Opinion

This business of Telangana

M. SOMASEKHAR | Updated on November 23, 2017 Published on August 01, 2013

Hyderabad blues.   -  THE HINDU

There could be a lull in the flow capital into Telangana. Inflows could start once the dust settles.

Till 2009, Andhra Pradesh was among the fastest growing states in the country. It was a favourite destination for global investments. Hyderabad, its capital with a history of over 400 years, was the most sought-after for business.

What after Telangana?

So far, it has symbolised uncertainty and turmoil. Statements made by the ruling Congress in December 2009 on separate statehood for Telangana led to agitations and political turmoil.

Against the backdrop of an economic slowdown in most developed countries, the State slipped in its ranking as an investment destination.



But all is not lost; the interest among big names continues. For example, the Mahindras have launched a big tractor unit in Medak, Proctor and Gamble is setting up a unit, Tata-Sikorsky has a large unit in place, and Amazon is setting up shop. Existing corporates are expanding wherever possible.

The Congress-led, United Progressive Alliance’s decision to carve out a separate Telangana State has sought to end this political and business uncertainty, though most analysts feel it is for narrow political gain.

The decision, in effect, means that Telangana will have 10 districts and be the region it was when it was reluctantly integrated to form Andhra Pradesh — the first linguistic State in 1956.

There are many who feel it will be “wait and watch” for at least a year before a stable leadership emerges in the new State, reviving the economy in its wake.

In the short term, there could be a lull in the flow of capital into the new State till some clarity emerges on industrialisation trends.

TIME PAST, TIME FUTURE

There could be the migration of Seemandhra (coastal and Rayalseema) investors away from Telangana for new projects. According to rough estimates, they own about 75 per cent of the drug, infrastructure, realty, education, hospitals, hospitality, media and film industry in and around Hyderabad.

Indeed, the wheel may have turned full circle. The 1980s saw the emergence of the Andhra entrepreneur (or ‘Andhrapreneur’). The rise of N.T. Rama Rao, the charismatic film star and the Telugu Desam, brought a flood of investors into Hyderabad.

A new breed of entrepreneurs such as K. V. K. Raju, an NRI who established the Nagarjuna Group, and many others moved from the agriculture-rich coastal Andhra to Hyderabad — buying land and setting up industries in several sectors. The film industry moved to Hyderabad, from Chennai.

The Y. S. Rajasekhara Reddy regime of 2004-2009 gave a big-ticket push to irrigation projects, infrastructure and realty, which again saw a rush of infrastructure players. Even as established players such as the GVKs, GMRs, Lanco Group, IVRCL, NCC and Madhucon became national giants, Ramky, Transtroy, SEW and dozens of new enterprises sprang up again mostly from the Seemandhra districts.

Today, perhaps ironically, the creation of a new capital for the prosperous Seemandhra region requires huge investments, and entrepreneurs seeking opportunities are sure to go there.

According to estimates, it will require a couple of lakh crores to create infrastructure in a new capital. N. Chandrababu Naidu, the TDP chief and former Chief Minister of Andhra Pradesh, has demanded Rs 5 lakh crore.

Though cities such as Visakhapatnam, Tirupathi and Vijayawada are candidates, the region between Ongole and Guntur is being projected as the capital.

The Hyderabad Brand

Historically, post the formation of Andhra Pradesh, the Nizam’s city has seen investments from traditional business communities — Rajasthani Marwaris, Kayastha settlers and, in a small measure, Muslims who went to the Gulf. Some typical companies going back to this phase are Pittie Laminations, Zinda Tilasmath and Charminar Industries.

Other companies going back to this period are Allwyn, Bakelite Hylam, Hyderabad Industries and Vazir Sultan Tobacco. And textile and sugar mills — Azam Jahi mills in Warangal and the Nizam Sugar Factory in Zaheerabad. The 1960s and 70s saw the growth of the public sector. BHEL, HMT, ECIL, HAL, HCL, NMDC, NFC and NRSA, to name a few large units, were established courtesy M. Channa Reddy and Jalagam Vengal Rao, Chief Ministers from the Telangana region.

This created employment opportunities. At the same time, several Defence laboratories were set up, thanks to Suri Bhagvantham, the then Scientific Advisor to the Raksha Mantri. Hyderabad was perceived to be centrally-located in the country, with good climate, well connected as well as multi-cultural. What now?

Developing Telangana

The Telangana region is rich in resources. It has large forest tracts in Nallamalla, tendu leaves (used to make beedis), it is rich in limestone and coal, and has a bit of granite. It has the Singareni Collieries and limestone deposits in Nalgonda district. Agriculture is predominantly rain-fed.

At the moment, it will be deficient on the power front. Of the total 16,500 MW in AP, its share is 5800 MW (2400 MW hydel and therefore seasonal).

Two units at Bhoopalapally and Singareni are expected to add 1200 MW in the next two years. Traditionally, cheap labour from the region has been exploited in the construction industry, both in Hyderabad and Mumbai.

While Hyderabad, now being developed into Greater Hyderabad, has a well established industry, realty sector, education institutions, an international airport, and the upcoming Rs 16,500 crore metro rail, the challenge would be to develop Warangal, Nizamabad, Karimnagar and others.

The mainstay in some of the Telangana districts has been food processing, poultry, dairy, weaving (Pochampalli and Koyyalgudem), seeds and fertilisers. There are over 100 parboiled rice units and cotton and ginning mills in Adilabad. Sadly, real estate has devoured lands under poultry, and grape gardens around Hyderabad. The typical feudal-landlord attitude and a large population of poor people have hindered entrepreneurship in the region.

Some of the big industrialists in Telangana include the MP G. Vivekanand of the Visakha Group, J. Nrupender Rao of Pennar and J. Rameswar Rao of the My Home Group (cement).

One of the big draws of the Telangana region could be its friendly weather virtually round the year. With the international airport and good road infrastructure, there is tremendous scope to accelerate growth.

The Ordnance Factory in Medak district and the Mahindras’ huge presence in Zaheerabad are examples of development. There are a large number of SEZs, like the pharma SEZ in Jadcherla in Mahboobnagar. All these can trigger growth. The Telangana Chambers of Commerce and Industry has been established.

From where will Telangana get the new investments? Will the non-resident Indian from Telangana based in the US or the UK or the Gulf now bring in investments? Will the vacuum created by the Andhra investor be filled by those from outside the State?

Or will the new State unleash entrepreneurs from the region? These are some questions the 29th State will have to find answers for.

Published on August 01, 2013
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