White Paper on Industries in Andhra Pradesh during the period June 2014 – March 2019 Department of Industries & Commerce July 2019 Government of Andhra Pradesh 1 | Page Table of Contents 1. Preface ................................................................................................................................................. 3 2. Status of AP Reorganization Act 2014 ............................................................................................ 4 3. Concessions for Mega Projects ....................................................................................................... 8 4. MoUs during Partnership Summit / Sunrise AP Investment Summit ....................................... 11 5. Employment generated by the units in operation ........................................................................ 12 6. Industrial Incentives ......................................................................................................................... 13 7. MSME Development ........................................................................................................................ 14 8. Industrial Parks ................................................................................................................................. 14 9. Land Allotment .................................................................................................................................. 15 10. Way Forward ................................................................................................................................. 24 Annexure – I: SIPB Approved projects ................................................................................................. 27 Annexure – II: MoUs signed during Partnership Summits / AP Sunrise Investment Summit Meet .................................................................................................................................................................... 31 Annexure III: Industrial Clusters / Parks taken up by APIIC .............................................................. 33 Annexure IV: Concessional Allotments by APIIC ................................................................................ 36 2 | Page 1. Preface The State of Andhra Pradesh is strategically located to be an attractive destination for the manufacturing investments. With a large skill base, abundant raw materials, connectivity to large markets both within India and outside, and strong industrial infrastructure, Andhra Pradesh can be transformed into a thriving manufacturing hub. From 2014-2019, the industrial sector has gone through a spate of changes. However, the State, is yet to witness the real transformational outcomeswith respect toimproving the contribution of the industrial sector in the State’s GSDP, developing a thriving MSME ecosystem, establishing ready-to-ground industrial parks, job creation and maintaining a transparent and corruption free environment. The present Government of Andhra Pradesh, under the leadership of Hon’ble Chief Minister, Shri. Y.S Jagan Mohan Reddy, has desired to publish a status report in the form of a White Paper covering the performance of the Industries & Commerce department between June 2014 and March 2019 with respect to: a) Implementation of the AP Reorganization Act 2014 to promote industrialization in the State b) Concessions provided to Mega Projects c) Status of the MoUs entered by the State Government d) Status of the land allocations made by the State Government e) MSME sector development f) Development of industrial clusters and parks g) Industrial incentives backlog This White Paper also discusses the way forward to build on Andhra Pradesh’s growth path towards large-scale industrialization and job creation. 3 | Page Hereafter, for the purpose of this White Paper, the term ‘State Government’ refers to the Government of Andhra Pradesh during the period June 2014 to March 2019. 2. Status of APReorganization Act 2014 The residual state of Andhra Pradesh was formed through the enactment of the AP Reorganization Act 2014. Although the Act provisioned for various interventions to promote industrialization in Andhra Pradesh, most of these have not been implemented, including giving special category status and revenue incentives. 2.1. Financial incentives for attracting Investments Provision in the Act (Section 46 (2) (3) and Section 94 (1) & (2) UNDER SECTION 46 (2)(3), Government of India shall, while considering the special development package for the successor state of AP, provide adequate incentives, in particular for Rayalaseema& North Coastal regions Under Section 94 (1) & (2) (1) The Central Government shall take appropriate fiscal measures, including offer of tax incentives, to the successor States, to promote industrialisation and economic growth in both the States. (2) The Central Government shall support the programmes for the development of backward areas in the successor States, including expansion of physical and social infrastructure. Announcement made by the Hon’ble Prime Minister: The Hon’ble Prime Minister of India made an announcement in Rajya Sabha on 20th February 2014 that 4 | Page . Special status will be extended to the successor state of Andhra Pradesh comprising 13 districts, for a period of five years. This will put the state's finances on a firmer footing. Bill already stipulates that the central government shall take appropriate fiscal measures, including offer of tax incentives to the successor states in order to promote industrialization and economic growth in both the states. These incentives will be along the lines extended to some other states. As provisioned in the “AP Reorganization Act 2014”, CBDT (Central Board of Direct Taxes) has notified seven districts for availing tax incentives under section 32(1)(iia) and section 32AD of the Income-tax Act. These districts are: Anantapur, Chittoor, Kadapa, Kurnool, Srikakulam, Vishakhapatnam and Vizianagaram Any manufacturing unit setup in the above districts during the period from 01.04.2015 to 31.03.2020 will benefit from 15% of higher additional depreciation 15% of investment allowance on the cost of plant and machinery These incentives are not specifically given to Andhra Pradesh to meet the promises made in the AP Reorganization Act 2014. These incentives have also been extended for development of background areas across various states such as Telangana, West Bengaland Bihar, thereby providing no clear advantage to Andhra Pradesh to attract investors through additional incentives. While denying special status to Andhra Pradesh, the Union Government approved the North East Industrial Development Scheme (NEIDS), 2017, which offers GST-Reimbursement up to the extent of Central Govt. share of CGST and IGST for 5 Years. Reimbursement of Centre's share of income tax for first 5 years 30% of the investment in Plant & Machinery with an upper limit of Rs.5 Crore 3% on working capital credit advanced 5 | Page Reimbursement of 100% insurance premium on insurance for 5 years Transport and Employment subsidy etc. The Andhra Pradesh Government was not able to get these concessions for the state. The endeavor of the present administration will be to make all efforts possible to persuade Government of India to grant Special Category Status to Andhra Pradesh and provide necessary fiscal and revenue incentives as provided for special category states. 1.2. Visakhapatnam – Chennai industrial corridor (VCIC) Provisions in the Act (Schedule XIII) The Government shall, within six months from the appointed day, examine the feasibility of establishing a Vizag-Chennai industrial corridor along the lines of Delhi-Mumbai Industrial Corridor and take within such period an expeditious decision thereon The “AP Reorganization Act 2014” has clearly stated that the Government of India will examine feasibility and further support the development of Vizag-Chennai Industrial Corridor. Government of India had already supported the Delhi-Mumbai Industrial Corridor (DMIC) with grants as well. However, the State Government, instead of pursuing this matter with the Government of India, had agreed to develop the VCIC with a loan of Rs 4,170 Crores from Asian Development Bank.Additionally, on its part, the State Government committed contribution ofRs 1,434 Cr (USD 215 million) for the development of the VCIC from its own budget. Subsequently works have also been taken up under VCIC. Considering the weak finances of the state, the loan from ADBand the additional budgetary support has put an additional burden on the state exchequer. 6 | Page Government of Andhra Pradesh was not able to get the grant under NICDIT. The state government should have developed VCIC on the lines of DMIC, through100% grant funding by National Industrial Corridor Development & Implementation Trust (NICDIT), rather than through a loan to be repaid by the State Government. 1.3. Greenfield petrochemical complex Provisions in the Act (Schedule XIII) – Section 93 (4) IOC or HPCL shall, within six months from the appointed day, examine the feasibility of establishing a greenfield crude oil refinery and petrochemical complex in the successor State of Andhra Pradesh, and take an expeditious decision thereon. In line with the provision of the Act, Government of India was required to examine the feasibility to setup a Petchem complex in Andhra Pradesh. However, the Government of India suggested a viability gap funding to be provided by the State Government through an interest-free