Industrial Infrastructure Corporation Limited

DPR for Diversion of Forest Lands for Establishment of Industrial Parks At I.S.Jagannadhapuram Forest Block

in West Godavari District, Andhra Pradesh

Final Detailed Project Report June 2016

Prepared By

L&T INFRASTRUCTURE ENGINEERING LIMITED C1162901 RP004, Rev.B

L&T Infrastructure Engineering Ltd. Client: Andhra Pradesh Industrial Infrastructure Corporation Limited (APIIC) Parisramabhavanam, 6th Floor, Fateh Maidan Road, Hyderabad – 500 004 Project: DPR for Diversion of Forest Lands for Project No.: Establishment of Industrial Parks in W.G C1162901 District, AP Title: Final Detailed Project Report for IS Document No.: Rev.: Jagannadhapuram Forest Block RP004 B

This document is the property of L&T Infrastructure Engineering Ltd. (formerly File path: known as L&T-Rambøll Consulting Engineers Limited) and must not be l:\roads\2016\c1162901 - dpr for rf lands at eluru\outputs\reports\001-final passed on to any person or body not authorised by us to receive it nor be copied detailed project report\004-rp004- is jagannadhapuram-final dpr\004-rp04-is or otherwise made use of either in full or in part by such person or body without jagannadhapuram-final dpr.docx our prior permission in writing.

Notes:

1. Revised based on the feedback received from client a. Email dated on April 18, 2016 from ZM, , APIIC and Email dated on April 01, 2016 from Manager, Eluru, APIIC. 2. Earlier submissions from RP001 to RP018 were done with GBD Number – B1152201.

Revision Details:

B 29.06.2016 Third Submission LPN KRM TKSS A 20.04.2016 Second Submission LPN KRM TKSS LPN 0 14.08.2015 First Submission SJV TKSS KRM KRM Init. Sign. Init. Sign. Init. Sign. Rev. Date Details Prepared Checked Approved Table of Contents

DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

TABLE OF CONTENTS 1 Introduction ...... 1 1.1 Preamble ...... 1 1.2 Data Collection ...... 2 1.3 Site Visit and Meetings ...... 2 1.4 Structure of the Report ...... 2 1.5 Acknowledgement ...... 2 2 Site Appreciation ...... 3 2.1 Project Site ...... 3 2.2 Details of Forest ...... 3 2.2.1 Site Map ...... 3 2.2.2 Rehabilitation and Resettlement (R&R) Issues ...... 4 2.2.3 Flora and Fauna ...... 4 2.3 Existing Habitations around Project Site ...... 5 2.4 Demographic Pattern ...... 5 2.5 Regional Connectivity ...... 6 2.5.1 Airport and Port Connectivity ...... 6 2.6 Topography ...... 7 2.7 Soil Profile ...... 7 2.8 Climate and Rainfall ...... 7 2.9 Infrastructure Availability ...... 8 2.9.1 Water ...... 8 2.10 Environmental Considerations ...... 8 3 Market Study and Demand Assessment ...... 9 3.1 Preamble ...... 9 3.2 Information Sources ...... 9 3.3 Location Advantages/USP ...... 10 3.4 Location Attributes ...... 10 3.5 Advantage Andhra Pradesh ...... 10 3.5.1 Ease of Doing Business...... 10 3.5.2 Power Generation All Scenario ...... 11 3.6 Industry Overview ...... 13 3.6.1 Key Factors ...... 14 3.6.2 Growth & Opportunities ...... 14 3.6.3 Key Trends ...... 14 3.6.4 Some Major Indian Players ...... 15 3.6.5 Growth Parameters - Government Policy Reforms ...... 15 3.6.6 De-Licensing ...... 15 3.6.7 Tariffs & Custom Duties ...... 15 3.6.8 Initiatives to Increase Power Generation ...... 16 3.6.9 National Electricity Policy (NEP) ...... 16 3.6.10 Vision 2O22 for Indian Electric Machinery Equipment Industry ...... 16 3.6.11 Key Provisions of 2014-2015 Union Budget ...... 16 3.6.12 Export Incentives ...... 17 3.6.13 Generation Machinery: Boilers, Turbines, Generators ...... 17 3.6.14 Transmission Machinery ...... 17 3.6.15 Foreign Investors ...... 17 3.6.16 Growth Drivers ...... 17 3.6.17 Market Potential ...... 18 3.6.18 Exports Market ...... 18 3.6.19 Exports of Power Equipment ...... 18 3.6.20 Investment Opportunities ...... 18 3.6.21 Market Segmentation ...... 18 3.6.22 Generation Machinery ...... 19 3.6.23 Key Vendors ...... 26 3.6.24 Smart Grid ...... 26 3.6.25 Opportunities in Future ...... 27

Table of Contents Page i DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

3.6.26 Benefits of Smart Grid ...... 27 3.6.27 Challenges with India's Power Sector ...... 31 3.7 Industrial Parks competitive and land allocation ...... 32 3.8 Estimated Revenue ...... 32 4 Site Master Plan ...... 33 4.1 Preamble ...... 33 4.2 Planning Concepts ...... 33 4.2.1 Consideration ...... 33 4.2.2 Product Mix ...... 33 4.3 Site Master Plan ...... 34 4.4 Proposed Entry/Exit ...... 34 4.4.1 Circulation and Road Hierarchy ...... 35 4.4.2 Green / Open Areas ...... 35 4.4.3 Infrastructure Utilities/ Common Amenities/ Industry Related Facilities ...... 35 4.5 Housing ...... 36 5 Infrastructure Assessment and Cost Estimation ...... 37 5.1 Infrastructure Demand Assessment ...... 37 5.1.1 Internal Road Network ...... 37 5.1.2 Power Supply ...... 37 5.1.3 Water Supply ...... 38 5.1.4 Wastewater Management ...... 38 5.1.5 Solid Waste Management...... 38 5.1.6 Storm Water Management...... 38 5.2 Block Cost Estimates ...... 38 6 Cost Benefit Analysis ...... 40 6.1 Introduction ...... 40 6.2 Overall Approach & Methodology ...... 40 6.3 Revenue generation ...... 40 6.4 Cost incurred ...... 40 6.4.1 Project Investment ...... 40 6.4.2 Land Cost: ...... 40 6.4.3 Cost on Afforestation ...... 40 6.4.4 Foregone revenue from the forest land ...... 40 6.4.5 Interest ...... 40 6.4.6 Depreciation: ...... 40 6.5 Details of Cost and Benefit ...... 41 6.6 Conclusion ...... 41 7 Financial Analysis ...... 42 7.1 Objective ...... 42 7.2 Overall Approach & Methodology ...... 42 7.3 Key Assumptions in Financial Modelling ...... 42 7.4 Flexibility in Financial Model ...... 43 7.5 Construction Period and Project Life ...... 43 7.6 Project Cost...... 43 7.7 Financing Structure ...... 44 7.7.1 Funding Structure for the Project ...... 45 7.7.2 Financial Instruments & Cost of Funding ...... 45 7.8 Depreciation ...... 46 7.9 Operating Expenses ...... 46 7.9.1 Operation and Maintenance Expenses ...... 46 7.9.2 Administrative Expenses ...... 46 7.9.3 Insurance expenses ...... 46 7.10 Revenue Estimates ...... 47 7.11 Income Tax Calculations ...... 47 7.12 Financial Analysis - Base Case Scenario ...... 47 7.12.1 Key Parameters ...... 47

Table of Contents Page ii DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

7.13 Observations ...... 48 7.14 Conclusion ...... 48 8 Conclusion ...... 49

LIST OF FIGURES Figure 1-1: VCIC Location ...... 1 Figure 2-1: Project Location ...... 3 Figure 2-2: Location and Views of Project Site ...... 4 Figure 2-3: Existing Settlements within 2 km from Project Site ...... 5 Figure 2-4: Road Rail Connectivity...... 6 Figure 2-5: Seaports and Airports Distances from Project Site ...... 7 Figure 4-1: Planning Concepts ...... 33 Figure 4-2: Proposed Entry/ Exit Points ...... 35 Figure 5-1: Methodology for Infrastructure Assessment ...... 37

LIST OF TABLES Table 2-1: Environmental Sensitivity around the Project ...... 8 Table 4-1: Proposed Land Use Break up for Industrial Park ...... 34 Table 5-1: Block Cost Estimates ...... 38 Table 7-1 Project Development Schedule ...... 43 Table 7-2 : Capital Cost of the Project (2015 prices in Rs Mn) ...... 44 Table 7-3 : Different phases of an infrastructure project ...... 44 Table 7-4 : Means of Finance ...... 45 Table 7-5 : Details on Debt ...... 46 Table 7-6 : Depreciation Rates ...... 46 Table 7-7: Revenue Details ...... 47 Table 7-8 : Key Input Parameters – Base Case Scenario ...... 48 Table 7-9 : Key results – Base Case Scenario ...... 48

LIST OF DRAWINGS FD0201: Boundary of IS Jagannadhapuram Block on 1:50,000 SOI Topo Sheet FD0401: Site Master Plan – IS Jagannadhapuram IP FD0402: Circulation Plan FD0403: Typical Cross Sections Rigid 24m & 12m RoWs FD0404: Typical Cross Sections Rigid 45m & 30m RoWs FD0405: Green Area and Green Belt Layout FD0406: Infrastructure Utilities / Common Amenities

LIST OF ENCLOSURES Annexure 1.1: Form A for seeking prior approval under section 2 of the proposals by the state governments and other authorities Annexure 6.1: Annual Benefit from the Project Annexure 7.1: Interest During Construction (IDC) Annexure 7.2: Debt Service Coverage Ratio (DSCR) Annexure 7.3: Profitability Statement Annexure 7.4: Cash Flow Statement Annexure 7.5: Balance Sheet Annexure 7.6: IRR Calculation

Table of Contents Page iii DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

LIST OF ABBREVIATION AND ACRONYMS

ADB : Asian Development Bank APIIC : Andhra Pradesh Industrial Infrastructure Corporation Limited APPCB : Andhra Pradesh Pollution Control Board BAS : Building Automation System CAGR : Compound Aggregate Growth Rate CETP : Common Effluent Treatment Plant DGPS : Differential Global Positioning System FIRR : Financial Internal Rate of Return GBPD : Green Building Performance Disclosure GoAP : Government of Andhra Pradesh HVAC : heating, ventilation, air-conditioning Hectares : Ha IRR : Internal Rate of Return KLD : Kilolitres per Day km : Kilometre Kmph : Kilometre per hour L&TIEL : Larsen & Toubro Infrastructure Engineering Limited MLD : Million Litres per Day mm Millimetre Mn : Million MoEF : Ministry of Environment and Forests NCAER : National Council of Applied Economic Research NH : National Highway NHAI : National Highway Authority of India R&R : Rehabilitation and Resettlement RoW : Right of Way Sq. f : Square Feet Sq. m : Square Meter STP : Sewage Treatment Plant TPD : Tonnes Per Day VCIC : Vizag – Chennai Industrial Corridor VK-PCPIR : Visakhapatnam Kakinada Petroleum Chemical Petro-chemical Investment Region WACC : Weighted Average Cost of Capital

Table of Contents Page iv

1 Introduction

DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

1 Introduction

1.1 Preamble Government of Andhra Pradesh (GoAP) has proposed to develop Vizag – Chennai Industrial Corridor (VCIC) with the financial assistance of Asian Development Bank (ADB). VCIC is a key segment of the East Coast Economic Corridor and also India’s first coastal economic corridor. VCIC is aimed at fulfilling the objectives of the Government of India, Make in India Policy which aimed to promote manufacturing activities. Following Figure 1-1 shows the VCIC Location.

Figure 1-1: VCIC Location The initial studies carried out for VCIC projected tremendous growth for Andhra Pradesh in the next 20 years. Once VCIC becomes functional, the manufacturing output would reach Rs 3,000 billion by 2025 and Rs. 7,825 billion by 2035. The proposed corridor is likely to have a strong influence on the industrial activities in all the 13 districts of Andhra Pradesh and therefore there is a need for large tracts of industrial land to keep pace with the projected industrialisation. West Godavari, one of the key districts coming within the immediate influence of VCIC has all the potential to become an industrial hub. GoAP has embarked on major initiative of positioning West Godavari District as the central hub for various sunrise sectors in an endeavour to attract investments from National and International Players across the globe. The district is known as Rice Granary of India and therefore GoAP proposed to promote the industrialisation in non-agricultural lands. In this regard, GoAP identified around 6573.38 Ha of Reserve Forest Lands located at Unguturu, Nallajerla, Dubacherla, IS Jagannadha Puram, Bhogolu and Ramasingavaram within the district for the purpose of industrialisation. In order to divert the identified forest lands for Industrial use, it is mandatory to seek approval from Ministry of Environment and Forests (MoEF) by submitting an Application along with a Detailed Project Report.

1 Introduction Page 1 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

Andhra Pradesh Industrial Infrastructure Corporation Limited (APIIC), a wholly owned subsidiary of Government of Andhra Pradesh (GoAP) been entrusted the task of pursuing with Ministry of Environment and Forests (MoEF) to procure the forest lands and develop sector specific Industrial Parks as a part of VCIC development. APIIC has appointed L&T Infrastructure Engineering Limited (L&TIEL) as Consultants to prepare the Detailed Project Report and also Application to MoEF for all the six sites (prescribed Proforma included as Annexure 1.1).

1.2 Data Collection The project area maps, DGPS survey details, flora and fauna , afforestation costs, details of existing and proposed industries were collected from West Godavari Collectorate, Forest Department and APIIC.

1.3 Site Visit and Meetings L&TIEL Team carried out a detailed visit of the I.S.Jagannadhapuram Forest Block on 21st May 2015. APIIC officials and DGPS survey agencies accompanied the team for the visit. Further L&TIEL had also attended the weekly review meetings scheduled at of office of the District Collector.

1.4 Structure of the Report The present report, Final Detailed Project Report is prepared based on the information collected from District Collectorate, APIIC, information available on public domain and internet. Prior to this report, L&TIEL delivered four reports, Preliminary Report, Draft Project Report, Final Detailed Project Report (Rev.0), Final Detailed Project Report (Rev.A) and the suggestions given on the earlier reports were accordingly considered in the present report. The report is structured in the following pattern.  Chapter 1 – Introduction  Chapter 2 – Site Appreciation  Chapter 3 – Market Study and Demand Assessment  Chapter 4 – Site Master Plan  Chapter 5 – Infrastructure Assessment and Cost Estimation  Chapter 6 – Cost Benefit Analysis  Chapter 7 – Financial Analysis  Chapter 8 – Conclusion

1.5 Acknowledgement L&TIEL sincerely thanks the District Collector and Magistrate for all the courtesy extended to the project team. L&TIEL also acknowledges the support provided by the officers of the Forest Department, Industries Department and APIIC.

1 Introduction Page 2 2 Site Appreciation

DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

2 Site Appreciation

2.1 Project Site The project site, covering an area of about 762 Ha (as per the details provided by APIIC and DGPS survey conducted by Rehobath Surveys) is located in D.Tirumala Mandal of West Godavari District, Andhra Pradesh. The site is connected to NH-16 (NH-5) on the South, SH- 42 on the East, SH-6 on the West. The following Figure 2-1 shows the location of site.

Figure 2-1: Project Location

2.2 Details of Forest

2.2.1 Site Map The proposed site comes under I.S.Jagannadhapuram Block as per the forest department. A map showing the IS Jagannadhapuram Block with boundaries is included as Figure FD0201. Pictorial illustrations of the project site are given as Figure 2-2.

2 Site Appreciation Page 3 N

0 Km 1 Km SCALE IN KILO METRES &T Ltd.

L&T-Ramboll Limited

Engineering

Engineers

L&T Infra Engineering Infrastructure Consulting DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

Figure 2-2: Location and Views of Project Site

2.2.2 Rehabilitation and Resettlement (R&R) Issues The entire land is with the Department of Forest and as informed by the authorities, the land is free from Rehabilitation and Resettlement issues.

2.2.3 Flora and Fauna The Floristic composition of the I.S.Jagannadhapuram Forest Block is as follows:  Memecylon edule (Alli)  Zizyphus xylopyrus (Gotti)  Carissa spinarum (Vaka)  Randia dumetorum (Manga chettu)  Mimusops hexandra (Pala)  Azadirachta indica (Vepa)  Dodonaea viscose (Bandedu)

2 Site Appreciation Page 4 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

 Webera corymbosa (Papidi)  Diospyros sylvatica (Tellagatha)  Maba buxifolia (Tella Alli)  Erythroxylum monogynum (Devadaru) As per the information from the department, there are no endangered flora and fauna reported in I.S.Jagannadhapuram Block.

2.3 Existing Habitations around Project Site The forest area is surrounded by plantations. The following figure shows the settlements located within 2km from the project site.

Figure 2-3: Existing Settlements within 2 km from Project Site

2.4 Demographic Pattern The nearest urban centre to I.S.Jagannadhapuram are Jangareddigudem (30 km) Tadepalligudem (30 km) and Eluru (45 km). Eluru is the district headquarters. As per provisional data of 2011 census, Eluru urban agglomeration has a population of 515,000, out of which males were 2,60,000 and females were 2,55,000. The literacy rate was 75.98%. Tadepalligudem has a population of 1,03,577. The total population constitute 51,176 males and 52,401 females. It is the agricultural commercial hub of West Godavari district which is renowned as the "Annapurna of Andhra Pradesh”. Eluru and Tadepalligudem are well developed and have the necessary social infrastructure.

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2.5 Regional Connectivity The proposed site is strategically placed in terms of connectivity (road, rail, air and sea) to the hinterland markets. The regional connectivity in terms of Road and rail is shown in Figure 2-4.

Figure 2-4: Road Rail Connectivity

2.5.1 Airport and Port Connectivity The regional connectivity in terms of Ports & Airports is shown in Figure 2-5.

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Figure 2-5: Seaports and Airports Distances from Project Site The nearest operational port is (93km). The site has also the advantages of the proposed Narasapuram Port (84 km) and Port (89km) and both are almost equidistant.

2.6 Topography The overall project site relatively slopes from west to east towards the coast. The site appears to be plain.

2.7 Soil Profile The Soils in the district are made up of Alluvial, Black Regur and Red Ferruginous besides a small belt of arenaceous sandy soils along coastal belt.

2.8 Climate and Rainfall The climate is moderate both in winter and summer seasons in delta area. The uplands areas in the district witness severe summer. The normal maximum and minimum temperatures recorded in the District are 48°C to 19°C respectively. The District receives its rainfall predominantly from South West Monsoon (785.6mm) as well and also from North East monsoon (254.6mm).

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2.9 Infrastructure Availability

2.9.1 Water Polavaram Right Bank canal is located in the close proximity and once operational can be water source for the proposed industrial hub.

2.10 Environmental Considerations Table 2-1: Environmental Sensitivity around the Project

S. Aerial Distance Areas Name / Identity No (within 15 km) 1 Areas protected under international conventions, Nil Nil national or local legislation for their ecological, landscape, cultural or other related value

2 Areas which are important or sensitive for Nil Nil ecological reasons - Wetlands, watercourses or other water bodies, coastal zone, biospheres, mountains, forests 3 Areas used by protected, important or sensitive Nil Nil species of flora or fauna for breeding, nesting, foraging, resting, over wintering, migration 4 State, National Highways SH-6, SH-42 & SH- 9km, 6km & 15 44 km 5 Defence installations Nil Nil 6 Routes or facilities used by the public for access SH-44 15km, west and to recreation or other tourist, pilgrim areas abutting boundary 7 Inland, coastal, marine or underground waters Polavaram Right 8 km canal Erra kaaluva 2 km

8 Densely populated or built-up area Tadepalligudem 30km, South east 9 Areas occupied by sensitive man-made land Primary Health Several PHCs in uses (hospitals, schools, places of worship, Centre different villages community facilities)

The activities proposed in the IP are mostly green and orange category type of industries.

2 Site Appreciation Page 8 3 Market Study and Demand Assessment DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

3 Market Study and Demand Assessment

3.1 Preamble West Godavari District with abundant natural, mineral and agricultural resources and better connectivity to the New Capital of Andhra Pradesh would be positioned in the state of Andhra Pradesh as “the happening district”. With right initiatives coming from the government, such as VCIC, the investment climate will soon transform the District as one of the key Destination in Andhra Pradesh. The proposed VCIC is expected to bring a major industrialisation for the district. It is proposed to develop and facilitate an exclusive industrial park to promote the ever growing “Electrical Machinery” industry with a clear focus on developing the external linkages such as access road, water and power. The park would provide the necessary impetus to the sector duly attracting huge investments from National and International players. The proposed location is I.S. Jagannadhapuram where the land proposed to be acquired is around 762 Ha. The said location is well connected by road, rail, air and port at Kakinada. The park also integrates the schemes of “Smart City” as well as ‘Make in India” themes of Government of India. This is one of the focused sectors as detailed by DIPP in the theme of Make in India. I.S. Jagannadhapuram is ideally located in the District of West Godavari with proper and adequate access to major towns like , Eluru, and the New Capital Region. Considering the location advantages, land availability, Electrical Machinery Manufacturing Sector seems to be ideal at I.S.Jagannadhapuram. The following sections will provide a brief discussion on the proposed product mix at I.S.Jagannadhapuram.

3.2 Information Sources The sector has been evaluated based on the following reports available on the public domain:  CERC, DIPP, Electric Monitor, IEEMA  Official websites of BHEL, L&T Alstom and APGENCO and Wikipedia and news clippings from Business Standard  Report on Electrical Machinery - Market & Opportunities by India Brand Equity Foundation (IBEF) (www.ibef.in)  White Paper on Power Sector in Andhra Pradesh  Indian Power Directory - January 2015- Updates by IBIS Research Information Services Pvt. Ltd. The information provided in the above reports have been reviewed and produced in the following sections.

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3.3 Location Advantages/USP The state of Andhra Pradesh is located in the southern part of India and forms a major constituent of the southern grid. Major electricity generation happens through the thermal and the hydro power plants. These power plants are being operated by Andhra Pradesh Power Generation Company (APGENCO). By February 2013, Andhra Pradesh is the fourth largest power generating state in India and also has the largest hydro power generation capacity in India (Andhra Pradesh is on first position for installed hydro power generation capacity). Andhra Pradesh (combined) has a total installed power generation capacity of 16,817 MW from all the sources. Out of it, 11771 MW is from thermal, 3737 MW is from Hydro, 1036 MW is from Renewable energy sources and 276 MW is from Nuclear (CEA- December 2012). (References: Central Electricity Authority (CEA), APGENCO, APERC).

3.4 Location Attributes 1. Availability of the required land which is free from habitation 2. Access to National and State Highways, Railways Air and Port 3. Adequate availability of water and labour force both semi-skilled and unskilled 4. Huge Investment Potential. 5. Adequate housing, healthcare, and recreational facilities. The location chosen is in close proximity to Eluru and Vijayawada where the new capital requires huge power. The project land is located in proximity to SH55 & SH6 and it is located in uplands area of the District with good access for water connectivity and less affected by floods. The total extent of project land is non-arable and hence no damage to the crops or for farming, and is classified as forest land. The location has better telecom and power connectivity and a part of the land can be used for evacuation of the generated power. Housing and other allied utilities can be sourced from Nallajerla which is fairly populous town of the District and is in close proximity to the proposed project site.

3.5 Advantage Andhra Pradesh

3.5.1 Ease of Doing Business To attract, any investment, the state seems to be pro-active and a good facilitator. GoI have evolved parameters of ranking states which are to be marked and the state of Andhra Pradesh scores well on many of the parameters, like acquiring land for the project, compliance with environment and labour regulations, obtaining infrastructure related utilities and enforcing contracts which are of particular important for private entrepreneurs. The state ranks high on majority of the parameters listed out by DIPP.

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3.5.2 Power Generation All India Scenario The total power generating capacity increased 19.8% during FY15, against 8.8% in the preceding fiscal and 11.7% two years back. This was made possible by a 24.7% increase in thermal power comprising 26.4% increase in coal-based thermal and 14.7% in gas based plants, 20.9% in nuclear power (after stagnation in the preceding two-three years), 4.5% in large hydropower and 15.1% in renewable energy sources. The total capacity addition of 60,572 MW in the conventional power during the first three years of the ongoing XII Plan period accounted for around 68% of the capacity addition in the segment targeted for the plan period. Going by the augmentation so far, the XII Plan target of fresh capacity addition of 88,000 MW is likely to be fulfilled, or even surpassed - a healthy show when viewed against the shortfall in the earlier recent plans. The total grid-connected installed capacity at the end of FY15 was placed at 267,637 MW; comprising 31,692 MW (12%) from rapidly rising non-conventional renewable power (RES) and 88% from conventional power. The share of non-conventional energy that comprises small hydro power, wind power, solar power, biomass/biogas and industrial/urban waste, has doubled from around 6% six-seven years ago. Thermal power, bulk of coal-fired, constituted four-fifths, large hydro 17% and nuclear just around 3% of conventional power. Captive generation capacity in industries having demand of 1 MW and above, grid interactive (as on 31-03-13) has been placed at 40,726 MW. The installed capacity for RES includes 3,804 MW in small hydro plants, 21,036 MW in wind power, 4,120 MW in bio-power and 2,632 MW in solar power. Around 36% of power capacity is in western region, followed by 27% in northern region, 24% in southern region, 12% in eastern region and only 1% in north-eastern, island regions. Western region leads in thermal power and northern region in large hydropower. Southern region leads in renewables, with 44% share in All-India aggregate, followed by western region (36%) and northern region (18%). Private sector overtakes public utilities: Marking a major change from pattern till recently, private sector has increasingly forayed into power infrastructure in recent years. Thus, during the XI Plan period, over two-fifths of conventional energy capacity addition was at the behest of private sector, with 32% coming from state government utilities and around 26% from Central government power companies. Most of the capacity addition in private sector was in

3 Market Study and Demand Assessment Page 11 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B thermal power with hydropower forming just 5%. In addition, around nine-tenths of capacity in RES is in private sector. As a result, the private sector utilities have emerged as the largest ownership group in the power infrastructure in the counting, accounting for 37% of the total grid-connected installed capacity (including RES) at the end of FY15; against 36% by state government utilities and 27% by Central government companies. Generation from renewable sources was estimated to be 56.6 billion kwh (+14% year-on-year) during April-February 2014-2015. RES generation was around 6% of total power produced in the conventional utilities. Among the ownership categories, private sector IPP that accounted for around a fourth of total power produced during the year increased 28%. Central sector utilities which accounted for two-fifths of all-India generation increased it by 2.6% and state government utilities with a little less than two-fifths share generated 4.7% more power during the year. Most of the increase in power generation came from the utilities in Western region, which recorded 14.6% increase, which was contributed by thermal stations as hydro generation in the region declined 31%. Northern region followed with 5.7% increase, southern region with 4.7% increase, eastern region with 6.6% increase. Thermal stations in the Southern region had the best PLF of 7%, whereas the stations in the eastern region had PLF of 60%.

Power Supply Even as the total power requirement in the country increased by 6.5%, against stagnation in the fiscal 2014, ex-bus power availability increased faster by 7.3% (5.6%). Average power shortage, as a result, declined to 3.6% during FY15, from 4.2% in the preceding fiscal, twice this measure in the earlier three years and double-digits during FY09 and FY10. The improvement in power deficit during FY15 was confined largely to southern region where the shortage declined from 6.8%to 4.3%. The shortage in Karnataka dropped from 9.5% to 4.3%, that in Andhra Pradesh (inclusive of newly-formed Telangana) eased from 6.9% to 5.4% and the same in Tamil Nadu from 5.9% to 3.1%. The shortage in western region was the lowest at 0.8% (1%): all the states in the region had only marginal deficit. The power shortage in the northern region was the highest at 6.3% (6%), which was due to 15.6% deficit in Uttar Pradesh and 19.1% in Jammu & Kashmir. All the other states faced milder deficit ranging from nil to 3%. The government focus is now more on transmission and distribution sector, according to reports. Following a number of steps taken for expediting forest clearances and intensive monitoring of critical transmission lines, 22,101 ckm of transmission lines have been commissioned during FY15 against 16,748 ckm commissioned during the preceding year, thus growing by 31.96%, which is the highest rate ever achieved in a single year. This is also 106% of the annual target of 20,882 ckm fixed for the year. Similarly, the overall increase in the transformation capacity has been 65,554 MVA during FY15 which is record achievement in a

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3.6 Industry Overview Growth in the Electrical Machinery sector depends on the growth of power generation and distribution and also on the reforms of power sector. The electrical machinery sector in India primarily caters to the power sector and is poised for growth in view of Government’s thrust on the power and construction industries. The Government of India is planning to increase from the present 180 GW to 350 GW of power generation capacity in the next 10 years. This will generate substantial demand for heavy electrical machinery. India produces the full range of power generation and transmission machinery. The Electrical Machinery industry consists of three key product categories. Generation Machinery: Generators, Boilers. Turbines, Etc. Transmission Machinery: Transformers and transmission towers. Distribution Machinery: Circuit Breakers, switch gears, control gears etc. The small and medium size sectors have a significance presence in the electrical machinery industry, with an estimated share of around 35%. Advantages in the Sector: India has a number of advantages in the manufacturing sector that make it an attractive investment destination. Apart from large and growing domestic market, it also has well developed supplier base, availability of skilled manpower, supportive regulatory environment and good support infrastructure. The Government is focusing on increasing the penetration of power supply in villages. Along with reach, the focus is also on improving the quality of power supplied. The utility electricity sector in India had an installed capacity of 271.722 GW as of end March 2015.Renewable Power plants constituted 28% of total installed capacity and Non- Renewable Power Plants constituted the remaining 72%. The gross electricity generated by utilities is 1106 TWh (1106, 000 GWh) and 166 TWh by captive power plants during the 2014–2015 fiscal. The gross electricity generation includes auxiliary power consumption of power generation plants. India became the world's third largest producer of electricity in the year 2013 with 4.8% global share in electricity generation surpassing Japan and Russia. During the year 2014-15, the per capita electricity consumption in India was 1010 kWh with total electricity consumption (utilities and non-utilities) of 938.823 billion kWh. Electric energy consumption in agriculture was recorded highest (18.45%) in 2014-2015 among all countries. The per capita electricity consumption is lower compared to many countries despite cheaper electricity tariff in India. The investments in the Indian Electrical Machinery industry was about US$100 billion in 2012 and is expected to increase at a healthy rate of more than 15%. The bulk of the new investment is expected to be in increasing generation and transmission capacity. The Indian electrical equipment industry is segmented into the generation equipment sector and transmission and distribution sector. The wire and cable industry in India covers approximately one quarter of the total transmission and distribution segment. The electric wires and cables market is expected to witness rapid growth in the coming years due to

3 Market Study and Demand Assessment Page 13 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B government investments in power and telecommunication plus dynamic industrialization and rapid urbanization. However, the increasing price of raw materials adversely affects the growth of this industry, as well as increased competition from unorganized sectors and inexpensive imports (Source: IEEMA). The Indian electrical equipment industry was valued at over Rs.1.31 lakh crore in FY14, with generation equipment sector accounting for 18%, and T&D equipment sector, 82%. The T&D industry is 9.92% of the manufacturing sector in terms of value and 1.39% of the GDP. It also provides direct and indirect employment to 15 lakh people and over 50 lakh across the entire value chain. The industry’s exports stood at $5 billion. A rugged performance design of domestically manufactured electrical equipment has evolved over the years to meet the tough network demand in the country. The domestic industry is fully geared up to meet the likely demand arising out of the XII Plan and even beyond. Yet, in this scenario, disproportionate reliance on imported power equipment, with uncertain quality and lifecycle, and with no domestic manufacturing facility to provide emergency repairs, spares, replacements, etc. especially for heavy equipment, the long term risks are unimaginable. Also, with the integration of automation and communication technology into the T&D network, there is also a possibility of a major security.

3.6.1 Key Factors  Installed capacity is set to increase – By 2022, installed power capacity in India is expected to reach 350 GW from 180 GW due to increasing industrialization and economic development.  Demand for generation equipment on the rise – By 2022, the generation equipment industry in India is expected to increase to US$ 27.5 billion from US$5.7 billion on 2011, an increase of almost 5 times.  Increasing power demand to drive T&D equipment market – BY 2022, the T&D equipment market in India is expected to increase to US$75billion from US$ 18.5 billion in 2011. (Source: GoI, Ministry of Heavy Industries & IBEF.ORG)

3.6.2 Growth & Opportunities  Power Demand is estimated to reach 350 GW by 2022.  Government Programmes aimed at providing electricity to over 100,000 rural areas and 22.6 million households below poverty line will also boost demand for power.  Planned power capacity addition of around 185,000 MW by 2022, will provide significant opportunities.  The sector has witnessed increasing entry of global players through JV mode.  Existing players are planning huge capacity expansion over the next few years.  Electricity machinery sector is de-licensed. 100% FDI is permitted paving the way for huge investments and technology transfer into the country.  Significant Special Economic Zones have been approved by the sector.  Due to favourable policy, cumulative FDI of US$3.2 billion has flown into the country between April 2000 to February 2013.

3.6.3 Key Trends Industry players are upgrading their transmission capacities to the next higher voltage systems of 765 Kva and are gearing up to supply transformers and related equipment’s. The

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Manufacturers are becoming more competitive with respect to their product designs, manufacturing and testing facilities. Investments in R&D in the electrical machinery industry are amongst the largest in India’s corporate sector. Increasing competitiveness in the industry and changing consumer demands have also led to new versions of products being launched in the market. New Players are entering into strategic alliances and tie-ups with technology suppliers across the globe to enhance capabilities. Besides, the vision of GoI to increase the household cover of millions of rural population is another dimension of the growth in the industry.

3.6.4 Some Major Indian Players  Larsen & Toubro Ltd.  Bharat Heavy Electricals Ltd.  Siemens India Ltd.  ABB India Ltd.  Alstom T&D India Ltd.  Crompton Greaves  KEC International  Kalpataru Transmission Ltd.  Power Grid Corporation Ltd. which is the nodal agency for transmission.

3.6.5 Growth Parameters - Government Policy Reforms  Market-oriented reforms, such as the target of ‘Power for All’ and plans to add 88.5 GW of capacity by 2017 and 93 GW by 2022.  Incentives for capacity addition in power generation will increase the demand for electrical machinery.  Indian manufacturers are becoming more competitive with respect to their product designs, manufacturing and testing facilities.  A large pool of human resources and advancements in technologies.  Increasing scope for direct exports to neighbouring countries.  Investments in research and development in the electrical machinery industry are amongst the largest in India’s corporate sector.  Capacity creation in sectors such as infrastructure, power, mining, oil and gas, refinery, steel, automotive and consumer durables are driving demand in the engineering sector.  Nuclear capacity expansion will provide significant business opportunities to the electrical machinery industry.  Rapid increases in infrastructure investment and industrial production will fuel further growth.  A comparative advantage in terms of manufacturing costs, market knowledge, technology and creativity.

3.6.6 De-Licensing The electrical machinery industry has been de-licensed. This has facilitated the entry of global majors into the electrical machinery industry in India.

3.6.7 Tariffs & Custom Duties The customs duty on power generation equipment is 5% at present whereas transmission and distribution equipment attracts 7.5% customs duty.

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3.6.8 Initiatives to Increase Power Generation With planned capacity addition of 88.5 GW projected at the end of 2017 through the Accelerated Power Development Reform Program, the government plans to provide reliable, affordable and quality power to all.

3.6.9 National Electricity Policy (NEP) The government aims to achieve per capita electricity consumption of 1,000 kWh through its mission under NEP.

3.6.10 Vision 2O22 for Indian Electric Machinery Equipment Industry  To make India the country of choice for the production of electrical equipment and reach an output of USD 100 Billion by balancing exports and imports.  Areas of focus include technology and R&D, the lowering of customs duties on a range of equipment, the setting up of the Electrical Equipment Skill Development Council (EESDC), the establishment of electrical equipment industry clusters; the enhancement of product-testing infrastructure in the country; an increase of shares in the export market and financial support.

3.6.11 Key Provisions of 2014-2015 Union Budget Any of the following two deductions can be availed:  Investment allowances (additional depreciation) at the rate of 15% to manufacturing companies that invest more than INR 1 Billion in plant and machinery acquired and installed between 01.04.2013 and 31.03.2015 provided the aggregate amount of investment in the new plant and machinery during the said period exceeds INR 1 Billion.  In order to provide a further fillip to companies engaged in the manufacture of an article or thing, the said benefit of additional deduction of 15% of the cost of new plant and machinery, exceeding INR 250 Million which is acquired and installed during any previous year ending on 31.3.2017.

3.6.11.1 Tax Incentives  R&D Incentives: industry/private sponsored research programmes  A weighted tax deduction is given under Section 35 (2AA) of the Income Tax Act. A weighted deduction of 200% is granted to assess for any sum paid to a national laboratory, university or institute of technology, or specified persons with a specific direction, provided the said sum is used for scientific research within a program approved by the prescribed authority.

3.6.11.2 Companies Engaged in Manufacture Having an In-House R&D Centre A weighted tax deduction of 200% under Section 35 (2AB) of the Income Tax Act for both capital and revenue expenditure incurred on scientific research and development. (Expenditure on land and buildings are not eligible for deduction).

3.6.11.3 State Incentives Apart from the above, each state in India offers additional incentives for industrial projects. Incentives are in areas like subsidized land cost, relaxation in stamp duty, exemption on the sale/lease of land, power tariff incentives, a concessional rate of interest on loans, investment subsidies/tax incentives, backward areas subsidies, special incentive packages for mega projects, etc.

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3.6.12 Export Incentives  Export promotion capital goods scheme.  Duty remission scheme.  Focus product scheme, special focus product scheme, focus market scheme.

3.6.12.1 Areas Based Incentives Incentives for units in SEZ/NIMZ as specified in respective Acts or the setting up of projects in special areas such as the North-east, Jammu & Kashmir, and Himachal Pradesh and Uttarakhand.

3.6.13 Generation Machinery: Boilers, Turbines, Generators By 2022, the generation equipment industry in India is projected to grow to USD 25-30 Billion. The industry is sized at USD 6.7 Billion in 2012-13.

3.6.14 Transmission Machinery By 2022, the T&D equipment market in India is expected to grow to USD 70-75 Billion from USD 17.3 Billion in 2012-13.

3.6.15 Foreign Investors  Hitachi (Japan)  Babcock (UK)  Alstom (France)  Toshiba (Japan)  Ansaldo (Italy)  Colfax Corporation (USA)  MHI (Japan  Schneider Electric (France)  Legrand (France)  GE (USA)

3.6.16 Growth Drivers  Demand driven growth: Capacity addition for power generation; Rise in demand for power equipment; Industrialization leading to demand for boilers and turbines.  Investment driven growth: Entry of global Majors directly and through JV route; Increasing FDI flow; and Easy credit and subsidized loans to power generation companies. Capacity creation in sectors such as infrastructure, power, mining, oil and gas, refinery, steel, automotive and consumer durables are driving demand in the engineering sector. A comparative advantage is in the terms of manufacturing costs, market knowledge, technology and creativity. Rapid increases in infrastructure investment and industrial production will fuel further growth. Nuclear capacity expansion will provide significant business opportunities to the electrical machinery industry. Based on the projections of the government for capacity enhancement in the power sector, the domestic electrical equipment manufacturing industry has made huge investments in doubling and, in some cases, even trebling its production capacity. India's electrical equipment industry has shown some signs of growth in the first half of 2014- 15, with a 7.82% growth as compared to the same period last year. On one side the major

3 Market Study and Demand Assessment Page 17 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B drivers are cables, LV and HV switchgear while on the other side power transformers, transmission lines and conductors continue to show a declining trend.

3.6.17 Market Potential Based on investment estimates and capacity-addition targets, it is estimated that the size of the domestic market in generation equipment is expected to reach US$ 25-30 bn by 2022 (from US$ 5.7 bn in 2011), while that of the T&D equipment industry is estimated to grow to US$ 70-75 bn (from US$ 18.5 bn in 2011).  Estimated output by 2022 is USD 100 Billion.  The electrical equipment industry was worth USD 24 Billion in 2012-2013.  The market expanded at a CAGR of 10.5% over 2007-2012.  During the last 8 years, exports have increased at a CAGR of 14.8% to touch USD 4.9 Billion in 2013-2014.

3.6.18 Exports Market Transformers and generators are the primary drivers of the increase in exports. Indian manufacturers with capacity and advanced technology in industry, export a wide variety of equipment including transformers and cables. Exports of electrical machinery have registered continuous growth over the last decade. A key driver for exports has been increasing outsourcing of manufacturing goods from India, in addition to other factors like low labor costs, and improvement in technology and production methods.

3.6.19 Exports of Power Equipment  10.5% rate of market expansion between 2007-2012  USD 4.9 Billion of exports in 2013-2014  14.8% yearly increase in exports in the last 8 years.  USD 24 Billion-sized industry in 2012-2013 With planned capacity addition of 88.5 GW projected at the end of 2017 through the Accelerated Power Development Reform Program, the government plans to provide reliable, affordable and quality power to all. To make India the country of choice for the production of electrical equipment and reach an output of USD 100 Billion by balancing exports and imports.

3.6.20 Investment Opportunities By 2022, the generation equipment industry in India is projected to grow to USD 25-30 Billion. The industry is sized at USD 6.7 Billion in 2012-13. By 2022, the T&D equipment market in India is expected to grow to USD 70-75 Billion from USD 17.3 Billion in 2012-2013.

3.6.21 Market Segmentation The market delivered a growth at a CAGR of 12% till 2011 and expected to gain momentum and grow at a CAGR of 18-20% in the next 5 years. Cables, Transmission lines and Conductors account for a large chunk of the revenue. Domestic transformer industry has the capacity to manufacture the whole range of power and distribution transformers used for HVDC transmission up to 500KVA.

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3.6.22 Generation Machinery

3.6.22.1 Turbines & Generators The Indian electrical machinery industry manufactures a wide range of turbines such as steam and hydro turbines. While BHEL is the largest player, there is significant number of smaller units in the private sector. The production of turbines and generator set has grown at CAGR of over 10% in the last decade. While the user industry is maturing, significant opportunities exist for players with technological know - how and investment capability. The export of turbines is to the tune of $150 million during 2005-2006 and has grown into $500 million during the current decade.

3.6.22.2 Boilers BHEL is the largest manufacturer of boiler in the country with more than 50% of the market share. The industry has the capacity to manufacture boilers with super critical parameters of size upto 1000 MW. Production of boilers has grown at nearly 20% of CAGR. Exports of boilers from India have grown from $50 million in 2005-2006 to $200 million during the current period. The average annual revenue of the global boiler, turbine and generator (BTG) market between 2006 and 2012 amounted to $62.4 billion. This is expected to increase to $64 billion over the forecast period from 2013-2020. Rising global electricity demand and high dependency upon thermal power are the major drivers for the market. Global Data estimates an annual growth rate of 5.3% for the market between 2013 and 2020, driven by the targets of the 12th and 13th five-year plans. Rising electricity demand and heavy reliance upon thermal power will continue to be the major growth drivers over the forecast period. The gas power equipment market, although small compared with the coal market, will register considerable growth over the forecast period, as China moves towards cleaner sources of power generation. Over the period 2013-2020, the gas turbine and heat-recovery steam generator (HRSG) markets are expected to grow at respective compound average growth rates of 9.4% and 8.8% to reach $1.02 billion and $186 million by 2020.

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3.6.22.3 Transmission Machinery The Indian Electrical Machinery industry has the capacity to manufacture the entire range of power and distribution transformers including the EHV range. The Indian economy is witnessing signs of restoration and so is the power sector. The transformer market which had more than doubled manufacturing capacity over the last five years anticipating huge domestic and overseas demand is suffering from overcapacity. However, a shift in the Government of India’s focus to strengthen the power T&D system opens up abundant opportunities for the transformer markets. The Indian transformers market has been in the forefront for over five decades and has a well-matured technology base up to the 800 kV class. With increasing demand for reliable power in the country, the power transformers market is witnessing a growth trend. The reliability of the bulk power system is heavily dependent on a network of transmission lines which basically requires transformers. Power transformers are an indispensable component for electricity Transmission and Distribution. India exports a considerable number of power transformers for international markets as well. The power transformer industry in India is dominated by multinational and several large companies as it required high capital investment primarily due to high level of technology involves and sophisticated manufacturing and testing facilities. The power transformer market is pegged at US$70-75 for the year FY’2014 which has accelerated at a CAGR of 11.1% during FY’2009-FY’2014. Exports have grown at a CAGR of 30%. According to the research report, capacity utilization is anticipated to register a magnificent CAGR of 13.4% during the forecasted period FY’2015-FY’2019, due to the upcoming T&D projects and expanding electrification needs.

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The power and distribution transformers market in India is projected to grow at a CAGR of over 10% till 2020. Power transformers contribute a major portion in overall market revenues due to their higher price points. Under the 12th five year plan (2012-2017), Indian government allocated US$ 200 billion for strengthening the country's power generation, transmission and distribution sector. One of the major developments underway includes the country's shift from 765 kV to 1200 kV power transmission. This, in turn, is fuelling the demand for EHV and UHV class power transformer installations throughout the country. India is also focusing on use of alternative energy resources like nuclear and solar energy for power generation, which is expected to further boost transformer deployments in the country in the coming years. India has been witnessing a significant rise in power demand for the past few decades on account of rapid growth in population, industrialization and urbanization. The government has taken up various initiatives including Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) for electrification of rural pockets of India, which has spurred significant investments in the country's power sector. Notable technological upgrades are underway to reinforce the country's transmission and distribution network, which would continue to drive the demand for power and distribution transformers in India. Considering the negative impact of these technological developments on the environment, the industry has been undergoing a paradigm shift towards green technologies. As a result, transformer manufacturers in India as well as in other countries have started investing heavily towards their research and development efforts. Foreign players, especially Chinese and Korean electrical equipment manufacturers, have captured almost one fourth of Indian transformers market, mainly in EHV and UHV class power transformers, as the products offered by them are considered cheaper and technologically advanced.

3.6.22.4 Distribution Machinery Switchgear is mostly used in Transmission and Distribution by power utility companies. They are used for switching the equipment or the circuit during the event of fault. With the growing transmission and distribution network across globe, the number of substations will keep on increasing. This increasing number of substations is expected to increase the use and demand for switchgears. Maximum T&D expansion projects are on-going in Asia-Pacific and the market is expected to be the biggest and the fastest growing market for switchgear. The Switchgear industry is fragmented and offers several opportunities for consolidation and growth in efficiency through an increase in economies of scale. The industry has low entry and exit barriers. This is a major driver of the Switchgear market. Top players of the PR market are ABB (Switzerland), Eaton Corporation (Ireland), GE (U.S.), and Siemens AG (Germany). Switchgear is an integral part of the electric power system. The power sector offers a promising future, with growing demands for electricity following increasing urbanization in the developing nations. Switchgear forms a crucial part in the sector across various segments including power generation, transmission and distribution, and equipment protection. Switchgear is employed to minimize electric failures and mitigate after effects of fault currents that flow through the circuit. These high-intensity fault currents can damage equipment or devices in the circuit. The market is segmented on the basis of the application, in which the utilities are estimated to dominate the market, while other categories taken into consideration contribute considerable value to the market.

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Switchgear are preferred more over its substitute fuses as they do not provide re-closure function, which is very important in setting up the circuit in its normal functions. Moreover, there is no need of replacing the switchgear after every disconnection of the circuit due to faults, which is unavoidable in fuses. Leading players in this industry with their recent developments and other strategic industry activities have been profiled in the report. These companies include ABB Ltd. (Switzerland), Eaton Corporation (Ireland), GE (U.S.), Schneider Electric SE (France), and Mitsubishi Electric Corporation (Japan). Lucrative market for switchgear with estimated value of $136.71 billion by 2019 and major share for this is contributed by the Asia-Pacific region.

The switchgear industry can be categorised into two main categories; Low Tension switchgears (LT) and High Tension Switchgears (HT). The high tension segment is more technology sensitive. Higher price realization, better margins and presence of multinationals with access to higher technology attract a premium in this segment. Major players are Siemens, L&T Alstom T&D, Crompton Greaves, and ABB. The switchgear and control gear industry in India is currently valued at INR 135bn (~USD 2billion) in FY 2013 and has been growing at ~15% for the last three years. Value Notes estimates that the industry will be worth approximately INR 215bn (~USD 3.5billion) by FY 2017, growing at a diminished CAGR of ~10%. Low voltage switchgears, which account for more than 55% of the total market, has a higher share of unorganized players and it is anticipated to increase in the coming years. The forward integration of these unorganized players to medium and high voltage segments can lead to an increase in the unorganized market share in these segments too, which is currently dominated by five or six players. Increased planned capacity addition in the power sector and improvement in technology along with government directives to replace old redundant machinery is creating a replacement demand in the switchgear segment.

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Safety concerns have led to an increase in the demand for Earth Leakage Circuit Breakers (ELCB) and Miniature Circuit Breakers (MCB), the two major varieties of switchgears used in the household segment. The growth in the sectors is around 25% year on year.

3.6.22.5 Electric Motors Electric Motors are widely used for a range of industrial applications. Indian market for electric motors, generators and transformers more than doubles in value over 2007-2012 to stand at Rs.1.1 trillion. Dominant 84% share of locally available products purchased by domestic electricity suppliers. Market dominated by local manufacturers, as imports account for only 12% of sales in 2012. Local companies generate Rs.923 billion earnings in 2012, registering 20% annual expansion from 2007. Industry turnover anticipated to increase further, recording 16% CAGR over 2013-2020 forecast periods.

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3.6.22.6 Electrical Conductors TechNavio's analysts forecast the Electrical Conductors market in India to grow at a CAGR of 13.56% over the period 2013-2018. One of the key factors contributing to this market growth is the increasing demand due to replacement activities in the country. The Electrical Conductors market in India has also been witnessing a growing popularity of green products in the country. However, the increasing competition between major vendors in the market could pose a challenge to the growth of this market. The Electrical Conductors market in India to grow at a CAGR of 13% to 2018. The Electrical Conductors market in India is driven by several factors, including the increasing demand for electrical conductors due to replacement activities and the country's rapid urbanization. Several end-users are replacing their old equipment such as T&D transformers, switchgears, circuit-breakers, and power cables with technically advanced T&D equipment to revamp their existing transmission networks, thus increasing the demand for electrical conductors. The growing popularity of green products is a major trend in the Electrical Conductors market in India. Several companies in the market are increasingly focusing on developing wires and

3 Market Study and Demand Assessment Page 25 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B cables that have a less detrimental impact on the environment. The chemicals used in these wires have enhanced fire-retarding capability and do not produce hazardous fumes in case of a fire. The vendors are also trying not to compromise other parameters such as flexibility, efficiency, and ease of usage while producing power cables that are eco-friendly. Some of the eco-friendly functions that major vendors maintain in power cables are flame and fire retardancy, low emission of poisonous fumes, non-corrosiveness, and halogen-free insulation. However, one of the major challenges is increasing competition among the major vendors in the market. Many vendors are reducing their product prices to capture the market of cost- driven companies and SMEs, thus increasing the competition among vendors.

3.6.23 Key Vendors  Finolex Cables Ltd.  Havells India Ltd.  Kalpataru Power Transmission Ltd  KEC International Ltd  Polycab Group  Sterlite Technologies Ltd. The growth in LV products and FHP motors indicates some industrial activity. However, exports in general are helping the industrial growth in positive directions. But huge imports of EHV transformers, reactors, cables and insulators at alarmingly high value mainly from China, Sweden and Germany are worsening the situation.

Conductors and energy meters have registered a tremendous growth in their turnover with 44.9% and 28.2%, respectively, over the past year, according to the annual report by the Indian Electrical and Electronics Manufacturers' Association (IEEMA). The growth of communication cables, largely used in smart grids, has seen a 35.9% growth. IEEMA is the representative body for the Indian power equipment sector.

3.6.24 Smart Grid Smart grid as a concept in India is under development, with micro solutions scattered across regions. Fourteen pilot smart grid projects are under various stages of being bid or awarded. For tomorrow's smart cities, some elements are already taking shape. Once state level grids

3 Market Study and Demand Assessment Page 26 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B become smart, it leads to a trickle-around effect for strengthening the national grid. Power Grid was already working on putting optical ground fibers along the national grid. Smart Grid facilitates efficient and reliable end-to-end intelligent two-way delivery system from source to sink through integration of renewable energy sources, smart transmission and distribution. In this way Smart Grid technology shall bring efficiency and sustainability in meeting the growing electricity demand with reliability and best of the quality.  Smart Grid also enables real time monitoring and control of power system as well as helps in reduction of AT&C losses, demand response and demand side management, power quality management, outage management, smart home energy system etc.  Smart Grid will act as a backbone infrastructure to enable new business models like smart city, electric vehicles, smart communities apart from more resilient and efficient energy system and tariff structures.

3.6.25 Opportunities in Future Indian power system is facing high AT&C Losses, poor distribution network, wide demand – supply gap of energy, poor asset management etc. Smart grid technology will bring solutions to all of the mentioned problems and sustainability by way of demand side management, demand response, outage management, reduction in AT&C losses and improved customer satisfaction. Large investment is expected for Smart Grid Applications in distribution in 12th and 13th Plan, which will provide huge business prospects in coming years.

3.6.26 Benefits of Smart Grid The smart grid is expected to provide benefits to Utilities, Consumers & society in the following areas.

Area Utility Consumer Society

 Improved  Reduced  Improved level of  Reduction in cost Reliability operational cost service with fewer ultimately help keeping  Increased employee inconveniences the prices of goods and safety  Reduced out-of- services lower than they would be otherwise  Increased revenue pocket costs resulting from loss of  Virtual elimination of  Higher customer power blackouts satisfaction  Improved infrastructure  Reduced capital boosts economic cost development

 Improved  More opportunities  Downward pressure  A more robust Economi to leverage its on energy prices and transmission grid will cs resources and enter total customer bills accommodate larger new markets  Increased capability, increases in wind and  Increased revenues opportunity, and solar generation i.e. as theft of service is motivation to reduce green energy. reduced consumption  Downward pressure on  Improved cash flow  Opportunity to prices — through from more efficient interact with the improved operating and management of electricity markets market efficiencies billing and revenue through home area  Creation of new electricity management network and smart markets — enabling processes meter connectivity society to offer its

3 Market Study and Demand Assessment Page 27 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

Area Utility Consumer Society

 A flatter load profile  Opportunity to electricity resources to will reduce reduce transportation the market and creating operating and costs by using the opportunity to earn a maintenance (O&M) electric vehicles in revenue stream on such costs lieu of conventional investments as demand vehicles response, distributed  Opportunity to sell generation, and storage consumer produced electricity back to the grid

 Improved  Increase asset  Increased capability,  Deferral of capital Efficiency utilization opportunity, and investments as future  Reduction in lines motivation to be peak loads are reduced losses on both more efficient on the and more accurately transmission and consumption end of forecasted through the distribution the value chain combined efforts of consumers and delivery  Reduction in  Increased influence companies transmission on the electricity congestion costs market  Reduced consumption of KWh’s through  Reductions in peak conservation, demand load and energy response, and reduced consumption transmission and leading to deferral distribution (T&D) losses of future capital investments  Increased asset data and intelligence enabling advanced control and improved operator understanding  Extended life of system assets through improved asset “health” management  Improved employee productivity through the use of smart grid information that improves O&M processes  Improved load forecasting enabling more accurate predictions on when new capital investments are needed  Reduced use of inefficient generation to meet system peaks

3 Market Study and Demand Assessment Page 28 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

Area Utility Consumer Society

 Improved  Increased capability  Increased capability,  Reduced CO2 emissions Environm to integrate opportunity, and  Improved public health ent intermittent motivation to shift to renewable electric vehicle resources transportation  Reduction in  Improved opportunity emissions as a to optimize energy- result of more consumption efficient operation, behavior resulting in reduced system a positive losses, and energy environmental impact conservation  Increased  Opportunity to opportunity to improve purchase energy environmental from clean leadership image in resources, further the area of creating a demand improving air quality for the shift from a and reducing its carbon-based to a carbon footprint “green economy”  Increased capability to support the integration of electric-powered vehicles  Reduction in frequency of transformer fires and oil spills through the use of advanced equipment failure / prevention technologies

3 Market Study and Demand Assessment Page 29 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

3 Market Study and Demand Assessment Page 30 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

3.6.27 Challenges with India's Power Sector The entire power sector value chain is dependent on the financial viability of the power distribution sector since this is essentially the funnel which feeds revenues to the transmission and generation sectors. There is a need to focus on improving its performance, especially of the government-owned power distribution utilities. Reducing the aggregate technical & commercial (AT&C) losses is going to be a critical component of this entire strategy. While there have been surfeits of schemes aimed at reduction of AT&C losses, the desired results are still far from being achieved. During the period 2005-2006 to 2013-2014, India’s imports of electrical equipment have increased at a CAGR of 19.73% in Rupee terms, standing at Rs.58,354 crore ($9.7 billion) for the FY14. Imports of electrical equipment in the country have now captured over 35% of the Indian market. The industry has witnessed a significant under-utilization of installed domestic capacity, resulting in loss of employment of qualified engineers, technicians and workers.  Inadequate last mile connectivity is the main problem to supply electricity for all users. The country has already adequate generation and transmission capacity to meet the full demand temporally and spatially. However, due to lack of last-mile link-up with all electricity consumers and reliable power supply (to exceed 99%), many consumers depend on DG sets using costly diesel oil for meeting unavoidable power requirements.  The distribution companies should focus on providing uninterrupted power supply to all the consumers who are using costly DG set's power. This should be achieved by laying separate buried power cables (not to be effected by rain and winds) for emergency power supply in addition to the normal supply lines. Emergency supply power line shall supply power when the normal power supply line is not working.  A system of cross-subsidization is practiced based on the principle of 'the consumer's ability to pay'. In general, the industrial and commercial consumers subsidize the domestic and agricultural consumers. This has financially crippled the distribution network, and its ability to pay for power to meet the demand.  The residential building sector is one of the largest consumers of electricity in India. Continuous urbanisation and the growth of population result in increasing power consumption in buildings. Thus, while experts express the huge potential for energy

3 Market Study and Demand Assessment Page 31 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

conservations in this sector, the belief still predominates among stakeholders that energy-efficient buildings are more expensive than conventional buildings, which adversely affects the “greening” of the building sector.  Key implementation challenges for India's electricity sector include new project management and execution, ensuring availability of fuel quantities and qualities, lack of initiative to develop large coal and natural gas resources available in India, land acquisition, environmental clearances at state and central government level, and training of skilled manpower to prevent talent shortages for operating latest technology plants.  Shortages of fuel: despite abundant reserves of coal, India is facing a severe shortage of coal. The country isn't producing enough to feed its power plants. Some plants do not have reserve coal supplies to last a day of operations.  Poor pipeline connectivity and infrastructure to harness India's abundant coal bed methane and shale gas potential.  The giant new offshore natural gas field has delivered less fuel than projected. India faces a shortage of natural gas.  Theft of power  Losses in the connector systems/service connections leading to premature failure of capital equipment’s like transformers.

3.7 Industrial Parks competitive and land allocation Vision document of 2022 of GoI envisages promotion of electrical machinery manufacturing cluster to help achieve the target set by the Government. It is expected that the government of India will soon announce a scheme on the lines of Electronic Manufacturing Clusters to help investments and exports in this sector. At present, there are no exclusive industrial parks dedicated for Electrical Machinery Industry. It was part of heavy engineering industry group. However, with the focus on improving power generation, transmission and distribution and emphasis on new technology “smart grids”, it is felt desirable to have a focused park catering to the needs of the industry. The district being proximity to several thermal and gas based plants rearing up in the neighborhood, it is prudent to develop such a theme based park, which would have backward and forward linkages. Since the sector has high potential for exports and also needs importing of high technology equipment, it may be considered to develop the park as Sector focused SEZ. Out of the proposed extent of 1,862 acres, an extent of 1,000 acres may be reserved for Boilers/Turbines and the balance extent for the transformers, circuit breakers, conductors, switchgears, energy meters, etc. The park is expected to generate an investment of more than Rs.10,000 Crores and an employment of around 10,000 persons both direct and indirect.

3.8 Estimated Revenue S. Revenue Per Ha (Rs Name of Forest Block Type of industry NO Crore) 1 IS Jagannadhapuram Electrical Machinery Manufacturing Sector 49.4

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4 Site Master Plan

4.1 Preamble A state-of-the-art Master Planning incorporating holistic and sustainable industrial development concepts shall include:  Long term vision with focus on international competence  Focus on integrated infrastructure  Optimal utilisation of available land and flexibility in plot division  Optimal use of natural resources including energy conservation measures  Traffic management  Integration of operation and management aspects Such an approach shall ensure that various stake holders of the project as well as the environment are benefited.

4.2 Planning Concepts The planning concepts considered for the site master planning are presented in the following Figure 4-1.

Figure 4-1: Planning Concepts

4.2.1 Consideration  The site boundary provided by APIIC is the base for preparation of the Site Master Plan for the project site.  Surrounding land use and wind direction taken into consideration for the land use plan proposed within the site  Existing connectivity to the site is from the State Highway which is at a distance of 15 km from SH-44 and 6 km from SH-42.

4.2.2 Product Mix Based on the Market Study Assessment, product mix considered is Electrical Machinery Manufacturing Park. The park contains the manufacturing units for the following components.

4 Site Master Plan Page 33 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

 Boilers/Turbines  Transformers  Circuit breakers  Conductors  Switchgears  Energy meters

4.3 Site Master Plan The following land uses are proposed in the Industrial Parks.  Industrial Use  Common Amenities (admin, canteen, dormitory, training canters, QA, QC testing center, Fire Station etc)  Infrastructure Utilities (Water Treatment Plant, wastewater treatment plant etc)  Green areas and green belt  Logistics  Road Network The area break up of all the proposed activities in the project site is shown in the following Table 4-1. Table 4-1: Proposed Land Use Break up for Industrial Park

S. No Type of activity Area in Ha % to total area 1. Industrial 548 71.9 2. Common amenities 14 1.9 3. Infrastructure Utilities 17 2.2 4. Logistics 9 1.2 5. Green Areas 19 2.4 6. Greenbelt 87 11.5 7. Roads 68 8.9 Total Area 762 100

The total industrial land proposed in the industrial park covers 72% of the total area. Green area and belt cover around 14% and the roads cover around 9%. The balance land is proposed for the infrastructure utilities, common amenities, administrative building, common parking space and industry related facilities which accounts to around 5%. Site master plan is provided as Figure FD0401.

4.4 Proposed Entry/Exit Proper planning of Entry/ Exit is essential for effective functioning of the Industrial Park. There is one entry/ exit proposed in the Industrial Park area and is shown as Point 1. Exclusive entry/exit is proposed and the location of emergency entry/exit is shown as Point 2 in Figure 4-2. In the case of emergency, the Industrial Park users can utilise the emergency entry/exit which is linking to the existing SH-44 via G.Kothapalle village road.

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25 Ac. 50 Ac. 30 M WIDE ROW WIDE M 30 40 Ac. 50 Ac. 50 Ac. Khammam

11 Ac. 24 M WIDE ROW 50 Ac. ROW WIDE M 24 24 M WIDE ROW TO KHAMMAM/ 50 Ac. HYDERABAD 50 Ac. East Godavari 50 Ac. 30 M WIDE ROW 4 Ac. SH 42 17 Ac. JANGAREDDIGUDEM

50 Ac. RIVER GODAVARI 30 M WIDE ROW WIDE M 30 PARIMPUDI 50 Ac. 50 Ac. SH 43 YERRA KALUVA RESERVOIR 16 Ac. 50 Ac. DEVARAPALLI 30 M WIDE ROW 50 Ac. ROW WIDE M 30

SH 44

50 Ac. SH 42 DWARAKA 50 Ac. TIRUMALA 50 Ac. 30 M WIDE ROW SCR MAIN LINE 6 Ac. GNT ROAD 50 Ac. SH 6 50 Ac. BHIMADOLE 136 Ac. NH 5 (AH 45) TO NIMMALAGUDEM TADEPALLIGUDEM TO 45 M WIDE ROW TANUKU RAJAHMUNDRY/ VISAKHAPATNAM/ 30 Ac. 45 M WIDE ROW 50 Ac. ELURU KOLKATA 50 Ac. 20 Ac. SH 42 22 Ac. 50 Ac. 50 Ac. ENTRY/EXIT TO 4 Ac. VIJAYAWADA/ 45 M WIDE ROW CHENNAI NH 165 (NH 214) 50 Ac. ROW WIDE M 24 75 Ac. Krishna NH 216 (NH 214A)

TO ONGOLE 75 Ac.

43 Ac. TO NALLAJERLA 45 M WIDE ROW WIDE M 45 43 Ac. LEGEND

27 Ac. 10 Ac. INDUSTRIAL

IS JAGANNADHAPURAM AREA (Ha.) % COMMON AMENITIES INDUSTRIAL (ELECTRICAL EMERGENCY MACHINERY 548 71.9 INFRASTRUCTURE UTILITIES ENTRY/EXIT MANUFACTURING) COMMON AMENITIES 14 1.9 INFRASTRUCTURE UTILITIES 17 2.2 LOGISTICS LOGISTICS 9 1.2 GREEN AREA 19 2.4 GREEN AREAS GREEN BELT 87 11.5 ROADS 68 8.9 TO G.KOTHAPALLE TOTAL 762 100 GREEN BELT Road Lengths In Metres In Km 45 M Row 5840 5.8 30 M Row 5776 5.8 0 Km 0.5 Km 1 Km 24 M Row 2140 2.2 12 M Row (Periphery Road) 13400 13.4 SCALE IN KILO METRES &T Ltd.

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Figure 4-2: Proposed Entry/ Exit Points

4.4.1 Circulation and Road Hierarchy The entire IP will have different hierarchy of roads, with the primary road of 45m RoW. The secondary roads are of 30m, 24m and 12m RoW. The entire circulation plan is shown in Figure FD0402. Typical Cross sections of the RoW are provided in Figure FD0403 and Figure FD0404. Green belt proposed along the boundary will have peripheral road for maintenance purpose.

4.4.2 Green / Open Areas Green belt is proposed along the site boundary. Green areas are also proposed near the infrastructure utilities to serve as recreational facilities and lung spaces. In addition to this, all the industrial units shall develop green areas within their premises as per the prevailing Andhra Pradesh Pollution Control Board (APPCB) provisions. The green areas proposed are shown in Figure FD0405.

4.4.3 Infrastructure Utilities/ Common Amenities/ Industry Related Facilities The following amenities are proposed in the site and proposed location is shown in Figure FD0406.  Truck parking and dormitory  Administrative building  Sewage Treatment Plant  Clinic at convenient locations  Fire station at prominent locations near the entrances  Community hall, recreational spaces, banks and ATMs, post office, restaurants, cafeterias, fuel filling station, hotel, convention centre, etc at convenient locations distributed so that it can be easily accessed

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25 Ac. 50 Ac. 30 M WIDE ROW WIDE M 30 40 Ac. 50 Ac. 50 Ac. Khammam

11 Ac. 24 M WIDE ROW 50 Ac. ROW WIDE M 24 24 M WIDE ROW TO KHAMMAM/ 50 Ac. HYDERABAD 50 Ac. East Godavari 50 Ac. 30 M WIDE ROW 4 Ac. SH 42 17 Ac. JANGAREDDIGUDEM

50 Ac. RIVER GODAVARI 30 M WIDE ROW WIDE M 30 PARIMPUDI 50 Ac. 50 Ac. SH 43 YERRA KALUVA RESERVOIR 16 Ac. 50 Ac. DEVARAPALLI 30 M WIDE ROW 50 Ac. ROW WIDE M 30

SH 44

50 Ac. SH 42 DWARAKA 50 Ac. TIRUMALA 50 Ac. 30 M WIDE ROW SCR MAIN LINE 6 Ac. GNT ROAD 50 Ac. SH 6 50 Ac. BHIMADOLE 136 Ac. NH 5 (AH 45) TO NIMMALAGUDEM TADEPALLIGUDEM TO 45 M WIDE ROW TANUKU RAJAHMUNDRY/ 30 Ac. 45 M WIDE ROW VISAKHAPATNAM/ 50 Ac. ELURU KOLKATA 50 Ac. 20 Ac. SH 42 22 Ac. 50 Ac. 50 Ac. ENTRY/EXIT TO 4 Ac. VIJAYAWADA/ 45 M WIDE ROW CHENNAI NH 165 (NH 214) 50 Ac. ROW WIDE M 24 75 Ac. Krishna NH 216 (NH 214A)

TO ONGOLE 75 Ac.

43 Ac. TO NALLAJERLA 45 M WIDE ROW WIDE M 45 43 Ac. LEGEND

27 Ac. 10 Ac. 45 M WIDTH RoW

30 M WIDTH RoW

EMERGENCY 24 M WIDTH RoW ENTRY/EXIT 12 M PERIPHERAL ROAD IS JAGANNADHAPURAM AREA (Ha.) % LOGISTICS 9 1.2 ROADS 68 8.9 LOGISTICS TOTAL 77

TO G.KOTHAPALLE Road Lengths In Metres In Km 45 M Row 5840 5.8 30 M Row 5776 5.8 24 M Row 2140 2.2 0 Km 0.5 Km 1 Km 12 M Row (Periphery Road) 13400 13.4 SCALE IN KILO METRES &T Ltd.

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L&T Infra Engineering Infrastructure Consulting &T Infrastructure Engineering Ltd. L&T-Ramboll Consulting Engineers Limited L & T Infra Engineering &T Infrastructure Engineering Ltd. L&T-Ramboll Consulting Engineers Limited L & T Infra Engineering N

KEY MAP-WEST GODAVARI DISTRICT

25 Ac. 50 Ac. 30 M WIDE ROW WIDE M 30 40 Ac. 50 Ac. 50 Ac. Khammam

11 Ac. 24 M WIDE ROW 50 Ac. ROW WIDE M 24 24 M WIDE ROW TO KHAMMAM/ 50 Ac. HYDERABAD 50 Ac. East Godavari 50 Ac. 30 M WIDE ROW 4 Ac. SH 42 17 Ac. JANGAREDDIGUDEM

50 Ac. RIVER GODAVARI 30 M WIDE ROW WIDE M 30 PARIMPUDI 50 Ac. 50 Ac. SH 43 YERRA KALUVA RESERVOIR 16 Ac. 50 Ac. DEVARAPALLI 30 M WIDE ROW 50 Ac. ROW WIDE M 30

SH 44

50 Ac. SH 42 DWARAKA 50 Ac. TIRUMALA 50 Ac. 30 M WIDE ROW SCR MAIN LINE 6 Ac. GNT ROAD 50 Ac. SH 6 50 Ac. BHIMADOLE 136 Ac. NH 5 (AH 45) TO NIMMALAGUDEM TADEPALLIGUDEM TO 45 M WIDE ROW TANUKU RAJAHMUNDRY/ 30 Ac. 45 M WIDE ROW VISAKHAPATNAM/ 50 Ac. ELURU KOLKATA 50 Ac. 20 Ac. SH 42 22 Ac. 50 Ac. 50 Ac. ENTRY/EXIT TO 4 Ac. VIJAYAWADA/ 45 M WIDE ROW CHENNAI NH 165 (NH 214) 50 Ac. ROW WIDE M 24 75 Ac. Krishna NH 216 (NH 214A)

TO ONGOLE 75 Ac.

43 Ac. TO NALLAJERLA 45 M WIDE ROW WIDE M 45 43 Ac. LEGEND

27 Ac. 10 Ac. GREEN AREAS

GREEN BELT

EMERGENCY ENTRY/EXIT IS JAGANNADHAPURAM AREA (Ha.) % GREEN AREA 19 2.4 GREEN BELT 87 11.5

TO G.KOTHAPALLE

0 Km 0.5 Km 1 Km SCALE IN KILO METRES &T Ltd.

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KEY MAP-WEST GODAVARI DISTRICT

25 Ac. 50 Ac. 30 M WIDE ROW WIDE M 30 40 Ac. 50 Ac. 50 Ac. Khammam

11 Ac. 24 M WIDE ROW 50 Ac. ROW WIDE M 24 24 M WIDE ROW TO KHAMMAM/ 50 Ac. HYDERABAD 50 Ac. East Godavari 50 Ac. 30 M WIDE ROW 4 Ac. SH 42 17 Ac. JANGAREDDIGUDEM

50 Ac. RIVER GODAVARI 30 M WIDE ROW WIDE M 30 PARIMPUDI 50 Ac. 50 Ac. SH 43 YERRA KALUVA RESERVOIR 16 Ac. 50 Ac. DEVARAPALLI 30 M WIDE ROW 50 Ac. ROW WIDE M 30

SH 44

50 Ac. SH 42 DWARAKA 50 Ac. TIRUMALA 50 Ac. 30 M WIDE ROW SCR MAIN LINE 6 Ac. GNT ROAD 50 Ac. SH 6 50 Ac. BHIMADOLE 136 Ac. NH 5 (AH 45) TO NIMMALAGUDEM TADEPALLIGUDEM TO 45 M WIDE ROW TANUKU RAJAHMUNDRY/ 30 Ac. 45 M WIDE ROW VISAKHAPATNAM/ 50 Ac. ELURU KOLKATA 50 Ac. 20 Ac. SH 42 22 Ac. 50 Ac. 50 Ac. ENTRY/EXIT TO 4 Ac. VIJAYAWADA/ 45 M WIDE ROW CHENNAI NH 165 (NH 214) 50 Ac. ROW WIDE M 24 75 Ac. Krishna NH 216 (NH 214A)

TO ONGOLE 75 Ac.

43 Ac. TO NALLAJERLA 45 M WIDE ROW WIDE M 45 43 Ac. LEGEND

27 Ac. 10 Ac. COMMON AMENITIES INFRASTRUCTURE UTILITIES

AREA (Ha.) EMERGENCY IS JAGANNADHAPURAM % ENTRY/EXIT COMMON AMENITIES 14 1.9 INFRASTRUCTURE UTILITIES 17 2.2

TO G.KOTHAPALLE

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 Wastewater treatment plant (CETP)  Solid waste management  Apart from the above common amenities, Industrial park will also include industry related facilities like R&D centres, material testing centres, QC laboratories, training centres, weigh bridge, exhibition cum business centre, etc.

4.5 Housing1 Proposed park will generate employment and it is proposed that the nearest urban centres will be serving the housing needs of the employees.

1 This proposal on housing was based on the discussions on submission of the Preliminary Report and review meeting on May 29, 2015 at Collector & District Magistrate Office, Eluru, W.G District, Andhra Pradesh.

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DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

5 Infrastructure Assessment and Cost Estimation The following infrastructure is proposed for the Industrial park.  Road Network  Water supply  Wastewater management  Storm water management  Solid waste management  Power supply system

5.1 Infrastructure Demand Assessment Infrastructure demand assessment for the site is carried out considering the proposed land use, area break up. The following Figure 5-1 shows the methodology adopted for infrastructure assessment of the site.

Figure 5-1: Methodology for Infrastructure Assessment

5.1.1 Internal Road Network The master plan of project site is proposed such that it provides an efficient road network. This network ensures that all parts of the site are effectively connected with each other with efficient traffic movements. Proposed different RoW in project site are 45 m, 30m, 24m and 12 m wide road is used as peripheral road for service and also for emergency exit at the time of fire hazard. The road cross-sections are proposed based on the RoW for various categories of roads in the master plan.

5.1.2 Power Supply The total power demand for the industries in the project site will be 76 MVA.

5 Infrastructure Assessment and Cost Estimation Page 37 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

5.1.3 Water Supply Total water demand for various uses in the industrial park includes process water, green belt maintenance, fire demand, drinking, flushing, etc. The total water demand for the park is estimated at 9 MLD.

5.1.4 Wastewater Management Wastewater is generated from the industrial use, common amenities proposed in the project site. It is broadly classified as industrial effluents and domestic wastewater. The total wastewater estimated to be generated from the site is 7 MLD.

5.1.5 Solid Waste Management The total solid waste generation from the project site is estimated at 5TPD.

5.1.6 Storm Water Management Storm water drains are proposed within the RoW of Roads.

5.2 Block Cost Estimates Block cost estimates for the infrastructure development of the site is based on the infrastructure demand and line estimates.  Total cost for site grading is Rs.130 Crores  The total cost for development of road network in the industrial parks is estimated at Rs. 131 Crores  Cost for development of streetlights is estimated at Rs.6 Crores  Total cost for development of water supply and distributions costs Rs.4 Crores  Wastewater management costs about Rs.40 Crores  Drainage costs around Rs.40 Crores  Cost for solid waste management is estimated as Rs.1 Crores. Industrial waste is proposed to be managed by contractor to be engaged by industry/APIIC  Cost for development of green belt, landscaping, admin and security cabin is estimated at Rs.13 Crores  For power component, it is assumed that power will be supplied by the Government (APTRANCO) and the industries will be charged based on the usage. Table 5-1: Block Cost Estimates S. No Item Cost (in Rs. Crores) 1. Site grading 130 2. Road network and Signages 131 3. Street lights 6 4. Water supply network including storage 4 5. Drainage 40 6. Wastewater Management 40 7. Solid Waste Management 1 8. Green belt, landscaping, admin and security cabin 13 Sub Total 365 Engineering and project management @ 2.5% 9

5 Infrastructure Assessment and Cost Estimation Page 38 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

S. No Item Cost (in Rs. Crores) Contingency @ 5% 18 TOTAL COST 392

5 Infrastructure Assessment and Cost Estimation Page 39 6 Cost Benefit Analysis

DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

6 Cost Benefit Analysis

6.1 Introduction Government of Andhra Pradesh (GoAP) decides to utilise forest land for setting up of industrial parks. As required by the GoI policy, the cost and benefit from the forest land conversion has to be estimated prior to the conversion of forest land to industrial lands. This Chapter covers the Cost Benefit analysis of Electrical Machinery Manufacturing Park at IS Jagannathapuram, Andhra Pradesh.

6.2 Overall Approach & Methodology The cost benefit analysis has been carried out by analysis the benefit generated by the business that will be established in the converted land against the expense / cost incurred in the conversion process.

6.3 Revenue generation The revenue from the converted land comes to Rs.494 Mn per Ha. The revenue generating space in the project comes to 547.77 Ha with that the total revenue from the project is estimated at Rs.2,70,600 Mn.

6.4 Cost incurred The details of the cost incurred while converting the forest land to the industrial land are given in the following paragraphs.

6.4.1 Project Investment The capital outlay incurred for the development is estimated at Rs.1,03,650 Millions.

6.4.2 Land Cost: APIIC has to pay Forest Department an amount of Rs 0.8 Mn per Ha as the cost of forest land.

6.4.3 Cost on Afforestation APIIC has to carry out a compensatory afforestation effort for utilising the earmarked for the development of Industrial Park. The capital expenditure for afforestation efforts comes to about Rs 0.54 Mn per Ha whereas the maintenance expenses for the same comes to around Rs 0.25 Mn per Ha per annum.

6.4.4 Foregone revenue from the forest land The foregone revenue from the forest land comes to around Rs 1.20 Mn per Ha. Same has been considered for the cost – benefit analysis.

6.4.5 Interest The interest incurred in funding the project comes to 12% per annum. The interest expense has been considered on the development cost estimated for the project.

6.4.6 Depreciation: The details of the depreciation to be charged on the project assets are given in the following table.

6 Cost Benefit Analysis Page 40 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

Depreciation Rate of Depreciation % w.r.t to capital cost Civil 3.33% 40% Electrical 7.42% 20% Mechanical 7.42% 15% Msc Assets 7.42% 25% The total depreciated amount comes to Rs.5,995 Mn.

6.5 Details of Cost and Benefit The Overall benefits from the project comes to Rs.270,600 Mn whereas the expenses incurred on converting forest land comes to Rs.123,705 Mn. The details of the analysis is given in Annexure 6.1

6.6 Conclusion The revenue from the converted land justifies the cost incurred for the conversion exercise as the overall B/C (Benefit / Cost) ratio comes to 2.19:1.

6 Cost Benefit Analysis Page 41 7 Financial Analysis

DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

7 Financial Analysis Financial feasibility is a key determinant in a business oriented investment decision. A project will attract investors and all other stakeholders only if the project generates sufficient revenues, during the project life, to cover the initial and additional investment costs, if any, plus a sufficient return on investment. The viability study on financials include the key standard parameters like Post Tax Project Internal Rate of Return (IRR), Equity IRR and Coverage ratios to ascertain the debt servicing capability of the project. This Chapter covers the financial viability for the development of Electrical Machinery Manufacturing Park at IS.Jagannadhapuram, Andhra Pradesh.

7.1 Objective The primary objectives of the financial analysis are to evaluate the financial viability of the project and to ascertain whether the project shall be attractive for its various stake holders.

7.2 Overall Approach & Methodology The overall approach to evaluate financial feasibility of the project involves determination of Financial Internal Rate of Return (FIRR) for the Project and comparing it with the Weighted Average Cost of Capital (WACC). This approach is preferred for infrastructure projects in which tariffs/ user fees can be levied and recovered with a reasonable certainty. The emphasis is on checking the adequacy of projected revenue streams to recover the capital investment and desired returns. The steps followed under this approach are:  Project Phasing and estimation of Capital Expenditure  Means of Finance  Identifying revenue sources and estimating the project revenues  Estimation of capital costs, operating expenses and financing costs over the project horizon  Drawing up of profit & loss and cash flow statements for project  Estimation of net operating cash flows for the project  Calculation of IRR and ADSCR

7.3 Key Assumptions in Financial Modelling The financial model takes inputs from the detailed technical studies done for the project & other data sources for financial assumptions.  The financial analysis has been carried at nominal prices, as the nominal price method attempts to capture the effect of economic environment of the project.  The capital costs for all the project elements of Industrial park have been taken and same shall be escalated by 5% per annum on 2015 prices to derive the subsequent project development costs.  The project will developed in single phase.  Indigenous capital cost and operating cost escalation has been assumed at 5% per annum  Economic assumptions have been derived from the values of base indicators for the Year 2015-16.  Financing Assumptions and data relating to loans, interest rates, tenure etc. have been taken on the basis of prevailing market trends.

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 Depreciation rates, tax rates and concessions applicable to infrastructure projects have been taken as per the guidelines of Companies Act and Income Tax Act.

7.4 Flexibility in Financial Model The financial analysis is based on the master plan. However, the model provides flexibility in choosing and executing a different land absorption forecasts .The model also provides flexibility in choosing financing mix for the project. The funds requirement in a particular year can be met through various sources of debt and equity. The model incorporates the flexibility of using different capital structures (D/E mix) for different phases.

7.5 Construction Period and Project Life The project shall be developed in single phase in tandem with the land absorption projection made for the project. As per the proposed schedule of implementation, the construction is assumed to begin from April 01, 2016. The construction period, including post construction activities like commissioning, is assumed to be requiring 18 months for the development. The COD may thus be assumed as 30 September, 2017. The details on major project milestones are given in Table 7-1. Table 7-1 Project Development Schedule

Construction Details- Phase I

Construction Start Period 01-Apr-16

Construction period ( in months) 18

First FY during Construction 31-Mar-17

Completion of Construction 30-Sep-17

Fy after completion of Construction 31-Mar-18

No of Operating Months in the first year after COD 12

Period considered for viability study (in years) 30

Last Financial Year 31-Mar-46

Working months in the last F Year 12

7.6 Project Cost The cost of the project is estimated at Rs. 5,379 Million (at 2015 prices). This cost is spread over a period between years 2016 and 2017. The cost includes Civil development cost, water supply and distribution network, external road connectivity, green belt development, Equipment cost etc. The land cost is estimated at Rs 1.33 Mn per Ha, which consist of Rs 0.8 Mn per Ha to be paid to Forest department and the compensatory afforestation cost of Rs 0.54 Mn per Ha. The break-up of this cost (major heads) are given in Table 7-2.

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Table 7-2 : Capital Cost of the Project (2015 prices in Rs Mn) PROJECT LANDING COST IN RS Mn Amount in Rs Mn

Civil Cost 1,460

Electrical 730

Mechanical 548

Msc Assets 913

Block capital Cost 3,650

Land and Site Developments 1,013

Contingency @ 5% 183

Engineering and Project Management @ 2.5% 91

Preoperative expenses 59

Financing cost 39

Interest During Cost 344

Landing Project Cost 5,379

7.7 Financing Structure The financing structure reflects the risk of the projects, the security requirements of the lenders and financing requirements of the sponsors. The financing structure of a project also depends on the stage in lifecycle of the project. Infrastructure projects have three distinct phases with different risks. Both equity investors and lenders can be expected to seek different rewards and expect different guarantees depending upon which phase they are investing in. A typical Infrastructure project would involve the following phases as given in Table 7-3. Table 7-3 : Different phases of an infrastructure project

Phase Risks Financing Development phase Very high risk Only equity, mainly from sponsors Construction/start-up High risk Large volume of finance required. Mixture of phase equity & Senior debt is used under this phase. Public utility/operation Lower risk Refinancing with bonds or equity possible; high phase D/E ratios could be explored.

Also in the initial years of a project, greater equity participation may be more appropriate mode of funding, since if debt is used, interest cost would mount substantially due to the lack of any cash income in the development and construction phases of the project. But the availability of equity is bound to pose problem due to the magnitude of risks involved. The challenge for the promoters in structuring financing packages is to secure debt with maturities long enough to match capital servicing cash flow requirements with the limited inflows in the initial phases.

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Financing has been exclusively based on loans from the commercial banks, bilateral agencies and equity from the sponsors. Capital market sources have hardly been used in these projects. Also, equity financing has contributed a relatively small share of the financing. Infrastructure projects in developing countries usually have a financing pattern of 30-40% equity and 60-70% debt.

7.7.1 Funding Structure for the Project It is considered that APIIC would raise sufficient fund in the form of Own fund and through debt raised from multilateral agencies / commercial banks. The funding structure refers to the mix of debt and equity components used as means of finance. We have considered a conservative D/E ratio of 1.5:1 for funding the project. The details of the funding structure are given in Table 7-4. Table 7-4 : Means of Finance

Source of Fund Amount in Rs Mn Composition % Equity 2099 39.0% Debt 3156 58.7% Non-refundable deposit 124 2.3% Total 5379 100%

7.7.2 Financial Instruments & Cost of Funding The preferable financing sources/instruments, their tenure and dividend/interest on them are given below: Equity Structure The equity contribution would be from the project promoter raised from own sources. The Equity structure can either be consisting of a single member or may be of a consortium formed by various equity contributors (state agencies) having interest in the same project. Term Loan from Commercial Banks The potential sources of rupee debt include Indian Term Lending Institutions, Scheduled Commercial Banks, and Infrastructure Development Financing Agencies. These institutions are generally lent to infrastructure projects at rupee term loan interest for a longer tenure of upto 10 to 12 years. Commercial Banks loans would have a moratorium period of 1year. The current prime lending rate of Commercial Banks is 11.50 to 13.50 % per annum. Most infrastructure projects get term loans at PLR less 0.5 to 1.5%, depending upon the promoter and the project revenue stream. In view of the continual decrease in prime lending rates over the last few years, a rate of 12.00% is considered for the project. The details on debt are given in Table 7-5.

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Table 7-5 : Details on Debt

Details on Debt Interest on Senior Debt 12.00% Processing charges 0.75% Tenor Period under construction (in years) 1.5 Moratorium ( in years) 1 Repayment Period (in years) [Ballooned Repayment] 3

7.8 Depreciation Depreciation rates have been taken based on the current statutory requirements of Income Tax Act and Companies Act. The Written down Value Method has been used for the purpose of Income Tax, and the Straight Line Method has been adopted for the Companies Act purposes. The rates have been assumed based on the following categories of charges. Table 7-6 : Depreciation Rates

Depreciation Rates Rate SLM (%) Rate WDV (%) Civil Cost 3.34% 10.00% Electrical 7.42% 15.00% Mechanical 7.42% 15.00% Msc Assets 7.42% 15.00%

7.9 Operating Expenses Expenses are recurring in nature and would be incurred on day to day basis. These include Operating and Maintenance expenses, administration expenses, insurance premium etc. The expenses details are given in following paragraphs.

7.9.1 Operation and Maintenance Expenses For the operation and maintenance of the park, a provision of 2.50% on the block cost has been considered which will be escalated by 5% per annum.

7.9.2 Administrative Expenses The administrative expenses for the project are estimated at 1% of the Block cost. The expense will be escalated by 5% per annum.

7.9.3 Insurance expenses Insurance shall be taken so as to mitigate any unforeseen events which may damage project assets. It is assumed that the project will incur insurance fee, annually, which would be equivalent to 0.75% on WDV of Fixed Assets.

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7.10 Revenue Estimates The Industrial Park (I.P) will have revenue streams in the form of an upfront premium and the maintenance expenses collected from the occupants. The leasable space in the IP comes to 5475591 Sqm. The Upfront premium lease rent and the respective escalation factor considered for the viability study are given in Table 7-7. Table 7-7: Revenue Details Revenue Sources Upfront Premium / Annual Maintenance Annual Sqm In Rs charge / Sqm In Rs Escalation Industrial Area 1230 30 5%

The agreement with the occupant shall be made for a period of 30 years wherein 2% of the initial premium shall be collected from the occupants as annual maintenance fee during the term of the agreement. The annual maintenance fee shall be escalated by 5% per annum.

7.11 Income Tax Calculations The Income Tax rate assumed for the project is 32.45%.

7.12 Financial Analysis - Base Case Scenario

7.12.1 Key Parameters The key project parameters computed are Project IRR (pre-tax), Project IRR (post-tax) and Equity IRR. The Project IRR (pre-tax) has been calculated based on the project outflows in the form of capital investment while the inflows have been considered based on the revenue net of operating expenses (excluding interest and tax) i.e. Profit Before Tax Plus: Interest Plus: Depreciation. The Project IRR (post-tax) calculation is similar to Project IRR (pre-tax) except that in the inflows, the tax payments have also been considered i.e. Profit After Tax Plus: Interest Plus: Depreciation. The equity IRR is based on the equity contribution being made by the investor as an outflow and the inflow is the net cash available for payment of dividend i.e. Profit After Tax Plus: Depreciation Less: Loan Repayment Obligation. The DSCR has been calculated for the entire loan tenure. The details of Interest During Construction (IDC) is provided in Annexure 7.1. Further, DSCR calculations, the projected Profitability statement, Cashflow statement, Balance sheet, IRR calculations are given in Annexure 7.2, Annexure 7.3, Annexure 7.4, Annexure 7.5 and Annexure 7.6, respectively. Based on the above analysis a base case scenario, with the following mix of key input variables and revenue estimates, has been prepared.

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Table 7-8 : Key Input Parameters – Base Case Scenario

D/E ratio 1.5 :1 Cost of INR debt 12.00% Term of INR debt Ballooned Repayment Project Cost Sensitivity 100% of base case Lease premium and Annual Maintenance expense Sensitivity 100% of base case

Table 7-9 : Key results – Base Case Scenario S. No Project Parameters Returns 1 Pre-tax IRR 23.56% 2 Post Tax IRR 16.05% 3 Equity IRR 22.35% 4 Average Debt Service Coverage Ratio with DSR 1.62

7.13 Observations Project IRR The project has IRR (post tax) of 16.05 %, considering the cashflow generated by the business till 2046. No terminal value on the project assets has been considered for the viability assessment. The Industrial Park development is a ‘Greenfield’ project and has a high perceived commercial risk; however this level of return may be just sufficient to get nullify the same.

7.14 Conclusion It is concluded that the project is financially viable based on the assumptions considered by the consultant on project cost, capital structuring, cost of capital, revenue and cost assumptions etc.

7 Financial Analysis Page 48

8 Conclusion

DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004 rev. B

8 Conclusion It is concluded that the project is financially viable based on the assumptions considered by the consultant on project cost, capital structuring, cost of capital, revenue and cost assumptions etc. Industrial development is proposed in the forest area for the following reasons.  IS.Jagannadhapuram block comes under the influence of the proposed VCIC. Initial studies projected tremendous growth for Andhra Pradesh in the next 20 years. Once VCIC becomes functional, the manufacturing output would reach Rs. 3,000 billion by 2025 and Rs. 7,825 billion by 2035. The proposed corridor is likely to have a strong influence on the industrial activities in all 13 districts of Andhra Pradesh and therefore there is a need for large tracts of industrial land to keep pace with the projected industrialisation.  IS.Jagannadhapuram Block is located between Kakinada and Gannavaram Nodes in West Godavari District. Most of the agricultural land in West Godavari District is three/two crop. To meet the industrial demand it is proposed to avoid the agricultural land and develop the industrial parks in the forest area. This will also help in preserving the agricultural land getting converted into industrialisation and also improves food security.  As compensation it is proposed for forestry in Anantapur and Chittor districts to the equal extend of area to be diverted for industrial area in West Godavari district.  Considering the location strengths Electrical Machinery Manufacturing Sector is proposed at IS.Jagannadhapuram.

8 Conclusion Page 49 Annexures

Annexure 1.1 Form A for seeking prior approval under section 2 of the proposals by the state governments and other authorities

Annexure 6.1 Annual Benefit from the Project DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannadhapuram Forest Block RP004, Rev.B

Annexure 6.1 IS Jagannathapuram - Electrical Machine Manufacturing Annual Benefit from the project Area Revenue (in A Benefit from the industrial land earmarked In Rs Mn Rs Mn) / Ha in Ha Revenue 494 547.77 Annual benefit 2,70,600

B Investment required for the industrial development In Rs Mn 1,03,650 Infrastructure Cost Site Grading 1300 Roads 1200 Street lighting 60 Water 40 Drainage 400 Waste water 400 Signage 110 Solid waste Management 10 Admin Green area etc 130 Sector wise investment 100000

C Land cost to Forest Department in Rs Mn per Ha 0.80 Area (in Ha) 762 610

D Cost incurred on afforestation (In Rs Mn per Ha) 89000 68 Maintenance cost in Rs Mn per Ha/annum 40000 30

E Foregone revenue from the forest land per Ha (Rs Mn) 1.20 Total Revenue from the forest land ( Rs Mn) 914

F Interest Rate 12% Interest on investment ( B*E) 12,438

G Depreciation % cost Civil 3.33% 40% 1,381 Electrical 7.42% 20% 1,538 Mechanical 7.42% 15% 1,154 Msc Assets 7.42% 25% 1,923

H Total annual cost 1,23,705

I BC Ratio = Annual benefit/ Total Annual cost (A/H) 2.19

Page 1 Annexure 7.1- Interest During Construction Annexure 7.2 - Debt Service Coverage Ratio Annexure 7.3 - Profitability Statement Annexure 7.4 - Cash Flow statement Annexure 7.5 - Balance Sheet Annexure 7.6 - IRR Calculation DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannathapuram Forest Block RP004 Rev. B

Annexure 7.1 Interest During Construction (IDC)

In Rs Mn Fy Basis 31-Mar-17 31-Mar-18 31-Mar-19 31-Mar-20 31-Mar-21 31-Mar-22 31-Mar-23 31-Mar-24 31-Mar-25 31-Mar-26 31-Mar-27 31-Mar-28 31-Mar-29 31-Mar-30 31-Mar-31 31-Mar-32 Interest capitalised 174.06 170.30 ------

IDC in Quarterly Basis in Rs Mn Quarters 30-Jun-16 30-Sep-16 31-Dec-16 31-Mar-17 30-Jun-17 30-Sep-17 31-Dec-17 31-Mar-18 30-Jun-18 30-Sep-18 31-Dec-18 31-Mar-19 30-Jun-19 30-Sep-19 31-Dec-19 31-Mar-20 Financial Charges from CF 30.17 41.12 48.23 54.55 75.61 94.69 94.69 94.69 94.69 94.69 92.80 90.90 87.12 83.33 77.65 71.97 Interest to be charge in P&L ------94.69 94.69 94.69 94.69 92.80 90.90 87.12 83.33 77.65 71.97 IDC 30.17 41.12 48.23 54.55 75.61 94.69 ------

IDC in Quarterly Basis in Rs Mn 30-Jun-20 30-Sep-20 31-Dec-20 31-Mar-21 30-Jun-21 30-Sep-21 31-Dec-21 31-Mar-22 30-Jun-22 30-Sep-22 31-Dec-22 31-Mar-23 30-Jun-23 30-Sep-23 Quarters 64.39 56.81 47.35 37.88 26.51 13.26 ------Financial Charges from CF 64.39 56.81 47.35 37.88 26.51 13.26 ------Interest to be charge in P&L ------IDC

1 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannathapuram Forest Block RP004 Rev. B

Annexure 7.2 Debt Service Coverage Ratio

DSCR Calculation 31-Mar-17 31-Mar-18 31-Mar-19 31-Mar-20 31-Mar-21 31-Mar-22 31-Mar-23 31-Mar-24 31-Mar-25 31-Mar-26 PAT - 307.38 722.90 1,081.55 1,467.28 1,081.20 31.89 33.77 35.84 38.08 Interst - 189.38 373.08 320.06 206.43 39.77 - - - - Amortisation of expenses 17.77 149.09 251.86 238.30 225.65 213.84 202.83 192.55 182.96 174.00 Deferred Tax - 45.35 32.95 (14.47) (12.30) (10.44) (8.84) (7.48) (6.31) (5.30) Total Cash flow 17.77 691.20 1,380.78 1,625.43 1,887.05 1,324.38 225.87 218.84 212.49 206.78

Debt Obligation repayment - - 126.25 631.27 1,136.29 1,262.55 - - - - interest - 189.38 373.08 320.06 206.43 39.77 - - - - Total Debt Obligation - 189.38 499.34 951.33 1,342.72 1,302.32 - - - -

Overall DSCR 1.62 ------Min DSCR 1.02 - 3.65 2.77 1.71 1.41 1.02 - - - -

2 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannathapuram Forest Block RP004 Rev. B

Annexure 7.3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Profitability statement In Rs Millions Revenues 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 FY 31-Mar-17 31-Mar-18 31-Mar-19 31-Mar-20 31-Mar-21 31-Mar-22 31-Mar-23 31-Mar-24 31-Mar-25 31-Mar-26 31-Mar-27 31-Mar-28 31-Mar-29 31-Mar-30 31-Mar-31 31-Mar-32 No of Operating Months - - 6.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00

Non Refundable Deposits ------Processing Area - - 721.32 1,507.34 1,894.57 2,320.85 1,547.23 ------Commercial Area ------Residential Area ------Maintenance charges ------Processing Area - - 7.11 40.07 86.86 144.81 204.41 222.89 234.03 245.73 258.02 270.92 284.47 298.69 313.62 329.30 345.77 Commercial Area ------Residential Area ------Total revenue - - 728.43 1,547.41 1,981.42 2,465.66 1,751.64 222.89 234.03 245.73 258.02 270.92 284.47 298.69 313.62 329.30 345.77 ------Expenses ------Administative expenses - - 19.64 40.74 42.78 44.92 47.17 49.52 52.00 54.60 57.33 60.20 63.21 66.37 69.69 73.17 76.83 Operation and Maintenance including marketing expenses - - 49.10 101.86 106.95 112.30 117.92 123.81 130.00 136.50 143.33 150.49 158.02 165.92 174.22 182.93 192.07 Insurance premium - - 15.26 28.69 26.43 24.36 22.47 20.74 19.16 17.71 16.38 15.16 14.04 13.01 12.06 11.19 10.39 Land lease rent to Sponsorer ------Total expenses - - 84.00 171.30 176.17 181.59 187.56 194.08 201.16 208.81 217.04 225.85 235.26 245.30 255.97 267.29 279.30 ------PBDIT - - 644.43 1,376.11 1,805.26 2,284.07 1,564.09 28.81 32.87 36.92 40.98 45.07 49.20 53.39 57.66 62.01 66.47 Depreciation - - 113.55 216.31 202.76 190.11 178.30 167.29 157.01 147.42 138.46 130.09 122.27 114.96 108.14 101.76 95.78 Amortisation of Land Leasehold - - 17.77 35.54 35.54 35.54 35.54 35.54 35.54 35.54 35.54 35.54 35.54 35.54 35.54 35.54 35.54 PBIT - - 513.11 1,124.26 1,566.96 2,058.42 1,350.24 (174.02) (159.68) (146.04) (133.01) (120.56) (108.61) (97.11) (86.02) (75.28) (64.85)

Financial Charges - - 189.38 373.08 320.06 206.43 39.77 ------

PBT - - 455.04 1,003.03 1,485.20 2,077.64 1,524.31 28.81 32.87 36.92 40.98 45.07 49.20 53.39 57.66 62.01 66.47

Income Tax - - 102.31 247.18 418.12 622.67 453.55 5.76 6.58 7.39 8.20 9.02 9.85 10.68 11.54 22.86 26.02 Deffered Tax - - 45.35 32.95 (14.47) (12.30) (10.44) (8.84) (7.48) (6.31) (5.30) (4.45) (3.71) (53.39) (57.66) (62.01) (66.47)

PAT - - 307.38 722.90 1,081.55 1,467.28 1,081.20 31.89 33.77 35.84 38.08 40.50 43.07 96.10 103.78 101.16 106.93

2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 FY 31-Mar-33 31-Mar-34 31-Mar-35 31-Mar-36 31-Mar-37 31-Mar-38 31-Mar-39 31-Mar-40 31-Mar-41 31-Mar-42 31-Mar-43 31-Mar-44 31-Mar-45 31-Mar-46 31-Mar-47 No of Operating Months 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 -

Sales Realisation ------Processing Area ------Commercial Area ------Residential Area ------Non Refundable Deposits ------Processing Area ------Commercial Area ------Residential Area ------Maintenance charges ------Processing Area 363.06 381.21 400.27 420.29 441.30 463.36 486.53 510.86 536.40 563.22 591.38 620.95 652.00 684.60 - Commercial Area ------Residential Area ------Total revenue 363.06 381.21 400.27 420.29 441.30 463.36 486.53 510.86 536.40 563.22 591.38 620.95 652.00 684.60 - Expenses ------Land amortised ------Construction cost ------Administative expenses 80.67 84.70 88.94 93.39 98.06 102.96 108.11 113.51 119.19 125.15 131.40 137.97 144.87 165.26 - Operation and Maintenance including marketing expenses 201.68 211.76 222.35 233.47 245.14 257.40 270.27 283.78 297.97 312.87 328.51 344.94 362.18 413.16 - Insurance premium 9.66 8.98 8.35 7.78 7.24 6.75 6.30 5.87 5.49 5.12 4.79 4.48 4.19 3.92 - Land lease rent to Sponsorer ------Total expenses 292.01 305.44 319.64 334.63 350.44 367.11 384.67 403.17 422.64 443.14 464.71 487.39 511.25 582.34 -

PBDIT 71.05 75.77 80.63 85.66 90.86 96.26 101.86 107.69 113.76 120.08 126.68 133.56 140.75 102.26 - Depreciation 90.20 84.97 80.08 75.50 71.22 67.20 63.43 59.90 56.60 53.49 50.58 47.85 45.28 42.87 - Amortisation of Land Leasehold 35.54 35.54 35.54 35.54 35.54 35.54 35.54 35.54 35.54 35.54 35.54 35.54 35.54 35.54 - PBIT (54.68) (44.75) (34.99) (25.39) (15.90) (6.48) 2.89 12.25 21.62 31.05 40.56 50.17 59.93 23.84 -

Financial Charges ------

PBT 71.05 75.77 80.63 85.66 90.86 96.26 101.86 107.69 113.76 120.08 126.68 133.56 140.75 102.26 -

Income Tax 28.88 31.51 33.95 36.25 38.43 40.53 42.59 44.61 46.63 48.67 50.74 52.85 55.03 42.36 - Deffered Tax (71.05) (75.77) (80.63) (85.66) (90.86) (96.26) (101.86) (107.69) (113.76) (120.08) (126.68) (133.56) (140.75) (102.26) -

PAT 113.22 120.02 127.31 135.07 143.29 151.98 161.14 170.77 180.89 191.50 202.62 214.27 226.47 162.15 -

3 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannathapuram Forest Block RP004 Rev. B

Annexure 7.4 In Rs Mn Cash Flow statement 31-Mar-17 31-Mar-18 31-Mar-19 31-Mar-20 31-Mar-21 31-Mar-22 31-Mar-23 31-Mar-24 31-Mar-25 31-Mar-26 31-Mar-27 31-Mar-28 31-Mar-29 31-Mar-30 31-Mar-31 31-Mar-32 Inflows ------Promoter's contribution 1,180.95 918.21 ------Un secured loan ------Grant from GOI ------Sales receipts gross ------Non Refundable Deposit - 721.32 1,507.34 1,894.57 2,320.85 1,547.23 ------Lease Deposit ------Lease receipts - 7.11 40.07 86.86 144.81 204.41 222.89 234.03 245.73 258.02 270.92 284.47 298.69 313.62 329.30 345.77 Deferred Tax liability - 32.26 24.68 (12.15) (10.97) (8.98) 53.43 36.33 24.95 17.21 11.89 8.20 97.11 86.02 75.28 64.85 Total Inflow 1,180.95 1,678.90 1,572.08 1,969.27 2,454.69 1,742.67 276.31 270.36 270.68 275.23 282.81 292.66 395.80 399.65 404.59 410.62

Outflow ------Land 1,012.92 ------Construction 1,792.19 2,181.01 ------Administrative expenses 5.72 27.86 40.74 42.78 44.92 47.17 49.52 52.00 54.60 57.33 60.20 63.21 66.37 69.69 73.17 76.83 Operation and Maintenance + Marketing 14.30 69.64 101.86 106.95 112.30 117.92 123.81 130.00 136.50 143.33 150.49 158.02 165.92 174.22 182.93 192.07 Marketing Expenses ------Insurance Premium - 15.26 28.69 26.43 24.36 22.47 20.74 19.16 17.71 16.38 15.16 14.04 13.01 12.06 11.19 10.39 Interest on term loan 174.06 359.68 373.08 320.06 206.43 39.77 ------Interest on unsec loans ------Repayment of quasi equity ------Income Tax - 72.79 185.12 351.03 555.04 403.53 ------Land lease rent to Sponsorer ------Total outflow 2,999.19 2,726.24 729.50 847.26 943.06 630.85 194.08 201.16 208.81 217.04 225.85 235.26 245.30 255.97 267.29 279.30

Bank Loan ------Opening Balance - 0.00 290.79 1,007.12 1,497.87 1,873.21 1,722.47 1,804.70 1,873.90 1,935.77 1,993.96 2,050.93 2,108.32 2,258.83 2,402.51 2,539.81 Monthly Surplus / (Deficit) (1,818.24) (1,047.34) 842.59 1,122.02 1,511.64 1,111.81 82.23 69.20 61.87 58.19 56.96 57.40 150.51 143.68 137.30 131.32 Cumulative Cash (1,818.24) (1,047.34) 1,133.38 2,129.14 3,009.50 2,985.02 1,804.70 1,873.90 1,935.77 1,993.96 2,050.93 2,108.32 2,258.83 2,402.51 2,539.81 2,671.13 Loan from Bank 1,818.24 1,338.13 ------Repayment of bank loan - - 126.25 631.27 1,136.29 1,262.55 ------Cumulative loan 1,818.24 3,156.37 3,030.12 2,398.84 1,262.55 ------Closing Balance 0.00 290.79 1,007.12 1,497.87 1,873.21 1,722.47 1,804.70 1,873.90 1,935.77 1,993.96 2,050.93 2,108.32 2,258.83 2,402.51 2,539.81 2,671.13

FY 31-Mar-33 31-Mar-34 31-Mar-35 31-Mar-36 31-Mar-37 31-Mar-38 31-Mar-39 31-Mar-40 31-Mar-41 31-Mar-42 31-Mar-43 31-Mar-44 31-Mar-45 31-Mar-46 31-Mar-47 Inflows ------Promoter's contribution ------Un secured loan ------Grant from GOI ------Sales receipts gross ------Non Refundable Deposit ------Lease Deposit ------Lease receipts 363.06 381.21 400.27 420.29 441.30 463.36 486.53 510.86 536.40 563.22 591.38 620.95 652.00 684.60 - Deferred Tax liability 54.68 44.75 34.99 25.39 15.90 6.48 (2.89) (12.25) (21.62) (31.05) (40.56) (50.17) (59.93) (23.84) - Total Inflow 417.74 425.96 435.26 445.67 457.20 469.85 483.64 498.61 514.78 532.17 550.82 570.78 592.07 660.76 -

Outflow ------Land ------Construction ------Administrative expenses 80.67 84.70 88.94 93.39 98.06 102.96 108.11 113.51 119.19 125.15 131.40 137.97 144.87 165.26 - Operation and Maintenance + Marketing 201.68 211.76 222.35 233.47 245.14 257.40 270.27 283.78 297.97 312.87 328.51 344.94 362.18 413.16 - Marketing Expenses ------Insurance Premium 9.66 8.98 8.35 7.78 7.24 6.75 6.30 5.87 5.49 5.12 4.79 4.48 4.19 3.92 - Interest on term loan ------Interest on unsec loans ------Repayment of quasi equity ------Income Tax ------1.21 5.07 8.86 12.58 16.24 19.85 23.43 21.03 - Land lease rent to Sponsorer ------Total outflow 292.01 305.44 319.64 334.63 350.44 367.11 385.88 408.24 431.51 455.72 480.95 507.24 534.68 603.37 -

Bank Loan ------Opening Balance 2,671.13 2,796.87 2,917.38 3,033.00 3,144.05 3,250.81 3,353.55 3,451.31 3,541.68 3,624.95 3,701.40 3,771.28 3,834.82 3,892.21 3,949.59 Monthly Surplus / (Deficit) 125.74 120.51 115.62 111.04 106.76 102.74 97.76 90.37 83.28 76.45 69.88 63.54 57.39 57.38 - Cumulative Cash 2,796.87 2,917.38 3,033.00 3,144.05 3,250.81 3,353.55 3,451.31 3,541.68 3,624.95 3,701.40 3,771.28 3,834.82 3,892.21 3,949.59 3,949.59 Loan from Bank ------Repayment of bank loan ------Cumulative loan ------Closing Balance 2,796.87 2,917.38 3,033.00 3,144.05 3,250.81 3,353.55 3,451.31 3,541.68 3,624.95 3,701.40 3,771.28 3,834.82 3,892.21 3,949.59 3,949.59

4 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannathapuram Forest Block RP004 Rev. B

Annexure 7.5 In Rs Mn Balance sheet 31-Mar-17 31-Mar-18 31-Mar-19 31-Mar-20 31-Mar-21 31-Mar-22 31-Mar-23 31-Mar-24 31-Mar-25 31-Mar-26 31-Mar-27 31-Mar-28 31-Mar-29 31-Mar-30 31-Mar-31 31-Mar-32

Liabilities ------Equity 1,180.95 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 Reserves & Surplus - 250.94 817.00 1,712.87 3,009.82 3,916.77 3,742.74 3,583.06 3,437.02 3,304.01 3,183.45 3,074.83 2,977.72 2,891.70 2,816.41 2,751.56 Total Owners fund 1,180.95 2,350.10 2,916.16 3,812.03 5,108.98 6,015.92 5,841.90 5,682.22 5,536.18 5,403.16 5,282.60 5,173.99 5,076.88 4,990.86 4,915.57 4,850.72 Unsecured Loan ------Grant from GOI ------Secured Loan 1,818.24 3,156.37 3,030.12 2,398.84 1,262.55 ------Lease Deposits ------Deferred Tax Liability - 32.26 56.94 44.79 33.82 24.85 78.28 114.61 139.55 156.77 168.66 176.86 273.97 359.99 435.28 500.13 ------Total Liabilities 2,999.19 5,538.74 6,003.21 6,255.66 6,405.35 6,040.77 5,920.18 5,796.82 5,675.73 5,559.93 5,451.26 5,350.85 5,350.85 5,350.85 5,350.85 5,350.85

Assets ------Gross Fixed Assets 2,999.19 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 Deletion ------Depreciation - 131.32 383.17 621.47 847.12 1,060.96 1,263.79 1,456.34 1,639.30 1,813.29 1,978.92 2,136.74 2,287.24 2,430.92 2,568.22 2,699.54 Net Fixed Assets 2,999.19 5,247.95 4,996.09 4,757.79 4,532.15 4,318.30 4,115.47 3,922.92 3,739.96 3,565.97 3,400.34 3,242.53 3,092.02 2,948.34 2,811.04 2,679.72 ------Cash balance - 290.79 1,007.12 1,497.87 1,873.21 1,722.47 1,804.70 1,873.90 1,935.77 1,993.96 2,050.93 2,108.32 2,258.83 2,402.51 2,539.81 2,671.13 ------Total Assets 2,999.19 5,538.74 6,003.21 6,255.66 6,405.35 6,040.77 5,920.18 5,796.82 5,675.73 5,559.93 5,451.26 5,350.85 5,350.85 5,350.85 5,350.85 5,350.85

FY 31-Mar-33 31-Mar-34 31-Mar-35 31-Mar-36 31-Mar-37 31-Mar-38 31-Mar-39 31-Mar-40 31-Mar-41 31-Mar-42 31-Mar-43 31-Mar-44 31-Mar-45 31-Mar-46 31-Mar-47

Liabilities ------Equity 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 2,099.16 Reserves & Surplus 2,696.88 2,652.13 2,617.14 2,591.75 2,575.85 2,569.37 2,571.05 2,578.23 2,590.98 2,609.45 2,633.76 2,664.08 2,700.58 2,703.40 2,703.40 Total Owners fund 4,796.04 4,751.29 4,716.30 4,690.91 4,675.01 4,668.53 4,670.21 4,677.38 4,690.14 4,708.61 4,732.92 4,763.24 4,799.74 4,802.55 4,802.55 Unsecured Loan ------Grant from GOI ------Secured Loan ------Lease Deposits ------Deferred Tax Liability 554.81 599.56 634.55 659.94 675.84 682.32 679.43 667.18 645.56 614.51 573.95 523.78 463.85 440.01 440.01 ------Total Liabilities 5,350.85 5,350.85 5,350.85 5,350.85 5,350.85 5,350.85 5,349.64 5,344.56 5,335.70 5,323.12 5,306.87 5,287.02 5,263.59 5,242.56 5,242.56

Assets ------Gross Fixed Assets 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 5,379.26 Deletion ------Depreciation 2,825.28 2,945.79 3,061.42 3,172.46 3,279.22 3,381.96 3,480.93 3,576.38 3,668.52 3,757.55 3,843.67 3,927.06 4,007.88 4,086.29 4,086.29 Net Fixed Assets 2,553.98 2,433.47 2,317.85 2,206.80 2,100.04 1,997.30 1,898.33 1,802.88 1,710.75 1,621.71 1,535.59 1,452.20 1,371.38 1,292.97 1,292.97 ------Cash balance 2,796.87 2,917.38 3,033.00 3,144.05 3,250.81 3,353.55 3,451.31 3,541.68 3,624.95 3,701.40 3,771.28 3,834.82 3,892.21 3,949.59 3,949.59 ------Total Assets 5,350.85 5,350.85 5,350.85 5,350.85 5,350.85 5,350.85 5,349.64 5,344.56 5,335.70 5,323.12 5,306.87 5,287.02 5,263.59 5,242.56 5,242.56

5 DPR for Diversion of Forest Lands for Establishment of Industrial Parks in W.G District, AP C1162901 Final Detailed Project Report for IS Jagannathapuram Forest Block RP004 Rev. B

Annexure 7.6 IRR Calculation (All figures in Rs Mn) Period 31-Mar-17 31-Mar-18 31-Mar-19 31-Mar-20 31-Mar-21 31-Mar-22 31-Mar-23 31-Mar-24 31-Mar-25 31-Mar-26 31-Mar-27 31-Mar-28 31-Mar-29 31-Mar-30 31-Mar-31 31-Mar-32 Project IRR (Pre tax) ------Capex (2,805.11) (2,181.01) ------Inflows ------PAT - 307.38 722.90 1,081.55 1,467.28 1,081.20 31.89 33.77 35.84 38.08 40.50 43.07 96.10 103.78 101.16 106.93 depreciation+ Amortisation - 131.32 251.86 238.30 225.65 213.84 202.83 192.55 182.96 174.00 165.63 157.81 150.51 143.68 137.30 131.32 Interest and Tax benefit from Debt component - 127.93 252.02 216.20 139.44 26.86 ------Net inflow post tax (2,805.11) (1,614.39) 1,226.77 1,536.05 1,832.36 1,321.91 234.71 226.32 218.80 212.08 206.13 200.88 246.61 247.46 238.46 238.25 Tax - 147.66 280.13 403.65 610.37 443.11 (3.08) (0.90) 1.08 2.90 4.57 6.13 (42.71) (46.12) (39.15) (40.45) Pre tax Cash flow (2,805.11) (1,466.73) 1,506.90 1,939.70 2,442.73 1,765.02 231.63 225.42 219.88 214.98 210.70 207.01 203.90 201.34 199.31 197.80 Pre Tax IRR 23.56% ------Post Tax IRR 16.05% ------

Period 31-Mar-33 31-Mar-34 31-Mar-35 31-Mar-36 31-Mar-37 31-Mar-38 31-Mar-39 31-Mar-40 31-Mar-41 31-Mar-42 31-Mar-43 31-Mar-44 31-Mar-45 31-Mar-46 31-Mar-47 Project IRR (Pre tax) ------Capex ------Inflows ------PAT 113.22 120.02 127.31 135.07 143.29 151.98 161.14 170.77 180.89 191.50 202.62 214.27 226.47 162.15 - depreciation+ Amortisation 125.74 120.51 115.62 111.04 106.76 102.74 98.97 95.44 92.14 89.03 86.12 83.39 80.82 78.41 - Interest and Tax benefit from Debt component ------Net inflow post tax 238.96 240.54 242.93 246.11 250.05 254.72 260.11 266.22 273.03 280.53 288.74 297.66 307.29 240.56 - Tax (42.17) (44.25) (46.68) (49.41) (52.43) (55.72) (59.28) (63.08) (67.13) (71.41) (75.94) (80.71) (85.72) (59.90) - 196.79 196.28 196.25 196.70 197.62 199.00 200.84 203.14 205.90 209.12 212.80 216.95 221.57 180.67 ------

Equity IRR Period 31-Mar-17 31-Mar-18 31-Mar-19 31-Mar-20 31-Mar-21 31-Mar-22 31-Mar-23 31-Mar-24 31-Mar-25 31-Mar-26 31-Mar-27 31-Mar-28 31-Mar-29 31-Mar-30 31-Mar-31 31-Mar-32 ------PAT - 307.38 722.90 1,081.55 1,467.28 1,081.20 31.89 33.77 35.84 38.08 40.50 43.07 96.10 103.78 101.16 106.93 Add Depreciation+ Amortisation - 131.32 251.86 238.30 225.65 213.84 202.83 192.55 182.96 174.00 165.63 157.81 150.51 143.68 137.30 131.32 Add Deferred tax liability - 45.35 32.95 (14.47) (12.30) (10.44) (8.84) (7.48) (6.31) (5.30) (4.45) (3.71) (53.39) (57.66) (62.01) (66.47) Less :Equity 1,180.95 918.21 ------Less : Senior debt Repayment - - 126.25 631.27 1,136.29 1,262.55 ------FCFE (Free Cashflow to Equity Holders) (1,180.95) (434.16) 881.45 674.10 544.33 22.06 225.87 218.84 212.49 206.78 201.68 197.17 193.21 189.80 176.45 171.78 Equity IRR 22.35%

Period 31-Mar-33 31-Mar-34 31-Mar-35 31-Mar-36 31-Mar-37 31-Mar-38 31-Mar-39 31-Mar-40 31-Mar-41 31-Mar-42 31-Mar-43 31-Mar-44 31-Mar-45 31-Mar-46 31-Mar-47 ------PAT 113.22 120.02 127.31 135.07 143.29 151.98 161.14 170.77 180.89 191.50 202.62 214.27 226.47 162.15 - Add Depreciation+ Amortisation 125.74 120.51 115.62 111.04 106.76 102.74 98.97 95.44 92.14 89.03 86.12 83.39 80.82 78.41 - Add Deferred tax liability (71.05) (75.77) (80.63) (85.66) (90.86) (96.26) (101.86) (107.69) (113.76) (120.08) (126.68) (133.56) (140.75) (102.26) - Less :Equity ------Less : Senior debt Repayment ------FCFE (Free Cashflow to Equity Holders) 167.91 164.77 162.30 160.45 159.19 158.46 158.25 158.53 159.27 160.45 162.06 164.10 166.54 138.31 -

6 L&T INFRASTRUCTURE ENGINEERING LIMITED 6-3-1192/1/1, 5th Floor, Block No.3 White House, Kundan Bagh, Begumpet, Hyderabad – 500 016 Ph: +91-040 – 40354444; Fax: +91-040-40354430, E-mail: [email protected] Web: www.lntiel.com