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April 2010
ANDHRA PRADESH
April 2010
Skilled and cost-effective labour Labour market flexibility Labour relations Availability of raw materials and natural resources
Procedures for entry and exit of firms Industrial regulation, labour regulation, other government regulations Certainty about rules and regulations Security, law and order situation
Tax incentives and exemptions Investment subsidies and other incentives Availability of finance at cost-effective terms Incentives for foreign direct investment (FDI) Profitability of the industry
Condition of physical infrastructure such as power, water, roads, etc. Information infrastructure such as telecom, IT, etc. Social infrastructure such as educational and medical facilities
ANDHRA PRADESH
April 2010
Contents
Advantage Andhra Pradesh State economy and socio-economic profile Infrastructure status State policies and incentives Business opportunities Doing business in Andhra Pradesh
Covering an area of 275,100 sq km, Andhra Pradesh is the fourth-largest state in India after Rajasthan, Madhya Pradesh and Maharashtra. It falls in the Southern peninsula of India; has a coast line of 974 km. The state has 23 administrative districts. Hyderabad is the capital city. Visakhapatnam,Vijayawada, Tirupati, Warangal, Gun tur, Kakinada, Nellore and Kurnool are the other key cities in the state. Andhra Pradesh has three major rivers, viz., the Godavari, the Krishna and the Thungabhadra. There are seven agro-climatic conditions and a variety of soils to support the cultivation of wide range of crops. The most commonly spoken language of the state is Telugu. Hindi, English and Tamil are the other languages used.
Source: Maps of India
The state offers a wide range of fiscal and policy incentives for businesses under the Industrial Investment Promotion Policy, 2005-10. Additionally, the state has well drafted sectorspecific policies.
The state has a large base of skilled labour, making it an ideal destination for the knowledge sectors. Further, the state has a large pool of semi-skilled and unskilled labour, especially, in the 15 to 49 age group.
Source: Maps of India
Facilitating infrastructure
The state has well-developed social, physical and industrial infrastructure and virtual connectivity; has good power, airport, IT and port infrastructure.
The state is targeting 9 per cent annual economic growth during the Eleventh Five-Year Plan period (200712). Vast natural gas reserves found in the KrishnaGodavari basin have opened up immense possibilities for the state economy.
The state has a stable political environment with a single-party government. The State Government is committed towards creating a progressive business environment.
Source: Maps of India
Andhra Pradesh Government Industry overall, biotechnology, ICT, tourism, textile and apparel Adequate skilled labour available
High
IT and ITeS Textiles and apparel Agro and food processing
Biotechnology
Policy thrust
Medium
Low
High
*Factor advantages include benefits due to geographical location and availability of factors like talent pool, natural resources and capital
ANDHRA PRADESH
April 2010
Contents
Advantage Andhra Pradesh State economy and socio-economic profile Infrastructure status State policies and incentives Business opportunities Doing business in Andhra Pradesh
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Andhra Pradesh Hyderabad 275,100 23 277 76.2 38.5 37.7 14.6 978 60.5 70.3 50.4 63.9
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At current prices, the Gross State Domestic Product (GSDP) was US$ 71.1billion in 2008-09. Between March 2000 and March 2009, the average annual GSDP growth was 11.5 per cent. The state is looking at an annual economic growth rate of 9 per cent during the Eleventh Five-Year Plan period (2007-12).
80.0
100.0
12
The Net State Domestic Product (NSDP) of Andhra Pradesh was about US$ 51.1 billion in 2007-08. The average NSDP growth rate between 19992000 and 2007-08, was about 9.4 per cent.
13
At US$ 29.1 billion, the tertiary sector contributed 61 per cent to the GSDP (at constant prices) in 2007-08. It was followed by the primary sector, contributing 35 per cent (US$ 16.5 billion) and the secondary sectors contribution of 4 per cent (US$ 2.1 billion).
39%
58%
3%
1999-2000
Source: CMIE
2007-08
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The per capita GSDP of Andhra Pradesh increased almost 2.5 times from US$ 368 in 1999-2000 to US$ 947 in 2007-08. A robust tertiary sector has helped Andhra Pradesh increase its average per capita GSDP by over 12 per cent between 1999-2000 and 2007-08.
Per capita GSDP
1000.0 900.0 800.0 700.0 (US$) 600.0 500.0 400.0 300.0 200.0 100.0 0.0 1999-00 Source: CMIE 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 368 395 427 474 556 586 653 789 947
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The natural resources, policy incentives and infrastructure in the state are favourably suited for investments in major sectors such as drugs and pharmaceuticals, biotechnology, IT/ITeS, mines and minerals, textiles, leather and tourism. Andhra Pradesh is one of the foremost states to have developed sector-specific policies. Forming industrial clusters and developing infrastructure has been a key strategy of the state to attract investments in various industries.
Agro and food-based industry Biotechnology Bulk drugs and pharmaceuticals IT and ITeS Mines and minerals Textiles and Leather Tourism
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Andhra Pradesh among the three largest food-grain producers in the country
In 2007-08, the total production of major crops of the state was over 49.0 million tonnes. The top ten crops account for over 96.2 per cent of the total crop production of the state. Sugarcane and rice, together, accounted for 68.5 per cent of total production.They were followed by maize, cotton and groundnuts. In 2007-08, Andhra Pradesh was among the three largest producers in the country of rice, maize, groundnut and sunflower seeds.
Crop Sugarcane Rice Maize Cotton Groundnut Gram Chilly Onion Mesta* Sorghum
Source: CMIE *A variety of Jute
Annual production (ooo tonnes) 20,254.0 13,324.0 4,135.0 3,491.0 2,604.0 912.0 772.0 690.0 501.0 470.0
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Andhra Pradeshs exports increased at a CAGR of about 26.6 per cent between 2001-02 and 2007-08.
2007-08
The states major exports products are software, drugs and pharmaceuticals, leather, animal and marine products, and agriculture and agrobased products. In order to boost exports from Andhra Pradesh, the State Government offers a special package of incentives to the export oriented units (EOU).
Export package to EOUs under the Industrial policy
2002-03 2001-02
Sales tax exemption on purchase of raw materials. Financial assistance through Andhra Pradesh State Financial Corporation (APSFC) at concession rates. Grant of 30 per cent on ground rent for participation in the international trade fairs, subject to a maximum limit of 9 sq m.
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The state has had a healthy FDI inflow over the years, primarily, in sectors related to IT/ITeS, automotive, engineering and electronics. According to the Reserve Bank of India, FDI inflows from April 2000 to October 2009 amounted to US$ 4.2 billion Of the total outstanding investments of US$ 141.5 billion as of December 2008, Andhra Pradesh had a well balanced distribution by sector with manufacturing, electricity, services, agriculture and construction having project investments of about 14 per cent to 27 per cent each.
14% 27% Manufacturing Mining 17% 4% Electricity Services Irrigation Construction 21%
17%
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ANDHRA PRADESH
April 2010
Contents
Advantage Andhra Pradesh State economy and socio-economic profile Infrastructure status State policies and incentives Business opportunities Doing business in Andhra Pradesh
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Road network
Andhra Pradesh has 17 National Highways running through it and covering 4,537 km. The roads under the State Road and Building Department was 191,792 km in 2006-07. Road density per thousand sq km was 697.4 in 2006-07. There are about 37 public-private partnership (PPP) projects in the roads sector that are at various stages of development.
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Railway network
Andhra Pradesh has a total railway network of 4,287.4 km, which is under the control of the South Central Railway with Secunderabad as the headquarters. The state has a total of 748 railway stations; the rail network comprises of 4,102.7 km of broad gauge and 184.7 km of metre gauge tracks.
South Central Railway network Division Secunderabad Vijaywada Guntakal Guntur Hyderabad Nanded Total Broad gauge 1,311.2 945.8 1,121.6 617.2 569.6 823.0 5,388.3 Metre gauge 0.0 0.0 184.7 0.0 0.0 175.9 360.6 Total 1,311.2 945.8 1,306.2 617.2 569.6 998.9 5,748.9
When completed, the Mass Rapid Transit Service (MRTS) project is expected to carry about 1.6 million passengers per day by 2011 and 2.6 million passengers per day by 2021. The total cost for the project has been calculated at US$ 2.6 billion. The state is the first to have a PPP Metro Rail project sanctioned by Government of India. The Central Government has already sanctioned 20 per cent of the project cost through the viability gap funding (VGF) mode. This project is environmental friendly and is expected to reduce pollutants by about 3,100 tonnes per annum (TPA).
Sources: South Central Railways website, http://scrailway.gov.in; Ministry of Road Transport & Highways , Annual Report, 2008-09; AP Admin setup, Directorate of Economics and Statistics website, www.apdes.ap.gov.in; Project description, Hyderabad metro rail website, www.hyderabadmetrorail.in
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Airports
The state has an international airport at Hyderabad and domestic airports at Visakhapatnam,Tirupati, Rajahmundry,Warangal,Vija yawada, Donakonda, Kadapa and Puttaparthy Hyderabad is connected to several key international destinations such as Amsterdam, Bangkok, Chicago, Frankfurt, Dubai, Sing apore, Sharjah, London and Kuala Lumpur, besides all major destinations across India. The Rajiv Gandhi International Airport near Shamshabad (about 27 km from Hyderabad) is a newly completed airport. It has replaced the former international airport of the city at Begumpet. The total cost for this project is US$ 560 million; it has been built on an area of 5,449 acres.
GMR-Hyderabad International Airport Limited (GHIAL), Shamsabad Started operations in May 2008. Constructed by the consortium of: GMR group Malaysia Airport Holding Berhad (MAHB) Government of Andhra Pradesh Airports Authority of India Single terminal, expandable structure Final capacity of 50 million passengers per year and 1 million tonne of cargo. Total built-up area of 900,000 sq m. Lufthansa Technik to set up a maintenance, repair and overhaul (MRO) facility at the airport. A new flight academy to be established at the airport.
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Ports
Andhra Pradesh is the second-highest cargo-handling port after Gujarat. The Visakhapatnam port ranks amongst the top three of the 12 major ports in the country. In 2009, it had a port traffic of 63.9 million tonnes which accounted for 12 per cent of total port traffic at all major ports. Coking coal, iron ore, petroleum products and thermal coal are some of the key products handled by the port. It also has a high volume of container traffic. Other than Visakhapatnam, the state has 12 intermediate and minor ports. In 2008, the minor ports at Andhra Pradesh handled about 9 per cent of the total traffic at all minor ports across the country.
Visakhapatnam Port Traffic (million tonnes)
70 60 50 40 30 20 10 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 22 23 26 30 33 34 36 36 40 45 44 46 48 50 56 56 65 64
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Telecom infrastructure
Andhra Pradesh had 4,166 telephone exchanges and 5.6 million telephone connections (excluding mobile phones) as of March 2009. The number of public call offices as of March 2009 were 200,291.
The State Government has embarked on a plan to have a reliable communications backbone, which is capable of gigabit ethernet connectivity across all government departments and offices. It would connect the state secretariat to district headquarters, mandals and villages, bringing the information superhighway to the doorstep of the common man in rural areas. The broadband network being implemented with private participation would connect the state headquarters with 10 gigabit per second (gbps) to each district headquarter, 1 gbps to each of the 1,128 mandal headquarters and 100 megabit per second to each of the villages.
There are about 27.4 million GSM cellular subscribers and 400,000 broadband connections. The state has approximately 44,000 km of fibreoptic cable network with public and private sector connectivity. Reliance Communications has created infrastructure for providing the required bandwidth for basic telecom services and other high-end services by laying a fibre-optic cable backbone of 3,000 km throughout the state.
Sources: Chief General Manager, Telecom, Andhra Pradesh Telecom Regulatory Authority of India 2008-09 annual report
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Power (1/2)
As of March 2009, Andhra Pradesh had a total installed power generation capacity of 9,224.3 MW, which comprised 7,097.9 MW under state utilities and 2,126.4 MW under the private sector. The capacity owned by state utilities comprised about 47 per cent of coal-based power plants and 50 per cent of hydro-power plants. About 75 per cent of the private sector controlled capacity was of gas-based power plants. Apart from the state and private sectors, NTPC, the central sector operator in the state, had plants of another 3,600.0 MW for thermal power generation. Per capita consumption was 703 kWh in 200708.
7,238.2
7,616.2
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Source: Central Electricity Authority
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Power (2/2)
The integrated Andhra Pradesh State Electricity Board (APSEB) was restructured in 1999 to form the following companies:
Segment Power generation Power transmission Power distribution Company name Andhra Pradesh Power Generation Corporation Limited (AP Genco) Transmission Corporation of Andhra Pradesh Limited (AP Transco) Central Power Distribution company of Andhra Pradesh Limited (APCPDCL), Hyderabad Southern Power Distribution Company of Andhra Pradesh Limited (APSPDCL), Tirupati Eastern Power Distribution Company of Andhra Pradesh Limited (APEPDCL), Visakhapatnam Northern Power Distribution Company of Andhra Pradesh Limited (APNPDCL), Warangal AP Gencos hydro-power plants AP Gencos thermal power plants
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Water supply
The average per capita supply of water in major cities is 106 lpcd* A coverage of 85 to 90 per cent in the core city areas. Operation and maintenance costs being recovered from water tariffs is high, at 85 per cent in Hyderabad.
Solid waste collection efficiency is very high across the cities of Andhra Pradesh and varies from 85 to 100 per cent, on an average, for all the cities Area coverage of the sewerage system in the major cities varies from 10 per cent to 45 per cent
Source: Commissionerate of Industries, Andhra Pradesh, 2006 Current per capita supply (litres/day) Desired Level
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Visakhapatnam has a high per capita road length of 1.03 km. Percentage of pucca roads in the cities varies from 70 per cent to 95 per cent. Percentage coverage of storm water drains varies from 30 per cent to 50 per cent.
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Sector Ports Roads Urban development Roads Roads Urban development Tourism Roads Roads Roads
PPP type BOOT BOT-Toll DBFOT BOT-Toll BOT-Toll Lease Lease BOT-Toll BOT-Toll BOT-Toll
Project cost (US$ million) 3,652.2 344.6 195.0 295.2 260.2 54.3 13.0 143.5 113.5 103.5
Stage Construction Construction Construction Bidding Bidding Bidding Bidding EOI EOI EOI
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The state had a literacy rate of 60.5 per cent in 2001 as against 44.1 per cent in 1991. In 2001, the male literacy figure stood at 70.3 per cent, while female literacy was at 50.4 per cent. A total of 41.6 million students were enrolled in schools in 2007-08.The total number of teachers was 439,136. Of the 97,475 schools in 2007-08, there were 62,464 primary schools, 17,957 upper primary, 16,937 high schools and 99 higher secondary schools. The state adds more than 100,000 engineering graduates, 12,000 management graduates and 350,000 English-speaking graduates every year. The Hyderabad University and the Osmania University are among the leading universities of the country.
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At the intermediate college level, courses are available in the science, arts and commerce streams. Vocational courses are offered in the fields of agriculture, engineering and technology, home science, paramedical, business and commerce, and humanities. Total junior colleges in 2007-08 were 4,032 with a total enrolment of 1.4 million students. The Technical Education Department of Andhra Pradesh supports 540 engineering colleges.
Degree colleges
Life-sciences institutes
Government colleges: 241 Aided colleges: 179 Unaided colleges: 1,459 Under-graduate and post-graduate colleges in 2008-09: 5,236
Centre for Cellular and Molecular Biology Centre for DNA Fingerprinting and Diagnostics Indian Institute of Chemical Technology International Crop Research Institute for Arid and Semi-Arid Tropics (ICRISAT) Directorate of Rice Research, National Academy of Agricultural Research Management National Institute of Nutrition Indian Council of Agricultural Research centres.
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Health infrastructure
Andhra Pradesh had 1,570 primary healthcare centres (4-6 beds) as of March 2008, with 2,214 doctors. There were 167 community healthcare centre (30 beds) with 235 specialists. Hyderabad has approximately 60 hospitals that classify as authorised centres for providing medical services. There are about 3,800 beds in tertiary care hospitals. Another 700 beds are expected to be added in the next few years.
Leading hospitals in Hyderabad Apollo Hospital Yashoda Super Specialty Hospitals Care Hospital Wockhardt Kamineni Hospital Nizams Institute of Medical Sciences MNJ institute of Oncology and Regional Cancer Centre Indo-American Cancer Institute and Research Hospital Global Hospital Medwin Hospital Medicity Hospital L V Prasad Eye Institute Krishna Institute of Medical Sciences
Source: Bulletin on rural health care statistics in India, Ministry of Health and Family Welfare website, www.mohfw.nic.in
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Cultural infrastructure
There are several sports complexes in Hyderabad,Visakhapatnam, Tirupati and other cities. Swimming and tennis are the major sports although, other games are also popular. The Boulders Hill in Hyderabad, The Army Golf Course in Secunderabad and the East Point Golf Club in Visakhapatanam are well known golf courses in the state. The Tirupati temple in Southern Andhra Pradesh makes the state one of the leading religious tourism spots in the country. AP Tourism promoted convention centres in Hyderabad state include Taramati Baradari, Hyderabad International Convention Centre, Shilpa Kala Vedika, HITEX, Marriott Convention Centre, Ramoji Film City, Katriya De Royal Convention Facilities.
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On the industrial infrastructure front, the state has taken a number of developmental initiatives to achieve consistent economic growth. The Government has initiated a set of prestigious projects including those in industrial infrastructure for the specific sectors, through the Andhra Pradesh Industrial Infrastructure Corporation Limited (APIIC). APIIC has already helped set up 272 industrial estates and specialized parks including the L&T Infocity, ICICI Knowledge Park, SP Bio-tech Park, Marine Bio-tech Park, Agri Bio-tech Park, special economic zone (SEZ), Pharma City, Hardware Park, HITEC city, leather parks, food processing park and agri-export zones. Since 2005-06, 592 IT parks have been registered by the Software Technology Parks of India (STPI).
2005-06
2007-08 AP
2008-09
Sources: IT parks, IT SEZs, IT and Communications Department website, http://apit.ap.gov.in; Export Performance of IT/ITES Industry for the year 2008-09- presentation, STPI website, www.hyd.stpi.in
35
The Central Government has given formal approval to 103 SEZs; in-principle approval to four SEZs and 70 notified SEZs. Export Promotion Industrial Park (EPIP ) to be set up in an area of 204 acres. APIIC is developing the park at an estimated cost of US$ 35.36 million. Critical Infrastructure Balancing Scheme (CIBS) to fund Industrial associations/service societies/NGOs for development of critical infrastructure.
Larsen & Toubro (L&T) Infocity Developed jointly by APIIC and L&T.
Integrated Infrastructure Development Centres (IIDC) to establish industries in rural/backward areas and provide agricultureindustry link. Centres are located in Nandyal (Kurnool),Tada (Nellore), Keelapattu and Madikonda (Warangal), Gajularamaram (Ranga Reddy) and Surampally (Vijaywada).
Spread across 158 acres at Madhapur with state-of-the-art infrastructure. Built in three phases with total built-up area of 1.8 million sq ft on 20.7 acres of land. Employs more than 12,500 persons.
Sources: Commissionorate of Industries, Andhra Pradesh, 2006; SEZ India website, www.sezindia.nic.in; Andhra Pradesh Government budget website, http://budget.ap.gov.in
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KARNATAKA
Nellore
Automobiles & Engineering IT / ITES Pharma / Biotech Mineral Textile & Apparel Food Processing
TAMIL NADU
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Infrastructure investments
Infrastructure investments in Andhra Pradesh were over US$ 26.2 billion, as of December 2008. Over 58 per cent of investments in infrastructure were in the area of power generation and distribution. About 20 per cent of the investments were in the railways sector, while another 10 per cent were in the oil and gas sector.
Investments (US$ million) 15,230.8 1,353.1 2,730.1 5,346.4 176.1 1,379.5 26,216.0
38
39
IT park
40
41
Brandix India Apparel City, Visakhapatnam Apparel Export Park, Visakhapatnam Textile Park, Pamidi Handloom Apparel Park, Pochampally
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Virtual infrastructure
E-seva
AP online
E-procurement
Presence of e-governance initiative, which offers a wide spectrum of citizenfriendly services One-stop shop for services of various state and central government departments in an efficient, reliable, transparent and integrated manner Facilitates online transaction processing of payments, issue certificates, permits, licenses and many other services
Launched by the State Government in August 2004, its objective is to bring government services/benefits closer to people living in rural areas. Further, it aims to provide computer literacy to at least one person in each family in rural areas Provides high bandwidth connectivity in rural areas
E-governance: gateway for the State Government; offers multiple services through a single window to citizens Developed and launched by the Government in partnership with Tata Consultancy Services Facilitates online submission of forms including registrations, licences, permits, certificates and representations to different government departments. Facilitates online payments for utilities, taxes, fee, deposits and stamp duties.
Automates procurement and purchase procedures spanning from demand aggregation to procurement and fulfilmentof the State Government. Presently, the portal is servicing 29 government departments, 39 public sector undertakings, four universities and 127 urban local bodies. Over 61,000 tenders with work amounting to US$ 26.3 billion have been handled through the portal.
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ANDHRA PRADESH
April 2010
Contents
Advantage Andhra Pradesh State economy and socio-economic profile Infrastructure status State policies and incentives Business opportunities Doing business in Andhra Pradesh
44
Promote Andhra Pradesh as an attractive destination for industrial investments. Market Andhra Pradesh as competitive investment destination for foreign Investments. Create enabling environment for ensuring maximum value addition to the locally available resources. Withstand global competition with emphasis on technology up-gradation and protecting Intellectual Property Rights Arrest environmental degradation. Encourage cluster concept to make the industries globally competitive. Develop effective regulatory mechanism for entry and operation of firms. Create a market driven environment with the private sector being the primary engine for growth.
Key mission: To make Andhra Pradesh a strong base for manufacturing sector To increase industrial investment by 10 per cent annually to reach US$ 3.8 billion by 2010 To contribute to the GSDP from industrial sector to be increased from 12.9 to 15.0 per cent Create additional employment opportunities and improve exports from the state by increasing the present share of exports in India from 4.4 to 10 per cent by 2010 Rural Industrialization with emphasis for promoting cottage and micro enterprises.
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25 per cent rebate in industrial estates/ industrial development area, limited to US$ 12,195. Reimbursement on power at US$ 20,000 per unit in the first year. 15 per cent investment subsidy on fixed capital investment subject to a maximum of US$ 36,585. Additional 5 per cent subsidy on fixed capital investment limited to US$ 12,195 for scheduled castes and tribes. 25 per cent of the tax paid during one financial year will be given back as a government grant for tax payment next year. Benefit will be available for five years from the date of commencement of production, i.e., up to the sixth year.. 3 per cent interest subsidy on prime lending rate on term loan, subject to a maximum of US$ 12,195 per year for five years . 5 per cent of project cost to SSI units of entrepreneurs belonging to the scheduled castes and tribes, limited to US$ 12,195. 8 per cent subsidy on capital equipment for technology up-gradation. 50 per cent subsidy for quality certification, limited to US$ 2,439; also available to existing units. 25 per cent subsidy on specific cleaner production measures, limited to US$ 12,195; also available to existing units. 50 per cent subsidy on the expenses incurred for patent registration limited to US$ 12,195.
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Roads, power and water to units contributing 50 per cent of cost of infrastructure from IIDF with ceiling of US$ 243,902. Special package of fiscal benefits on a case-to-case basis for existing units or projects.
Sources: Andhra Pradesh Industrial Investment Promotion Policy 2005-10, Project Vikas- NMCC website, http://nmcc-vikas.gov.in
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To achieve a US$12 billion IT hardware and electronics manufacturing industry. AP Technology Services Limited (APTS) to function as a specialised agency for all e-governance initiatives in close coordination with the Directorate of Electronic Delivery of Services (EDS) and the Institute for Electronic Governance (IEG). To expand the existing programme of training of chief information officers (CIO) and develop links with leading institutes such as the JF Kennedy School of Government at the Harvard University and the Civil Services College in Singapore for offering specialised programmes in e-governance and other related institutions. The AP Broadband project to provide affordable bandwidth to citizens, businesses and government entities in Andhra Pradesh. It is proposed to establish the network with threshold bandwidths of 10 gbps at the district level, 1 gbps at the mandal level and 100 mbps at the village level. The network will be established under the PPP mode. Rajiv Internet village is an innovative project of rural kiosks for delivering a host of government-to-citizens and business-tocitizens services and computer training for e-literacy.
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Power: it is classified under industrial units for the purpose of levying industrial power tariff. Rebate on cost of land: IT/ITeS companies establishing their own facilities on clear government land are eligible for a rebate in cost of land calculated at the rate of US$ 487.80 per job created. This rebate in not available on acquired land. Stamp duty: 100 per cent reimbursement of stamp duty, transfer duty and registration fee has to be paid by the IT and telecommunication companies. Zoning regulations and special stipulations for IT parks on private land and IT campus: IT/ITeS units will be exempt from the zoning regulations and from the payment of conversion fee. Urban land ceiling (ULC) exemption: private land-owners will be allowed exemption under ULC for development of IT parks with a minimum of 25 acres in the periphery of city limits and beyond. Units with a minimum of 5 acres within city limits will be eligible for ULC exemption, subject to payment of prescribed fee. Training incentive: an incentive of US$ 48.78 per candidate will be provided to training centres which successfully train candidates in communication and soft skills, and provide employment in reputed IT/ITeS companies. Reimbursement of patent filing and partial reimbursement of quality certification costs.
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The package is meant for IT units with a turnover of less than US$ 2.43 million and more than US$ 240,000 per annum. Power: rebate of 25 per cent on power tariff in the first three years of operations and conversion to industrial power tariff. Exhibition subsidy: reimbursement of 50 per cent exhibition subsidy for participating in international exhibitions, limited to 9 sq , of space, with respect to stall rent payable for participation in international events notified by the Information Technology and Communications (ITC) Department IT&C. Allotment of land: Government will endeavour to reserve land for preferred allotment to small and medium enterprises (SME) in other locations. Criteria for allotment will be prepared separately. IT exporters associations: Government will support associations such as HYSEA, NASSCOM, STPI, IEG or any such organisation (as decided by the committee) in creating libraries for making available materials on trends in technology, market intelligence, research reports and analysis, etc., by contributing US$ 24,000 per annum for development of the SME sector. US$ 24,000 as recruitment assistance for employing minimum 100 employees in IT and 200 employees in ITeS within one year of commencement of commercial operations in Hyderabad or within 50 km of Hyderabad. This incentive will not be available if the incentive rebate on cost of land is availed. US$ 36,000 as recruitment assistance for employing minimum 100 employees in IT and 200 employees in ITeS within two years of commencement in the tier-II cities. A special package of incentives will be offered to mega projects. Such projects will be defined as projects creating employment for more than 1,000 persons in the case of IT and 1,500 persons in the case of ITeS. An investment of above US$ 12.195 million will be considered as a mega project.
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To adopt new and more efficient, cost-effective delivery channels with suitable interfaces for backward integration. The Government to establish a standards-based e-government Gateway to enable the various service providers to interact with the backend databases and applications of various government departments and agencies and provide cost-effective services to the citizens and businesses. To avoid the problem of limited suitability of all the delivery points and channels for delivering all the services, those services involving checking of documents, issue of certificates, licenses needing authentication, etc., to be done at departmental outlets and/or e-Seva centres. For sustaining various citizen-service projects and initiatives, it is necessary that the concerned partner, vendor or entrepreneur is compensated on a per transaction basis. The transaction cost could be met either by the government department/agency or by the customer, depending on the nature of the service. The following principles are to be adopted in this regard:
No user charges to be collected from the citizen in respect of payment for utility bills and taxes, irrespective of the delivery channel. The concerned department or agency will pay the service charges to the service providers. In respect of other services such as information services, interactive services like online filing of forms, form submission and issue of certificates, a charge of US 11 cents to US 33 cents to be payable by the customer to the operator of the Service Delivery Point (SDP). The revenue sharing between the SDP, service providers and the government department to be mutually agreed between the various parties involved and specified in a Service Level Agreement (SLA).
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To create an enabling environment and simplify procedures; to facilitate the flow of venture capital funds and address issues such as Intellectual Property Rights (IPR). The thrust areas identified include diagnostics, therapeutics, pharmaco-genomics, bioinformatics, agriculture biotechnology, industrial biotechnology, inputs to the industry (hardware suppliers instrumentation and chemicals), marine biotechnology, forest and environment-focussed biotechnology, contract research in all areas of biotechnology and related areas. The strategy adopted involves encouraging R&D, developing infrastructure, providing incentives, land and grants for training institutes and housing, mega projects, developing adequate human resources, creating an enabling environment, funding biotech activities, and protecting IPR. The Andhra Pradesh Government is working on a new biotechnology policy.
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Concession on allotment of land on a long lease of 33 years. For mega projects, the lease period to exceed 33 years and lease rent shall be 10 per cent of market value, subject to review every five years. Investment subsidy of 20 per cent of project cost and 15 per cent for up-gradation of existing hotels, limited to US$ 48,000. 100 per cent reimbursement of stamp duty and transfer fee on purchase of land or lease of land meant for the project. Reimbursement of 25 per cent of value-added tax and luxury tax paid for a period of five years. Reimbursement of 25 per cent of entertainment tax for multiplexes in theme parks and urban entertainment centres for a period of five years, limited to 100 per cent of the project cost for projects more than US$ 1.219 million and located in notified tourism areas or special tourism areas. Floor area index relaxation, and automatic conversion/exemption from land-use zoning regulations. Market development assistance scheme for promotional activities
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Fresh Food Policy, 2005 Incentives: Reimbursement of cost of power to be extended for a period of five years from April 2005.
Food processing units that commenced commercial production after November 14, 2003, are eligible for reimbursement of power costs.
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ANDHRA PRADESH
April 2010
Contents
Advantage Andhra Pradesh State economy and socio-economic profile Infrastructure status State policies and incentives Business opportunities Doing business in Andhra Pradesh
Company logos cited in this section are registered trademarks of the respective companies.
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IT and ITeS
Andhra Pradesh has had a steady growth in IT/ITeS exports, recording a 24.5 per cent growth in 2008-09 against the national average of 20.7 per cent. Total exports were about US$ 5.1 billion in 2008-09 against US$ 5.6 billion in 2007-09. There are 69 IT and ITeS companies registered under Software Technology Park (STP) scheme, including nine foreign companies. The state attracted investments to the tune of US$ 110 million, of which investments from foreign companies were at US$ 2 to US$ 3 million as of July 2009. Total employment generated by IT and ITeS industry in the state increased from 239,000 in 2007-08 to 251,786 in 2008-09. The total employment generated by the IT sector in 2008-09 increased by 12,768 for the STP and SEZ units.
Key players
Mahindra Satyam Microsoft Cognizant Genpact Intergraph CSC Zensar iGate Patni Computers IBM Sonata Software
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Microsoft
Genpact
Cognizant
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Patni Computers
IBM
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Ikanos Communications
HCL
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CSC
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Hyderabad is the hub of the bulk-drugs industry, accounting for one-third of the national production of bulk drugs. The state produces a majority of 500 basic drugs produced in the country.
Key players Dr Reddys Laboratories Aurobindo Pharma AMRI Novartis Nektar Shantha Biotechnics Vimta Labs Indian Immunologicals Parexel Biological E. Bharat Biotech Indigene
The biotechnology market size of the sector in Andhra Pradesh in 2008-09 stood at US$ 475 million and accounted for 18 per cent of the total Indian biotechnology industry. The industry accounts for 43 per cent of the total biotech revenue generated by companies in south India (US$ 1,104 million). The State Government has helped develop the pharmaceutical and biotechnology industry through specific policies promoting knowledge-based cluster approach with financial incentives and appropriate infrastructure support. Presence of related educational infrastructure has also helped the industry. The biotechnology incubation centre was commissioned in late 2008.
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Aurobindo Pharma
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Matrix Labs
Hetero Drugs
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Nektar
Shantha Biotechnics
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PAREXEL
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Indigene
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The state is a leading producer of cotton, with a production of about 227 million bales in 2008-09, an increase of 8.6 per cent over 2007-08. Medium grade and superior long staple varieties of cotton are predominantly grown in the state There are over 80 spinning mills including a number of 100 per cent export-oriented units with state-ofthe-art machinery, producing cotton, synthetic and blended yarns. There are 1,079 weaving units with a production capacity of 789 million metres of fabric per annum. The state has, moreover, emerged as a large textile processing centre. Over 100 units are set up in the state with a processing capacity of 13 million metres of cloth per annum. The number of power looms in the state aggregates to around 44,000 employing approximately 1,10,000 workers Apparels, fabrics and furnishings have been identified as potential products by the state. It aims to achieve, annually, US$ 6 billion in textiles exports, and US$ 2 billion in handloom exports by 2010. The state aims to increase its domestic contributions for apparels and textile products to US$ 4.87 billion. The domestic sales of the state are expected to be around US$ 3 billion per annum by 2010. The state aims to generate an additional employment to 1.5 million people in this sector by 2010.
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The agricultural sector in the state witnessed a growth of 7.5 per cent over the last five years and the total crop area increased to 12.2 million hectares by 2008-09. A variety of agro-climatic conditions in the state make it conducive for growing a variety of horticulture crops such as fruits, vegetables, spices, tuber crops, plantation crops and floriculture. The state is the largest producer of rice in India. It is a leading producer of cash crops such as tobacco, groundnut, dry chilly, turmeric, oilseeds, cotton, sugar and jute. It is the second-largest producer of horticulture products in India; production is expected to reach 22.9 million tonnes by 2020. The state produces some of the finest varieties of mangoes, grapes, guavas, papayas and bananas. It is the number one producer of sweet lime, lime, papaya, chilly, turmeric and palm oil. To achieve the growth envisaged for the agricultural sector, the state aims to attract investments of around US$ 17.07 billion by 2010, with the total investment until 2020 targeted at around US$ 39.02 billion.
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Key players CongAgra Foods Kraft foods ITC APDDCF Cargill Ushodaya Enterprises
Cargill
ITC Limited
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Ushodaya Enterprises
Kraftfoods
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Fisheries
In 2007-08, the state has 6.21 million hectares of forest area, which accounts for 22.6 per cent of the total geographical area of the state. The contribution of forestry to the GSDP was estimated at US$ 412 million in 200607, a 7 per cent increase over 200506.
Ranks first among Indian states in brackish-water shrimp production and fresh-water prawn production. It stands second in fresh water fish production and, in addition, is fifth in marine fish production. The overall fish production in the state was an estimated to touch 1.4 million tonnes in 2008-09 as against 1.3 million tonnes in West Bengal, making Andhra Pradesh the highest producer of fish in the country. In addition to fresh water fish, the state will be harvesting 260,000 tonnes of marine fish and 40,000 tonnes of brackish water shrimp. Andhra Pradesh is already the top producer of brackish water shrimps in the country. The contribution of fisheries to GSDP in 2006-07 was estimated to be US$ 1,600 million, a 6 per cent increase over 2005-06 . The Andhra Pradesh Government has entered into an agreement with the US-based World Tuna Development International (WTDI) to develop tuna fishery in the Bay of Bengal. The State Government will invest US$ 2 million towards 51 per cent of the equity in the proposed joint venture company named as Andhra Pradesh Marine Fisheries Development Limited (APMFD) while WTDI will invests the remainder. The balance US$ 11.5 million will be taken as term loans from banks.
Sources: Commodities Bureau Agriculture action plan 2009-2010, Department of Agriculture website, http://agri.ap.nic.in, Andhra Pradesh economy in brief 2008, APDES website, www.apdes.ap.gov.in, news publications
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The sector is rapidly expanding and playing a significant role in improving the rural economy. Providing gainful employment to a large number of small and marginal farmers and agricultural labourers to enhance their economic status Activities of the animal husbandry department have been oriented towards health of livestock and increased production of milk, eggs and meat.
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According to the Petroleum Ministrys provisional figures for 2008-09, the net natural gas production was about 1,515 million cu m. The states Krishna-Godavari basin area has a total hydrocarbon resource base of 1,130 million metric tonnes. Andhra Pradesh is set to become the second Indian state after Gujarat to enter the oil and gas exploration and production segment through bids for oil and gas blocks under the Central Governments New Exploration Licensing Policy (NELP). The Andhra Pradesh Government decided to enter the oil and gas exploration and development sector and set up a special purpose vehicle (SPV), the Andhra Pradesh Gas Infrastructure Corp Limited as a joint venture between two state-owned entities. The infrastructure provider for industries in the state, APIIC, would hold 51 per cent in the SPV and AP Genco, would hold the balance. Petroleum companies are in the process of setting up a gas grid across Andhra Pradesh; ONGC is setting up a 7.5 million tonnes refinery in the Kakinada SEZ with a capital outlay of US$ 1.82 billion. Hindustan Petroleum Corporations Visakhapatnam plant has expanded its refined crude throughput from the existing 7.50 million tonnes in 2003-04 to 9.4 million tonnes in 2007-08. In October 2009, the Department of Petroleum, Government of India, signed a memorandum of understanding with the Andhra Pradesh Government for setting up a petroleum, chemicals and petrochemicals investment region (PCPIR) in the Visakhapatnam-Kakinada region as an industrial cluster. The investments expected in the PCPIR are estimated to be around US$ 74.6 billion.
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Tourism
Andhra Pradesh is known for its pristine beaches, sacred places of worship, lush green forests, spicy cuisine and hospitable people With tourist attractions such as Charminar, Golconda Fort, and Ramoji Film City, Araku Valley, Borra Caves, Tirupati Balaji Temple, and Puttaparthi Saibaba, the state offers attractive investment opportunities to developers and investors. The state ranked seventh in international tourist arrivals and accounted for 5.6 per cent of the total international tourist arrivals in India in 2008. About 88 projects worth US$ 197.6 million have been commissioned by the private sector. During the last four years, the State Government has facilitated 68 projects with a total investment of US$ 368.3 million. Nine projects have been sanctioned for the state by the Ministry of Tourism during 2008-09, at a project outlay of US$ 21 million. Andhra Pradesh Tourism Development Corporation (APTDC) has developed tourist infrastructure and special packages to facilitate the overall development of the tourism sector in the state. The State Government has identified Hyderabad,Visakhapatnam, Tirupati,Vijayawada, Nagarjunasagar and Warangal for tourism development.
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Leather
The state is a major producer of hides and skins, producing about 19 million pieces per annum, constituting around 10 per cent of the countrys output. The 34 large and medium tanneries in the state produce about 40 million sq ft of processed hides and skins per annum. The state has15 leather goods and footwear manufacturing units in the large- and medium-scale sector. The Government provides financial assistance in the form of investment grants to the extent of 30 per cent of cost of plant and machinery for SSI and 20 per cent of cost of plant and machinery for other units, subject to a ceiling of US$ 120,000 for technology up-gradation or/and expansion.
Leather Industries Development Corporation (LIDCAP) LIDCAP is the nodal agency for leather industry development in the state. Plans to establish71 mini-industrial parks on 25 acres of land for processing raw material; 16 medium industrial parks of 100 acres each for processing semi-finished leather; six mega industrial parks of more than 300 acres each including an international leather complex at Krishnapatnam (KILC). KILC is a world class infrastructure for leather tanning and leather processing. The project finance is supported by the Government of India, Government of Andhra Pradesh and has private participation in the SPV. KILC is located at Krishnapatnam in the Nellore district in an area of 412 acres near the sea coast. It is proposed that KILC will house about 25 tanning units in a floor area of 250 acres of land and about 21 leather processing units with capacities ranging between 6 and 25 tonnes and a total capacity of 300 tonnes in a floor area of 220 acres.
Source: Leather sector in AP, ILC profile, LIDCAP website, www.lidcap.org
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Andhra Pradesh is estimated to account for approximately nine per cent to total mineral production in 2008-09. The states mineral production was valued at US$ 2.4 billion in 2007-08, a 14 per cent increase over 2006-07. Production in iron ore increased by 73 per cent, while that of manganese ore by 120 per cent and petroleum (crude) by 11 per cent in 2008-09. Production of silica sand increased by 136 per cent, ochre by 86 per cent, quartzite by 67 per cent, dolomite by 19 per cent, limestone by nine per cent and coal eight per cent in 2008-09.
Contribution to national minerals production (%) Barytes Ball clay Corundum Diamond Calcite Mica Garnet Limestone 94 63 61 40 39 28 26 23
Sources: Socio Economic Survey of Andhra Pradesh, 2007, news publication Indian mineral scenario - states, Ministry of Mines website, www.mines.nic.in
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Hyderabad is one of the leading hubs for the jewellery sector in India. The state produces a wide array of precious- and semi- gems as well as pearls. The AP Gems and Jewellery Park has been developed on an area of 2.5 acres in Hyderabad with an investment of around US$ 12.68 to US$ 13.90 million. The park is a joint venture between the Phoenix Group, IOI Corporation and AP State Trading Corporation. It has been developed as a state-of-the-art facility in which the floor space will be sold to jewellers and pearl dealers.
Hyderabad Gems SEZ Limited (HGSEZ) Situated at Hardware Park near the upcoming international airport. SEZ to be set up at a cost of about US$ 121.95 million. The 200-acre park will house more than 75 diamond, gold and watch manufacturing units and will generate 50,000 new jobs. An international trade centre, a world class convention centre, plus an exhibition area will also be a part of the SEZ. It is the first jewellery park to have an integrated manufacturing and trading facility.
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Being a major tourist hub in the country, the state is making rapid strides in the retail and entertainment segment. To attract new investments in the sector, the Government offers various incentives including an investment subsidy of 20 per cent of the project cost, subject to a maximum of US$ 50,000. To encourage up-gradation to international standards, selected hotels will be offered an incentive of 15 per cent of the project cost.
The sector is attracting investments in projects such as world -class spas, entertainment centres, mega shopping malls, multiplexes, business convention centres and theme parks. Urban entertainment, including amusement parks, has redefined leisure and entertainment activities in the city.
Promoters Gayatri Hi-Tech Hotels Limited Hotel Leelaventure Limited Royal Orchid Hotels Limited Taj GVK Hotels & Resorts Limited
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Electronic hardware
Semiconductors
Organised retail is catching up fast with significant mall development in the pipeline ; there are 20 existing and 24 upcoming malls in Hyderabad alone. Reliance Retail opened its first 'Reliance Fresh' stores in Hyderabad and Secunderabad in late 2006. The company plans to open hypermarkets in Visakhapatnam, Vijayawada and Guntur. Reebok has opened its largest store in the world in Hyderabad. GVK group opened GVK one a world-class shopping space measuring 6,25,000 sq . ft in May 2009. GVK one also hosts a 1,200-seat INOX multiplex along with a themed entertainment centre Funzone.
Key segments within the electronic hardware industries in the state: Telecommunications Industrial electronics Test and measuring equipment Computer and consumer electronic Strategic electronics There is immense scope for investments in the fields of nanotechnology, semiconductors, computer peripherals, appliances, precision engineering, integrated circuits, large scale integration chips (LSICs) and very large scale integration chips (VLSICs).
An investment of US$ 3 billion has been announced for setting up a fabrication unit in the Fab City, Hyderabad. Fab City has been allotted 1,200 acres, close to the new international airport. It offers various incentives such as exemptions, reimbursements, facilitating technical education, etc., for the sector under the Electronic Hardware Policy of the state.
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Greater Hyderabad growth corridor project Roads Godavari drinking water supply scheme Finished steel project
Source: www.projectstoday.com
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Sector Transport Refinery Power Aluminium Industrial park Aluminium Power Construction Roads Power
Promoter Hyderabad Metro Rail Limited Kakinada Refinery & Petrochemicals Limited East Coast Energy Private Limited Jindal South West Aluminium Limited Yeswanth Industrial Infrastructure Projects Private Limited National Aluminium Co Limited Sheshadri Power & Infrastructure Private Limited CBD Tower Private Limited National Highways Authority of India AP Genco
Investment (US$ million) 2,637.4 3,260.9 2,407.6 1,956.5 1,652.2 1,521.7 1,521.7 1,521.7 771.7 645.4
Location Hyderabad Kakinada, East Godavari Srikakulam Boddavara Perupalem Hindupur Hyderabad Multiple locations Warangal
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Contents
Advantage Andhra Pradesh State economy and socio-economic profile Infrastructure status State policies and incentives Business opportunities Doing business in Andhra Pradesh
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Controls the office of the Principal Secretary, Industries & Commerce, Commissioner of Industrial Promotion They are responsible for SSIs and control the office of the Commissioner of Industries & Export Promotion, Commissioner Handlooms and Textiles, Commissioner for Sugar and Director, Mines and Geology. The Industries & Commerce department is headed by the Industries Minister and is controlled by the Principal Secretary.
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Contact list
Key agency Contact Information 6th Floor, Parisrama Bhavan Fateh Maidan Road, Basheerbagh Hyderabad - 500 004 Phone: 91-40-2323 7622, 2321 2798 Fax: 91-40-2323 3393, 2323 3251 E-mail: apiic@hyd.sancharnet.in Website: www.apiic.in Industries and Commerce Department 2nd Floor, D Block, Room No-348A Secretariat Hyderabad - 500022 Phone: 91-040-23454449 Fax: 91-040-23452985 E-mail: secy_inds@ap.gov.in Website: www.industriesportal.apcgg.gov.in
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Annexure
Exchange rates Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Averages for the year
INR equivalent of one US$ 46.60 48.30 48.04 45.60 43.70 45.20 45.00 42.00 40.20 46.00
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DISCLAIMER
India Brand Equity Foundation (IBEF) engaged ICRA Management Consulting Services Limited (IMaCS) to prepare this presentation and the same has been prepared by IMaCS in consultation with IBEF. All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of IBEF. This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the information is accurate to the best of IMaCSs and IBEFs knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice. IMaCS and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation. Neither IMaCS nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.
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