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Expediting process for obtaining project permissions, development of 1.5 lakh acres land bank and 150 ready-to-occupy industrial parks are some of the key measures taken by the state government to drive industrial growth.
After a lull in investment due to global economic slowdown and unrest over bifurcation, Telangana is set to witness a revival in industrial growth. TheTelangana government has come out with a new industrial policy framework that is expected to help the state bring down dependency on the services sector for economic growth. Traditionally, the industrial sector has been lagging behind services sector in Telangana. Services sector contributes over 60 per cent of the state’s economy followed by industry and agriculture. In 2014-15 serviceoriented economy witnessed a growth of 10 per cent while the industrial sector clocked just about 4.1 per cent growth. During the past 10 years, the industrial sector witnessed an average growth rate of 7.8 per cent. The last few years were particularly tough for the industrial sector in the state due to political uncertainty and global economic crisis. As a result, the sector registered an all-time low of 0.13 per cent growth in FY14. To reverse this trend and to spur industrial growth, the Telangana government last year unveiled an investor-friendly industrial policy, which was lauded by the industrial community.
Policy framework
The industrial policy framework promises to offer minimum inspection and maximum facilitation. The framework lists out norms for giving permissions to mega (investments of `200 crore and above), large (`10 crore-`200 crore) as well as small and medium project proposals. As part of this effort, the government has created a bank of 1.5 lakh acres of land which can be used for industrial purposes and transferred it to the Telangana State Industrial Infrastructure Corporation (TSIIC). This land is ready to be occupied for industrial purposes. This transferring of land to TSIIC will help save crucial time for industries and is an investment-friendly initiative. In addition, TSIIC also has 150 readyto- occupy industrial parks. Some of the industrial parks will also permit multi-sectoral activities and general manufacturing units. According to Telangana Chief Minister K Chandrasekhar Rao, his office would set up a ‘chasingcell’ to monitor the progress of various proposal. Rao said, as per the new policy Telangana State Industrial Project Approval and Self-certification System (TS-iPASS), the government would take penal action against government officials if there was any undue delay in processing applications. Under the new policy, mega projects would get permissions in 15 days.
Focus on natural strengths
The government has also identified 14 core areas for a focused approach which include life sciences, pharma, information technology, aerospace, automobiles, textiles, minerals and transportation and logistics, among others. In order to enhance its exports potential, Telangana is looking at focusing on its natural strengths. Telangana has large amounts of land available as well as clusters which cater to the production of auto components and spare parts as well as textiles. It also has rich natural resources. The state accounts for 20 per cent of the country’s coal deposits. The region is also rich in limestone deposits that cater to cement factories. Telangana has other mineral resources like granite, bauxite and mica. With over $7 billion IT exports in 2014, the state also accounts for a significant portion of the country’s overall software exports.
Enabling investment
Signs of improvement in investment are already visible in the state. According to a report by the Ministry of Statistics and Programme Implementation, the number of factories in Telangana increased to 13,656 in 2012-13 as against 9,005 in 2011-12. These factories employ 7,01,110 people. The state attracted investment to the tune of `22,520.63 crore in the past 15 years, resulting in 40,894 MSMEs being set up in Telangana. These units provide employment to 5,65,496 people. During the same period, 2,091 large industrial units were established, which generated over 6,67,499 jobs. Together, these projects brought in an investment of `45,393.33 crore. According to a government official, in 2014-15 about 1,496 new investors applied for clearances for their projects under the Single Window System, of which 1,173 were granted permission by the government.
The new industrial framework is expected to enable the state’s export strategies further. Exports cannot be looked at in isolation as it depends on various other factors and policies such as industrial policy, monetary policy, infrastructure development, human resources development and various other policies. The policy will address these matters in a comprehensive manner. Investors feel the state government’s response to new project proposals are extremely encouraging. “The state government is offering both operational and policy support. Besides, it is also committed to provide a conducive environment for industrial growth,’’ says an industry expert.
Infrastructure
The state has one of the best industrial ecosystems in the country. Though Telangana is a new state, its capital Hyderabad is well-established with large-scale industrial landscape, including government-owned electronics manufacturing and defence industries in addition to a plethora of private industrial undertakings. The city with its Outer Ring Road, connecting radial roads and the upcoming Metro Rail will help kickstart industrial growth. In addition,the state has many skill generating training institutes and engineering colleges. The city is expected to grow further on account of outstanding infrastructure, cost competitiveness, skills availability, which in turn would spur industrial development. During the decade 2004-05 to 2014-15, the state registered an average growth rate 7.8 per cent at constant prices (2004-05). Hyderabad, Rangareddy and Medak districts together contribute 45 per cent of the state economy. These areas have been clocking an annual growth rate of 10 per cent in the last decade. The remaining seven districts account for about 55 per cent. Hyderabad is the hub for drug industry with the city accounting for 20 per cent of pharma exports from India.
Hyderabad and Rangareddy also house 37 of the 72 notified special economic zones (SEZs) in the state. In fact, Hyderabad and Rangareddy districts account for 44 per cent of the registered manufacturing and 39 per cent of the construction activity of the region. The central government has approved the engineering, procurement and construction of Yadgiri-Warangal section of National Highway – 163 in Telangana on EPC basis. The 99-km road will cost about `1,905.23 crore. The project is expected to expedite the improvement of infrastructure in Telangana and also in reducing the time and cost of travel, particularly in case of heavy traffic plying on the Yadgiri-Warangal sector.
Challenges
One of the major challenges for the state is about tackling the fierce competition it faces from Andhra Pradesh in attracting investment. With AP’s new capital coming up in Amaravati, there are chances that it may find place in the expansion map of existing industries. “Besides, Telangana is a land locked state, which has to depend on ports in Andhra Pradesh for exports. While industries like pharma and IT continue to thrive in Telangana, big manufacturingfacilities, which want to take advantage of proximity to ports, may move to Andhra Pradesh,†says an industry expert. Then there are unresolved issues between the two states such as water and power sharing. There will be a lot of interdependence between the two new states and this requires constant dialogues and settlement of issues like water sharing and power supply. If a manufacturing facility in Telangana has a captive power plant in AndhraPradesh, it will now come under interstate sale of power. This can lead to cumbersome procedure hassles for an investor. Another concern is combating Naxalism. Six districts of Telangana – Nizamabad, Medak, Khammam, Karimnagar, Warangal and Nalgonda – are part of the infamous ‘red corridor’. The new government will have a tough time convincing investors to set up industries in these areas.
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