AP's all wired up with promise

Is the electronics industry getting the much-needed push? The policy initiatives seem to have given rise to a new climate of enthusiasm.

The Centre has come up with a National Electronics Policy that promises to create a hardware base for the industry, create a couple of crore jobs and promote indigenous development in the sector, now dominated by foreign players, especially from South Korea, Taiwan, China and the US.

Taking a cue from the Union Ministry of Information Technology, Andhra Pradesh formally came out with the Electronics Hardware Policy 2012-17. Neighbouring Karnataka, housing the maximum number of research centres, IT companies and a good number of electronics units, announced its own policy last year.

The Policy document was unveiled by the Chief Minister, Mr Kiran Kumar Reddy, at the Advantage AP, IT Summit last week. The moot question is — will the policy give the required boost for the industry to rebound in Andhra Pradesh, especially Hyderabad?

At present, the State ranks fifth in the country, with a production of Rs 6,500 crore and export of Rs 650 crore as per data available for 2009-10. There are about 300 electronics units, which employ around 60,000. The major segments in the hardware area are industrial electronics, communication and broadcasting, computers and peripherals, strategic electronics, semiconductors and solar products.

ECIL initiatives

Ever since the Electronics Corporation of India Ltd (ECIL) was set up in 1967 under the visionary leadership of Dr A S Rao, Andhra Pradesh had a head start in this important industrial area. In the decades that followed, the State saw the emergence of several industries, both in the public and private sectors.

The public sector giant under the Department of Atomic Energy spawned the growth of, first, a large number of ancillary units around Hyderabad. Second, it also contributed, in a way, to entrepreneurship, with some of the professionals moving out to start their own industries: Elico Industries, ITL Industries, being some of the first few electronics ventures that came up and continue till date. Most of the components and equipment were manufactured by the small and medium enterprises.

The State Government was also not far behind in realising the potential of electronics. The Andhra Pradesh Electronics Development Corporation was formed with the well-known technologist, Dr U V Warlu, heading it.

The Corporation also gave an impetus to the start of several electronic firms. The Electronics Testing and Development Centre and many units within the PSUs focussed on electronic development sprang up as well.

ECIL has done to the electronics industry in Andhra Pradesh, what the Indian Drugs and Pharmaceuticals Ltd (IDPL), sadly now in limbo, did to Hyderabad, which emerged as the bulk drugs capital of the country. ECIL went through troubled times in the 1990s, coming close to being referred to the Board for Industrial and Financial Reconstruction. It has since revived and is now growing in strength.

Will ECIL’s turnaround and robust march — thanks to its in-built strengths and support from the country’s strategic sectors and the government — find an echo in the fortunes of the electronics sector in the State, courtesy the new electronics hardware policy 2012?

AP Policy of 2012

Let’s examine the intent of the Government in the present context. The State Government hopes to spur the growth of electronics hardware manufacturing through a series of initiatives.

The Government wants to create four hubs in the four directions around the outer ring road, consisting of 300 acres of multiproduct electronic, Special Economic Zones, and another 200 acres for the supporting electronics industry.

A significant move announced includes the conversion of the existing FAB City and Aeronautical SEZ into centres of excellence to give fresh impetus to infrastructure.

Interestingly, the FAB City has been the most hyped project of successive governments in the State. Having not succeeded in getting a fab maker (foundry for manufacturing chips), the Government tried its hand at getting solar energy players to set up units. Though there was good response and nearly 20 companies were allocated land, hardly a handful got into action.

The policy has also dovetailed its move, as far as creating hardware manufacturing clusters in both SEZ and non-SEZ areas is concerned, with the Centre’s policy.

Further, start-ups and micro enterprises have been promised a 10 per cent subsidy on capital equipment for technology upgradation, besides a 25 per cent subsidy on lease rentals of up to Rs 5 lakh a year for three years.

The Government wants to create a single window for clearances and also spread the development in other cities, such as Visakhapatnam, Vijayawada, Warangal, Tirupati, etc. Plans are also afoot to set up a new 150-acre electronic hardware park.

A hardware park created nearly a decade ago near the present Rajiv Gandhi International Airport attracted hardly a handful of manufacturing units.

However, in tune with the huge response from PSUs and corporates to invest in projects in Andhra Pradesh, evinced at the CII-Partnership Summit in January, the unveiling of the Electronics Hardware Policy has also caught the attention of companies such as Samsung, Hitachi, Solartech and Huawei, to name a few.

They are exploring possibilities of setting up their production facilities, according to the State IT minister, Mr Ponnala Lakshmaiah. It is a different matter that the promised investments are yet to be realised.

inherent strengths

There is a favourable environment for the growth of the electronics sector in the State.

In addition to the presence of large PSUs such as ECIL, BEL, HAL, BHEL, etc, which have expertise, there are electronics manufacturing units, testing and development facilities. The good logistics connectivity apart, human resources, a key aspect, are available.

The State, with nearly 300 engineering and many technical colleges, produces nearly 3 lakh engineering and other graduates with technical degrees.

All the top engineering, management colleges (IIT, NITs, BITS) have presence. The State Government’s own Jawaharlal Knowledge Centres are churning out manpower to bridge the gap between industry and academia. The National Skill Development Council, the Confederation of Indian Industry, AP Chapter, are also working towards skill development.

Despite the difficult times that the State is passing through in terms of politics and administration, the IT sector has done quite well. As per official statistics, the total export revenues earned by the sector have grown from Rs 1,000 crore in 1998-99 to Rs 36,000 crore in 2010-11.

This is due to a combination of cost-effectiveness, abundant talent and maturing service delivery, the Government claims.

In the electronics sector, there is big need for huge investments, risk-taking entrepreneurship and the ability to take on intense competition.

The Government has shown its willingness to address challenges such as inadequate infrastructure (power, transportation and land) on the one side and higher taxes, and non-availability of finance, on the other, to give the push. It remains to be seen how the industry, entrepreneurs and investors will respond.

soma@thehindu.co.in

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