Naidu charts new policy to woo automakers

Andhra Pradesh Chief Minister, N Chandrababu Naidu, is pulling out all stops to make his state the next automotive hub of India. As part of this drive, he announced an industrial policy for 2015-20 last week coupled with a new automotive policy.

Naidu is keen on developing the Chennai, Chittoor, and Nellore/Krishnapatnam region as a manufacturing hub. While assuring swift clearances, he said this hub would have two ports at Krishnapatnam and Dugarajapatnam, airports at Tirupati and Nellore along with high-speed linking roads and industrial corridors.

Located close to the major automotive zone of Chennai and the relatively smaller region near Bengaluru, the proposed auto hub in AP will aim to attract a host of automakers keen on their next phase of growth in India.

Isuzu Motor of Japan is already on course with its new facility in the Sri City multi-product economic zone overlapping Chittoor and Nellore. Hero MotoCorp has, likewise, made public its intent to set up shop in AP and Naidu will be doubtless keen to add more names to the kitty.

Planning ahead

Last week saw Naidu at an interactive session with global executives from 25 countries at Sri City last week, where he listed out the essentials for setting up an industry - hassle-free power supply, water, adequate litigation free land, and early clearances. “I will ensure all of them; it is for you to turn this place into an auto hub,” he added.

Incentives being planned include fixed power cost reimbursement at Re 1 per unit for five years from the date of starting commercial production as well as complete reimbursement of stamp duty paid on purchase or lease of land meant for industrial use.

The auto policy announced last week has, as its pivot, the sound port logistics coupled with development of the Vizag-Chennai and Chennai-Bangalore industrial corridors. AP’s pitch includes industrial land bank of one million acres accompanied by relevant infrastructure.

The State plans to offer auto suppliers manufacturing clusters on a public-private partnership model with dedicated units. Two such clusters are planned in Nellore and Chittoor. The auto sector has been declared ‘public utility’ with round-the-clock power supply.

Naidu’s auto policy also provides for capital subsidy and reimbursements. Mega integrated automobile projects with investments of $240 million are ensured 100 per cent CST reimbursement for 10 years or a GST regime, whichever is earlier. Larger projects would be tackled on a case-to-case basis.

In addition, AP has provided for single window clearances and deemed clearance in cases of delay. It has entrusted the role of this single point interface to the Commissioner of Industries. The Centre’s much awaited announcement to grant special status to AP could translate into additional rebates for new units.

Lessons learned Reports are doing the rounds that TVS is looking at the state for its expansion plans along with other automakers. A host of Japanese investors and agencies such as JICA (Japan International Cooperation Agency) are also keen to participate in development in the region. This could spawn electronic clusters in the not-so-distant future.

From Naidu’s point of view, the biggest selling point for the new hub is its proximity to neighbouring States like Tamil Nadu, in particular, which has some top brands as its residents. Companies keen on expanding operations will find this part of AP a viable option as it is close to existing hubs which means sourcing of components becomes easier. The former united AP sans Telangana had the potential to become an auto hub but the concerns of inadequate power supply deterred manufacturers. Ideally, the area around Hyderabad would have been the perfect location for automakers along with the Chittoor-Nellore zone and possibly Visakhapatnam with its port connectivity.

During the 1980s, the Centre and State sought to create a manufacturing hub (inclusive of auto) near Hyderabad. This led to the setting up of an Allwyn scooter unit and another venture of Allwyn-Nissan for pickups and buses in the Patancheru area. Many ancillary units for piston rings, engine blocks etc also sprouted in this region.

Mahindra & Mahindra then set up its facility at Zaheerabad, not too far away from Hyderabad. This is home to light commercial vehicles and is also a major unit for tractors. Among the big misses in the erstwhile united AP was Malaysian automaker, Proton, which was eyeing Parvada near Vizag but later backed out. Volkswagen, likewise, came close to setting up a plant near Vizag but opted for Pune. Clearly, Naidu does not want such encores this time around as he sets about to woo automakers to the new AP.

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