Government Has Given Various Incentives for Industries
The coalition government in the state faces significant challenges in industrialization and job creation for millions of youths. Overcoming these challenges is not trivial. Nonetheless, the state government has embraced these challenges. In just 120 days since taking office, it has presented a concrete roadmap. Between 2014 and 2019, despite numerous issues related to division and financial difficulties, industries like Kia were brought to the state by Chandrababu. Now, by announcing six policies in one day, it has attracted the attention of investors both domestically and internationally.
Along with six policies aimed at attracting investments and providing employment, draft policies prepared for IT, textiles, and drone sectors have already received accolades as the best in southern states. These include depositing industry subsidies into escrow accounts and establishing private industrial parks while involving the general public and farmers as partners. Additionally, there will be incentives for micro and small enterprises to enable home-based entrepreneurs.
Initially, significant incentives will be given to the first 200 industries that set up, providing numerous jobs, and offering an additional 10% incentive for those who create a substantial number of jobs. The establishment of a corpus fund of ₹500 crores to develop the state as a textile hub and a maximum 75% subsidy on capital investment are significant steps aimed at fundamentally transforming the industrial landscape of the state, according to industry representatives.
Improved Incentives for Industries
According to the new policy, the state government will provide an average of 32% and a maximum of 72% in incentives for Fixed Capital Investment (FCI). Although Uttar Pradesh offers up to 100% incentives in FCI, industry representatives indicate that the investment-friendly atmosphere in Andhra Pradesh is unmatched.
Currently, Tamil Nadu offers the highest net present value (NPV) incentives in southern states, averaging 31%. In comparison, Andhra Pradesh has set 32% in its policy. Telangana does not provide a capital investment subsidy, making Andhra Pradesh’s incentives about 20% higher in terms of NPV numbers. Karnataka offers up to 38% in NPV incentives but applies them only when annual turnover targets are met, making it less attractive in practice.
For investors in the state, it is estimated that ₹58,478 crores will need to be paid over 12 years under FCI incentives, averaging ₹4,873 crores annually. Based on employment creation, it will provide ₹1,101 crores in subsidies over 11 years. Under the ‘Production-Based Incentive’ scheme, it will provide an average of ₹28 crores annually, totaling ₹140 crores over five years.
Escrow Accounts as a Game Changer for Subsidies
While governments announce incentives for industries, there is no guarantee of actual disbursement, which is a common experience for industrialists. To eliminate such distrust, the new industrial policy introduces an escrow account clause. The total incentive will remain in the escrow account, and once industries meet government conditions, the entire incentive will automatically be released to them. Industry representatives are calling this a game changer for transforming the state’s industrial landscape.
With goals such as ₹30 lakh crores in investments in the manufacturing sector, 5 lakh jobs, and ₹83,000 crores in FDI, the state has implemented the best industrial policy in southern India. Incentives will be released on a schedule once industries apply online. The escrow account will fund the incentives based on the revenue generated from taxes paid by the industries. Officials estimate that for every ₹100 paid as tax by an industry, ₹75 will be returned to them as incentives. This means that after paying incentives for up to ten years, the total amount paid by the industry in taxes will eventually go to the government.
Version 4.0 for Industrial Progress
The efforts made by the then TDP government between 2014 and 2019 aimed at attracting significant investments to Andhra Pradesh, which remained an agriculture-based state after the bifurcation, yielded positive results. At that time, Chief Minister Chandrababu attended World Economic Forum (WEF) summits and traveled abroad, leaving no stone unturned to attract investments by holding partnership conferences with industrialists in the state. During this time, industries like Kia, Apollo Tyres, Asian Paints, MedTech Park, and mobile manufacturing units in the electronic cluster in Tirupati were established. While industrial giants like Reliance were preparing for investments in the state, the YSR Congress government that came to power in 2019 unsettled the industrialists.
It pushed the state into a downturn, creating a situation where existing industries began to leave the state instead of new ones arriving. In such adverse conditions, Chandrababu, taking charge as Chief Minister for the fourth time, initiated the industrial progress version 4.0. From day one, the government focused on instilling confidence among investors and industrialists to attract investments to the state. The Tata Group was convinced to set up a TCS center in Visakhapatnam, creating jobs for 10,000 people.
Under the ‘Early Bird Offer,’ announcing up to 60% incentives in FCI for industries that come first will inspire investors. Promising an additional 10% incentive based on job creation is expected to play a crucial role in attracting investments. Industries investing between ₹50 crores and ₹500 crores in two years will be classified as ‘Sub-Large,’ those investing between ₹501 crores and ₹1,000 crores in three years will be ‘Large,’ and those investing between ₹1,001 crores and ₹5,000 crores in three years will be ‘Mega,’ while those investing over ₹5,001 crores in four years will be classified as ‘Ultra Mega’ industries.
Boost for Food Processing Industries
The state has announced a policy for food processing industries with a target of achieving ₹30,000 crores in investments and creating 3 lakh jobs in the next five years. Farmers will be given an incentive of ₹5 lakhs per acre for setting up food processing parks on their own land.
