global revenues are generated bythe Hyderabad centre. The company is a provider of outsourced software engineering services and hasdelivered over 500 product-class enterprise solutionstill date. The company plans to invest US$ 11 millionto expand its operations.

Visakhapatnam Steel Plant (VSP)The Visakhapatnam Steel Plant is one of the foremost steel plants in India, producing high quality standards of steel and allied products. VSP enjoys the reputation of being one of thecheapest producers of high quality steel in thecountry. The sales turnover of Visakhapatnam SteelPlant was US$ 1.3 billion during 2003-04, registering a rise of 22 per cent over the previous year. The cash profit was US$ 430 million and the netprofit US$ 330 million. The labour productivity, at 262 tonnes per man-year, has been the highestamong Indian integrated steel plants.

DOING BUSINESS IN ANDHRA PRADESHObtaining approvals

An indicative list of approvals with timeframe for setting up business in Andhra Pradesh

List of approvals and clearances required

Building approval

Power feasibility

Power Connection

Panchayat Clearance

Factories Clearance

Commercial Taxes

Water and Sewerage Clearance

Water Connection

Pollution Clearance

Financial Clearance

Land Acquisition

Land allotment in Industrial area

Alienation of Government land

Conversion of land for Industrialpurpose

Departments to be consulted

Municipality / UDA / TCP*

State Electricity Board

State Electricity Board

Gram Panchayat

Factories Department

Sales Tax Department

Pollution Control Board

HMWS & SB**

Pollution Control Board

State Finance Development Board

Municipality / UDA / TCP




Estimated time for clearance (in days)

7

7

23

7

7

7

7

23

60

21

15

7

15

45

*UDA: Urban Development Authority; TCP: Town and Country Planning**HMWS & SB: Hyderabad Metropolitan Water Supply and Sewerage BoardSource: Commissionerate of Industries and Commerce


Cost of setting up business

An indicative table on cost of setting up business in Andhra Pradesh

ManufacturingLand (US$ / hectare)* 373,416 Labour cost (US$ / man year)** 1,573

ServicesOccupation costs (US$ / sq ft / year) 18.4

Employee cost (US$ / man year)***

Software developers 6,383 Team leads 14,893 Architects 21,276.5 Project managers 31,915

Common headsCost of capital**** 10.57(Prime lending rate, per cent)

Electricity (US cents / kWh)*****

Metropolitan Area 9.1Non Metro Area 9.4

*Land cost has been estimated by computing the average cost of land at various Industrial Parks in Andhra Pradesh. **Source: Indiastat.com***KPMG Analysis on costing for an IT venture in India ****Estimated by computing the average Prime Lending Rates of prominent public sector, private sector and foreign banks in India*****Source: www.indiastat.comNote: Exchange rate used is INR 47 per US$

Confederation of Indian Industry (CII)Information on markets and opportunities forinvestment in Andhra Pradesh can also be obtainedfrom Confederation of Indian Industry which workswith the objective of creating a symbiotic interfacebetween industry and government.

Confederation of Indian Industry Southern Region

98/1, Velacherry Main RoadChennai 600 042Tel +91 44 52444555Fax +91 44 52444510Email [email protected]

Confederation of Indian Industry State Office

1-11-252/9, Regal HousePlot No 7Moti Lal Nehru NagarBegumpetHyderabad 500 016Tel +91 40 27765964Fax +91 40 27766116Email [email protected] www.ciionline.org

Contact for information

State Government WebsiteWeb www.ap.gov.in/

Andhra Pradesh Industrial DevelopmentCorporation Ltd (APIDC)Andhra Pradesh Industrial Development CorporationLtd was established in 1960 by the Government ofAndhra Pradesh for planned development of mediumand large-scale industries in the state offering a widerange of financial and consulting services. APIDCpromotes the process of industrial developmentundertaken by the Government. It has an authorisedcapital of about US$ 24 million and paid up capital of US$ 21 million.

Andhra Pradesh Industrial Development Corporation Ltd

Parishrama Bhawan5-9-58/B, Fateh Maidan RoadPost Box No 1049Hyderabad 500 004Tel +91 40 23235253 - 56Fax +91 40 23235516Email [email protected] www.apidc.org

The India Brand Equity Foundation is a public-private partnershipbetween the Ministry of Commerce & Industry, Government of India andthe Confederation of Indian Industry.The Foundations primary objective

is to build positive economic perceptions of India globally.

India Brand Equity Foundationc/o Confederation of Indian Industry

249-F Sector 18Udyog Vihar Phase IV

Gurgaon 122015 HaryanaINDIA

Tel +91 124 501 4087, 4060 - 67 Fax +91 124 501 3873Email [email protected]

Web www.ibef.org

andhra pradesh

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