INDIAN STATES

Economy and Business

Andhra Pradesh

www.ibef.org
Published by
 INDIAN STATES
Economy and Business

Andhra Pradesh

www.ibef.org
CONTENTS

Executive Summary 5

Economic Snapshot 7

The State Economy 9

Infrastructure 11
Social infrastructure 11
Access infrastructure 11
Industrial infrastructure 12

State Policy 14
Industrial Policy 14
Infrastructure Policy 14
SEZ Policy 14
Technology upgradation 15
Export promotion 15
Incentives 15
Intellectual Property Rights 15
Fostering industry clusters 16
e-Governance 16
IT Policy 16
Biotech Policy 16
Agro Policy 16

Business Opportunities 17
Key industries 18
Exports 20
Investment 21
Potential hubs for investment 21

Key Players 23

Doing Business in Andhra Pradesh 26

Obtaining approvals 26
Cost of setting up business 27
Contact for information 28

A report by KPMG for IBEF


Executive Summary
Andhra Pradesh is the fifth largest economy in the
country. Agriculture is the mainstay of the states’
economy. Although 70 per cent of the population
works in agriculture, the services sector has shown
a significant growth in the past decade. Mineral based
industry is another important source of income
in the state.
A politically stable and vibrant state, Andhra Pradesh
provides skilled IT manpower, pleasant climate, good
technical and social infrastructure and proactive
policies. The Government of Andhra Pradesh has
established several world-class academic institutions
in collaboration with reputed organisations worldwide.
The state has been proactive in establishing various
dedicated research organisations in different sectors.
In addition to the institutions set up by the
Government, the state has been persuasive in
welcoming the corporates to establish their
R&D facilities.
The state is a key player in the country’s power
sector with the highest hydel power generation.
Hi-Tech City, an IT park of the state, is the largest
IT facility in the country. Speciality parks for the
biotech sector have been proposed and are under
progress. The state has two Special Economic
Zones (SEZs) and growth centres, in addition
to the industrial parks set up by the Government.
ANDHRA PRADESH PAGE 5
The state has a state-of-the-art telecommunications
infrastructure, ensuring good connectivity to global
destinations.
Andhra Pradesh is endowed with fertile land and
bountiful mineral resources. The state is one of the
largest producers of rice and a leading producer of
major commercial crops and rich minerals. The
affluence of agriculture has spurred the growth of
allied industry like warehousing, cold storage,
packaging etc.
Mineral based industries in the state mainly include
cement and steel industries. The state is one of the
leading exporters of software products in the country.
It is also the largest exporter of bulk drugs and
pharmaceuticals, contributing about 33.3 per cent of
the total exports from the country. In addition,
leather and textile industries have shown a promising
growth over the years.
The state with its proactive policies ensures a good
investment climate for investors. The state is the first
to have a comprehensive ITES/BPO Policy and also
the first to have data protection and a consumer act
in the country. In order to ensure all round progress,
the state has formulated a food policy, pharmaceutical
policy and FDI policy extending a supportive hand to
the investors.
Industrial Centres in Andhra Pradesh
 ANDHRA PRADESH PAGE 7

An Economic Snapshot

Area (sq km) 275,000

Population (Census 2001, million) 76.2
Literacy Rate (%) 60.5
NSDP (US$ billion) (2002-03) 30.63
Sex Ratio (per 1000 males) 978
Length of Coastline (km) 974
National Highway Length (km) 4,104
Domestic Airports Hyderabad, Visakhapatnam, Vijayawada, Tirupati
International Airport Hyderabad
Major Port Visakhapatnam
Key Industries Agro-based
Mineral-based
Leather
Textiles
Engineering
IT
Pharmaceuticals
R&D
Industries with Growth Potential Biotech
Tourism
Advantage Andhra Pradesh
n Hyderabad is the ranked No. 1 Indian ITES destination by NASSCOM

n Ranks second in the number of industrial estates in the country

n Only state with abundant energy

n Several world-class academic institutions with foreign collaborations

n Accounts for about 23 per cent of software professionals in India

n Second largest storehouse of minerals in the country

n Largest producer of rice in south India

n Largest producer of minerals in value

n Largest exporter of bulk drugs

n First to have a comprehensive ITES/BPO Policy

n First to launch a world class training programme for ITES/BPO

n First to develop a data protection and consumer act

 ANDHRA PRADESH PAGE 9

THE STATE ECONOMY

Andhra Pradesh is the fifth largest economy in the Endowed with fertile land, water and supportive
country and second largest in the south. agro-climatic conditions, Andhra Pradesh
is a prosperous agricultural state. It is one of the
Sectoral contribution to GDP leading producers of various cash crops like tobacco,
(at constant prices 1993-94) 2000
dry chilly, groundnut, turmeric, oilseeds, cotton,
sugar, jute etc. The state produces some of the finest
varieties of fruits in the country. Andhra Pradesh
is the only state with abundant energy. Presence
25.8% of a long coast enabled the marine industry to
flourish in the state. The prosperity of agriculture
55.4% harnessed the growth of allied industries including
agro-processing, cold storage, warehousing, fertilisers
and packaging.
18.8%
Andhra Pradesh has a well-developed traditional
industry owing to the availability of wide range
Agriculture of natural resources.
Manufacturing
Services Andhra Pradesh is the second largest storehouse
Source: www.ap.nic.in
of mineral resources in India. The abundance of
limestone reserves spurred the growth of the cement
industry in the state. In addition, the state has
Growth of exports from the state performed well in the engineering sector.
(US$ million)
The pharmaceutical and bulk drug industry of the
3000 2866 state has a significant global presence with many
state based companies having established their
facilities abroad. The state accounts for the highest
2000 1750
1427
pharmaceutical based exports in the country.

1000 The services sector in the state has shown

a promising growth over the years. The contribution
of the services sector to the state GDP has been
0
1996-97 1999-00 2002-03 consistently over 50 per cent during 1993-2000.
Year The number of software companies in the state
Source: Government Website has risen from 26 in 1992-93 to 1,200 in 2001.

INFRASTRUCTURE
Social infrastructure
Andhra Pradesh offers a large pool of skilled
manpower. Every year, 350,000 skilled graduates
pass out from universities, 81,000 graduate from
engineering schools and another 10,078 students
graduate from management institutions. About
23 per cent of India’s software professionals within
and outside the country are from Andhra Pradesh.
The state has about 226 engineering colleges,
of which 30 per cent of the total capacity is allotted
for Information Technology. The state has dedicated
institutions for biotechnology, ITES/BPO and other
industries. The Government has set up a number
of institutions in collaboration with prestigious
institutions to reach world-class standards
in education. Some of these include:
n International Institute of Information Technology
established by IBM, Motorola, Signal Tree, Oracle
and Satyam
n Indian School of Business with the Wharton
School, the Kellogg School of Management and
London School of Business
n Master of Science in IT Programme (MSIT) in
collaboration with the Carnegie Mellon University
n Andhra Pradesh is the first to launch a world-class
training programme for ITES/BPO
n National Academy for Construction and the
Knowledge Park
The state provides better and advanced healthcare
facilities with a presence of Super Speciality Hospitals.
Hyderabad, the capital of Andhra Pradesh, has been
recognised as the ‘Health Capital’ of the country.
The state plans to start a large number of research
institutions like International Centre for Research
in Semi-arid Agriculture Technologies (ICRISAT),
ANDHRA PRADESH PAGE 11
Indian Institute of Chemical Technology (IICT),
Centre for Cellular and Molecular Biology etc.
The state has introduced various biotech courses
in the universities at all levels and plans to set
up the Indian Institute of Life Sciences.
Access infrastructure
Andhra Pradesh is well linked internally as well
as to the rest of the world. All airports in the state
have been upgraded to Boeing landing facilities. The
state is active in encouraging the private sector to
improve the port infrastructure. Three ports have
been privatised in the state.
n Highest number of landing centres in the country
at 508 in 2002-03
n Port infrastructure including 13 major and minor ports
n Cargo handling capacity of 44.6 MT
n Visakhapatnam port - second largest in the country
n Railway network of 5,107 mt, 620 stations
and handling capacity of 35 MT annually
n Road network of 194,523 km including 4,104 km
of National Highways
n Modern airports at Hyderabad, Visakhapatnam,
Vijayawada, Tirupati and Putaparthi with Boeing
landing facilities
The Visakhapatnam port handles largest tonnage
among all Indian ports. Other minor ports in the
state include Kakinada, Krishnapatnam, Vadarevu and
Gangavaram.
To provide a suitable atmosphere for setting up asset
management, venture capital companies, insurance
companies, commercial banks, a Financial District
is being set-up in Hyderabad. With the establishment
of Insurance Regulatory and Development Authority
headquarters at Hyderabad, the state has been
recognised as the ‘Insurance Capital.’
Power
Andhra Pradesh is the third largest power utility
in the country with a total power generation
of 10,273 MW (2004). Many projects are under
various stages of implementation to generate 4,715
MW by 2009. Among all Indian states, Andhra
Pradesh has progressed well in reforming its energy
sector (privatisation, separation of generation from
transmission and distribution etc).
Installed capacity of power
(in MW) 2003
1.5%
1.0%
34.6%
62.9%
Thermal
Hydel
Wind
Nuclear Source: www.indiastat.com
Vast natural gas reserves found in Krishna-Godavari
basin with 47 million standard cubic metres per day,
have opened up immense possibilities for
environment-friendly industrial and socio-economic
development in Andhra Pradesh.
n Highest PLF of 88.9 per cent in the country
n Highest hydel installed capacity in the country
n Srisailam complex is the largest hydro power
station with an installed capacity of 1,670 MW
in the country
n Srisailam complex is the first underground
powerhouse in the south
n Pochampad Hydroelectric Scheme is the first
to use microprocessor controls in powerhouses in
the country
n One of the leading producers of thermal power
in the country
n Thermal plants achieved top three positions
in PLF rankings in India in 2003
Industrial infrastructure
The state with 272 industrial estates ranks second in
in the country. The state has four growth centres
at Bobbili, Jadcherla, Hindupur and Ongole. The state
has two Special Economic Zones at Visakhapatnam
and Kakinada facilitating a good environment for
exports and investment. The state ranks third
in worker population and fourth in the total
number of factories.
Specialised parks
Apparel export park
Andhra Pradesh Industrial Infrastructure Corporation
(APIIC) is a pioneer in promoting and developing
industrial estates and industrial development
areas. Thus, the Government of Andhra Pradesh has
entrusted APIIC with the task of developing a
product-specific industrial area, the ‘Apparel Export
Park’ for garment manufacturers and exporters.
Genome Valley
The State Government has declared an area of 600 sq km
in Ranga Reddy District as the Genome Valley in which
biotech activities will be encouraged and promoted.
A Knowledge Park has been set up by the State
Government in collaboration with ICICI at Ranga
Reddy District. The ICICI Knowledge Park is a
200 acre facility, which provides organisations with
ready to occupy research and development
laboratories. The park also provides affordable
infrastructure to small and medium enterprises.
Adjacent to the ICICI Knowledge Park, a biotech
park has been established to create a world-class
R&D centre for biotech industries and comprises
of technology incubation for commercialisation
of viable research projects.

Marine biotech park
A marine biotech park that will act as a hub
for biotech companies developing products using
marine organisms is being set up at Parwada near
Visakhapatnam in association with APIIC. The park
will house a marine biotech complex with dry
laboratories, library and incubator facilities to enable
research by companies. So far 218 acres of land has
been earmarked for the park while land-leveling,
water supply installation and electrification work
is in progress. In a run up to the ambitious project,
the Government is supporting the development
of a Centre of Excellence in Marine Biotech
Resources Development at the Andhra University in
Visakhapatnam.
Agri-biotech park
The agri-biotech park provides an opportunity
to tap ICRISAT’s upstream research expertise
and use its world-class infrastructure. It brings
together the expertise available at ICRISAT,
the State Government and other reputed private
sector companies.
Pharma park
The pharma park is the result of a need felt to meet
the increasing demand for bulk drug manufactures.
A large part of India’s pharmaceutical activities will
be taking place in Andhra Pradesh. The APIIC having
in its possession about 2000 acres at Parawada has
taken up the responsibility of establishment of the
Pharma City. This is a very unique concept and the
first of its kind.
Export Promotion Industrial Park (EPIP)
The Export Promotion Industrial Park is located
at Pashamylaram and is well connected by road, rail
and air. Spanning an area of 160 acres, it is equipped
with all the essential facilities. It is ideal for export
ANDHRA PRADESH PAGE 13
oriented units such as hardware, gems & jewellery,
telecom, leather products and garments.
Gems & jewellery park
The gems & jewellery park is a joint venture
between Andhra Pradesh State Trading Corporation
Ltd (APSTC) and IOI Corporation, Malaysia. The joint
venture heralds a new era of gems and jewellery
trade in Andhra Pradesh. The project will be a free
processing zone, which proposes to work on the
lines of a Special Economic Zone with all incentives
and features.
Special Economic Zones (SEZs)
The Government of India has formulated a policy
for setting up SEZs in the country. They are
specially delineated as duty free enclaves for industry,
trade and services. Thus, the Government of
Andhra Pradesh has proposed the establishment
of a SEZ at Visakhapatnam.
IT infrastructure
Andhra Pradesh is connected to all the global
destinations through international gateways
in Mumbai, Chennai and Kochi. The state developed
a number of IT parks offering incentives to the
investors. The state is in the top quartile of Internet
subscribers with 219,000 in 2003.
n Two phases of Hi-Tech City, the largest of its
kind in the country
n Optical Fibre Cable (OFC) of 27,000 km in length
laid by BSNL
n Offers up to five levels of telecom redundancy
n Bandwidth of 365 Mbps out of Hyderabad and
100 Mbps out of other cities
n Satellite earth station - Ku band network
n Postal infrastructure includes 16,213 offices and
118 telegraph offices
STATE POLICY
The Government’s liberalisation and economic
reforms programme aims at rapid and substantial
economic growth and integration with the global
economy in a harmonised manner.
The Andhra Pradesh Industrial Policy 2005-10
is aimed at promoting industrialisation in the state.
Incentives are being given to attract investment in this
sector. The policy promises 100 per cent stamp duty
and transfer duty reimbursement. Giving in to the
long standing demands of the industry with respect to
high power cost, the state has decided to reimburse
0.016 cents per unit. Large industries will especially
gain as an Industrial Promotion Fund has been set up
to cater to their specific problems on a case-to-case
basis.
Industrial Policy
The objectives of the policy are:
n To promote Andhra Pradesh as an attractive
destination for industrial investment
n To market Andhra Pradesh as a competitive
destination for foreign investment
n To attract and develop appropriate
entrepreneurial leadership, management and
HRD systems
n To improve infrastructure by facilitating investment
in industrial infrastructure in private sector
n To encourage establishment of New Tiny and
Small Scale Industries particularly in rural areas
to achieve the twin objectives of employment
generation and utilisation of local resources
n To encourage cluster concept to make the
industries globally competitive
n To develop effective regulatory mechanism
for entry and operation of firms
n To create a market driven environment with the
private sector being the primary engine of growth
Industrial Infrastructure Development Fund
of US$ 37.23 million has been created to provide
infrastructure to industry.
Infrastructure Policy
Development of quality infrastructure for industrial
growth through private participation has been given
highest priority. In line with this objective, the
Government has constituted the Infrastructure
Authority (IA) for the rapid development of physical
and social infrastructure in the state and to attract
private sector participation in the designing, financing,
construction, operation and maintenance of
infrastructure projects.
The Government has provided all the recognised
industrial areas with facilities such as roads,
electricity, water, drainage etc. In addition, allied
infrastructure such as uninterrupted power supply,
telecommunication facilities including Internet
connectivity and information kiosks, transportation
links from industrial areas to towns have also been
provided.
The Government besides creating quality infrastructure,
is laying emphasis on creation and maintenance
of critical infrastructure required in the industrial
estates. Ongoing schemes like Industrial Infrastructure
Development Fund (IIDF) and Critical Infrastructure
Balancing Fund (CIBF) are to be continued.
Special Economic Zone Policy
The Government of India is enacting a Special Economic
Zone Act for streamlining the development of SEZs in
the country. The State Government would leverage
the act for the advantage of SEZs in various parts of
the state for balanced trade and commerce with
liberal tax, fiscal and administrative regime.

Technology upgradation
Technology is the key element contributing
to productivity, quality, competitiveness and market
acceptability of products. In a rapidly changing global
scenario, technology and business incubators have
emerged as useful instruments for innovation.
To provide technological support to the local
industries, the Government of Andhra Pradesh,
Confederation of Indian Industry (CII) and
Technology Information Forecasting & Assessment
Council (TIFAC) jointly promoted Andhra Pradesh
Technology Development and Promotion Centre
(APTDC) for transfer of technologies, providing
technological know-how, commercialisation
of technologies, technology upgradation etc.
In line with this objective, APTDC is in the process
of developing “T” Incubator - a technology incubation
programme which is an innovative system designed
to assist entrepreneurs in the development of new
technology based firms.
Apart from this, the Indian School of Business “K-hub”
was developed to create linkages among the technology
providers, academicians, incubators and business
development services. This will help promote
development of high quality entrepreneurship and pool
& share international best practices in incubation/
mentoring processes.
Export promotion
Export plays a major role in the industrial and
economic development. In order to boost exports,
the State Government is offering a special package
of incentives to Export Oriented Units (EOUs).
n Sales tax exemption on purchase of raw materials
for EOUs
n Andhra Pradesh State Financial Corporation
(APSFC) will extend financial assistance to EOUs
at concessional interest rates
ANDHRA PRADESH PAGE 15
n Export industries will be given a 30 per cent
grant for ground rent for participation in the
international trade fairs, subject to a maximum
limit of 9 sq mt
n To sensitise exporters, programmes will be
conducted with the assistance of EAN India and
SISI on bar-coding
n Export awards will be provided to EOUs
to recognise best performing units with respect
to quality, R&D and performance
n A state-of-the-art external information centre to
be set up in collaboration with local chambers of
commerce and associations and reputed
organisations for dissemination of information and
assistance to the export fraternity of the state
Incentives
In order to address the specific problems of existing
large industries, the Government may offer a special
package of fiscal benefits on a case-to-case basis.
Exact fiscal benefits would be decided by State
Investment Promotion Board (SIPB) from time
to time depending on the nature of the project,
investment, location, employment etc. An Industrial
Promotion Fund with adequate provision will be
created for this purpose. Guidelines and
modalities for operating the fund will be decided
by the SIPB.
Intellectual Property Rights
Intellectual Property Rights like any other property
right, allow the creator or owner of a patent,
trademark or copyright to benefit from his own
work or investment. To encourage industries for
innovation in product development, 50 per cent of
the expenditure incurred in obtaining the patent will
be reimbursed to enable the industry to protect the
invention.
In order to encourage innovation, units having patents
for products would be given purchase preference
in all purchases made by government departments.
Fostering industry clusters
Clusters allow small local enterprises to make more
effective use of underutilised resources (small scale
savings or family labour) generating incomes that they
cannot otherwise avail of while operating in isolation.
The Government of Andhra Pradesh has identified
six industrial clusters for development under
“Industrial Infrastructure Up-gradation 30 Scheme”.
Two clusters, namely, Pharma Cluster near Hyderabad
and Auto Components Cluster in Vijayawada have
already been approved by the Government of India for
assistance and these are in the process of development.
The other four clusters, namely, Marine Food
Processing Cluster in Bheemavaram, Powerloom
Cluster in Sircilla, Leather Cluster in Hyderabad and
Precision Engineering Tools and Components in Ranga
Reddy are under consideration by the Government of
India. Apart from the above, fourteen more clusters
are in the process of development under the
assistance of the Development Commissioner Small
Scale Industry (DCSSI).
The Government accords highest priority
to promotion of clusters in the state. The individual
units in the clusters are eligible for the general
incentives offered by the Government under
the policy. Apart from this, clusters are also eligible
for a special package of incentives for which the
State Government has created a fund under the
cluster development programme.
To capitalise on the natural resources and other
advantages available in the sub-regions, the
Government has proposed to develop industrial
corridors in various parts of the state for sustainable
and equitable industrial development.
e-Governance
The state has undertaken wide-ranging measures
to nurture its industries: simplified, less restrictive
regulations, labour and fiscal reforms, incentives
etc. In line with this objective, the state has enacted
a law for single-window clearances. It is the first
state in the country to have a law for single-window
clearances, which ensures that all clearances to
investors are given within a specified period. The
state has been qualified as “flexible” in its approach
to labour regulations and “good” for its simplification
of rules and regulations. It introduced the self-
certification concept, common annual returns in
place of multiple returns with simplified registers
and zero inspection regime through accredited
agencies.
IT Policy
The state’s pre-eminent role as a global software
provider creates impetus and significant opportunities
for the future. In order to capture the potential of the
IT sector, the Government has announced an exclusive
policy for the IT sector with an attractive package of
incentives.
Biotech Policy
A separate Directorate for Biotechnology is being
created. The Government is in the process to enact a
new Biotech Policy with attractive benefits soon after
the announcement of the Government of India’s
Biotech Policy, to accelerate the growth of biotech
industries in the state.
Agro Policy
By 2020, Andhra Pradesh will have a modernised
and vibrant agroindustry, bringing organised
activity into rural regions. Agro industry will create
higher incomes, export earnings and employment in
rural areas, thus, stemming migration to cities. In
addition, the state will have established an unbeatable
lead over other Indian states in various agricultural
sectors in which it has significant strengths.
 ANDHRA PRADESH PAGE 17

BUSINESS OPPORTUNITIES

There are several factors that affect evolution
of an industry in a particular region. The major
factors impacting evolution are:
n Policy proactiveness: The policy that a state
government adopts towards a sector directly
affects its attractiveness for further investment.
For example, the Government of Andhra Pradesh
has given many concessions to the IT sector. This
has prompted many IT majors, both domestic as
well as multinationals, to set up software
development operations in the state.
spurred the growth of the cement industry in the
state.
n Capability: Availability of good quality manpower
is a must for all industries to flourish. High literacy
rates and presence of good education and
vocational training institutions have ensured that
the state has well qualified manpower. This has
been a major factor enabling the success of Andhra
Pradesh in sectors like engineering, IT and ITES.
Given its strong base of technical workforce,
knowledge intensive industries are gradually taking
a lead position in the state.

n Availability of natural resources: Certain Based on an assessment of the above factors,

industries like agro-based industries have a high some of the industries with potential for investment
dependence on availability of natural resources. and growth in the state of Andhra Pradesh are
The availability of natural resources like limestone illustrated below:

Proactive
n Exclusive Policy Biotech Infrastructure IT & ITES
n Special Incentives
n Special Infrastructure
Food Processing Chemicals/
(SEZ, STPI, AEZ etc.)
Pharma
Proactiveness
Policy

Mineral-based
Industry
Engineering
Moderate Tourism
n Generic policy incentives

Sector Attractiveness Drivers

Natural Resources Capability

Driven Driven

This is the qualitative assessment to highlight relative interest of different sectors.

A case by case analysis is necessary before investment is made.
Source: KPMG analysis
Key industries
Agro-based
The agro-based industry in Andhra Pradesh employs
around 65 per cent of its total population. The state
produced 14.9 MMT of food grains in 2004-05.
Production of oil seeds and cotton stood at 2.6 MMT
and 2.74 million bales of 170 kg (in lint) respectively.
Andhra Pradesh contributes 25 to 30 per cent
to the total seafood exports in the country. The state
accounts for a large chunk of the country’s aggregate
production of rice. It is a leading producer of cotton
and targets annual sales of US$ 2,553 million by 2010.
The food products industry contributes 19.36 per cent
to total industrial production in the state. Andhra
Pradesh ranks second in the production of value
added food products and beverages with
a 10 per cent share of total value added in the
country. Horticulture accounts for 4.01 per cent
of agricultural gross state domestic product.
At present, 1.5 million hectares of land is employed
for horticulture in the state.
US$ million
Andhra Pradesh ranks first in the country in area and
production of mango, oil palm, chillies and turmeric.
The state ranks second in citrus and coriander; third
in cashew; fourth in flowers and fifth in grapes,
banana, ginger and guava, based on area and
production.
The state is keen to improve the research
infrastructure in the agro sector and has established
several organisations. Several MNCs like Conagra and
Krafts Foods, among others, have established their
facilities in the state.
Mineral-based
Andhra Pradesh has huge reserves of key minerals
such as coal, limestone, granite, bauxite and barytes. In
fact, the state is estimated to have one-third
of the country’s total mineral wealth. Andhra Pradesh
is the only southern state with coal deposits and
has 20 per cent of the country’s limestone reserves
and 27 per cent of its bauxite reserves. The world’s
best granite, Black Galaxy, is found only in Andhra
Pradesh. Andhra Pradesh is the second largest
producer of cement in the country. Larsen and
Toubro’s plant with a maximum capacity of 6 MTPA is
the largest in Asia. Gujarat Ambuja Cements Ltd plans
to invest US$ 160 million to set up a plant with
a capacity of 2 MTPA.
Leather and leather products
Andhra Pradesh with a livestock population of more
than 46 million is a major producer of hides and skins
in the country. The state contributes about 19 million
pieces per annum, which accounts for 10 per cent of
the country’s raw material. The leather industry in
Andhra Pradesh produces a large range of products
for the domestic and international markets.
Growth of leather exports
750
600
458
450
400
300 261 284
150
0
1997-98 1999-00 2001-02 2002-03
Year Source: Government Website
Textiles
The state is one of the major exporters of textiles
in the country at US$ 90 million in 2003. There are
about 1,050 weaving units with a production capacity
of 750 million metres of fabric in 2003. The state
is one of the leading textile processing centres
with over 100 units and a processing capacity
of 13 million metres of cloth per annum. The average
production of medium and superior long staple cotton
is 2.6 million bales. There are around 70 spinning mills
in the state with a total spindleage of 18.3 million and
9 open end spinning mills with 5,716 rotors.
 ANDHRA PRADESH PAGE 19

n Ranks second in production of raw silk
(3.8 million kg in 2000)
n Ranks fourth in production of wool
(3.4 million kg in 2001-02)
n Highest number of handloom development centres
Intergraph, Mentor Graphics, Metamor, Ram
Informatics Ltd, Sierra Optima, SQL Star International
Ltd and Visual Soft.
Growth of software sector

(397 in 2000-01)
n Ranks fourth in the number of textile mills
(98 in 2003) 1000

800 770

The growth in the sector is attributed to highly

US$ million
600
suitable soil and climatic conditions for cultivation of
cotton crop, long traditions of growing cotton and 400
availability of labour at competitive wage rates. 223
200
28
Engineering 0
Andhra Pradesh has a well-performing engineering 1996-97 1999-00 2002-03

industry producing a range of intermediate and final Year

goods such as foundry and forging items, machine
tools, auto components, testing machines, material
handling equipment and components for defence
production. The exports from this sector stood at
US$ 237 million in 2002-03. The state is the largest
compressor manufacturing centre in the country.
Many global players like Tecumseh, BPL, Electrolux,
among others, have established their manufacturing
facilities in the state.
Automobile sector is one of the emerging sectors
in the state with more than 20 auto-component
manufacturing companies. Mahindra & Mahindra has
a modern facility at Zaheerabad, with a capacity
of over 10,000 units per annum.
IT
The state has emerged as one of the leading software
exporters. It aims to capture 30 per cent of the
market share in IT and ITES by 2009.
MNCs like Microsoft, IBM, Motorola, Oracle,
Baan and Wipro have set up their operations in
Hyderabad. Some of the other major players in the
sector are CMC Ltd, DE Shaw, Infotech Enterprises,
Source: Government website
Pharmaceuticals
Hyderabad has emerged as a major drug manufacturing
city with a presence in the global market. Pharma
industry in the state contributes more than one-third
to the country’s total production. During 2000-01,
the state produced bulk drugs and formulations
worth US$ 462 million and US$ 1,150 million against
the total production of US$ 1.66 billion and US$ 3.9
billion respectively.
The exports from the state stood at US$ 500 million
in 2002-03 registering an annual growth rate of more
than 20 per cent. The sector accounts for about 18
per cent of the total exports from the state.
Andhra Pradesh has pioneers in the field of
medical/human and animal healthcare biotech, namely,
Shanta Biotechnics, Bharat Biotech, Krebs Biotech,
Biological E. Ltd, Jupiter Biosciences, Dr Reddy’s
Laboratories, among others. Most of the companies
have set up their R&D facilities in the state, thus,
making the state the pharmaceutical capital of the
country.

Research support
n Indian Institute of Chemical Technology
n Centre for Cellular and Molecular Biology
n National Institute of DNA Fingerprinting
n National Institute of Nutrition, Central University
R&D
The state is keen to encourage private sector
participation in improving R&D infrastructure.
Many leading companies have set up their facilities
particularly in the pharmaceutical sector because
of proactive state policies.
Hyderabad bio-cluster
Hyderabad, the capital of Andhra Pradesh, has
emerged as an important bio-cluster with CCMB,
ICRISAT and Osmania University forming the
academic backbone. Shanta Biotechnics, Bharat
Biotech, Biological E. Ltd and Dr Reddy’s
Laboratories form the industrial cluster in the state.
The bio-cluster focuses largely on vaccines and bio
therapeutics.
Lucent technologies, the US$ 38 billion telecom
major and the research wing of Bell Labs, has set
up a facility at Hyderabad focusing on Third
Generation (3G) wireless software design.
The facility started with a workforce of 300
and has now increased to 600.
Aurobindo Pharmaceuticals Ltd, among the top five
pharmaceutical companies in India, is an R&D driven
company based in Hyderabad with presence across
the world. Dr Reddy’s Laboratories, a leading bulk
drug exporter based in Hyderabad, has a good
presence in R&D and spends about 10 per cent of its
total revenues in drug discovery and R&D initiatives.
The facility operates with around 300 dedicated
researchers.
BHEL, one of the country’s leading producers
of heavy engineering products has established its
R&D facility with wide interests in power, CFD etc.
The organisation plans to invest an additional
US$ 8.9 million into R&D. Auto majors like Skoda
are planning to set up their R&D units with the
support of the Government.
Exports
The exports from the state stood at US$ 2.8 billion
during the year 2002-03. Over the years, the services
sector has seen a significant growth in exports. The
agro-based industry was the second largest contributor
to exports in 2002-03 and the largest during 1996-97
to 2001-02.
The exports from the pharmaceutical sector continue
to increase and stand at US$ 50 million.
Contribution of various sectors to exports (2002-03)
5.0%
5.4%
8.4% 26.9%
14.2%
22.3%
17.8%
Software
Agriculture & agro-based and forest products
Drugs & pharmaceuticals, chemicals and allied products
Leather, animal & marine products
Engineering items
Mineral & mineral products
Others
 ANDHRA PRADESH PAGE 21

Estimates of exports from Andhra Pradesh in 2002-03 Estimate of likely invesment in Andhra Pradesh (US$ million)
by Public Companies and CAGR
4271

60
5 year CAGR (per cent)

40
1740
1558
20

0
205 91
0 10 20 30 40 50

Irrigation

Mining and
Minerals

Engineering
and Hardware

Agro-based
Petrochem and
Chemicals,

Pharma
Share of exports (US$ million)

Food and beverages Chemical

Metals
Machinery
Source: CMIE Prowess Database; size of the
circle is indicative of the size of the exports
Investment*
Andhra Pradesh is an attractive destination for
Foreign Direct Investment (FDI) in the country. The
FDI inflow was over US$ 3.6 billion during 1991-
2004. Petroleum refineries, thermal based power and
irrigation are the industries that account for major
proportion of the investment.
Major projects include, a US$ 2.61 billion petroleum
products project being undertaken by Transworld
Corporation, USA, at Visakhapatnam; Kakinada Indian
Oil LNG Consortium** including Malaysian Petronas
plans to invest about US$ 1.34 billion for LNG
Storage & Distribution; Besicorp-Brooklyn Power
International and Pennsylvania Power & Light
plans to invest a total of US$ 483 million to set up
a captive coal-handling jetty at Krishnapatnam port.
In addition to industry, many projects have been
initiated in the infrastructure sector like ports,
roads, tourism and power. Two major projects
with an investment of over US$ 200 million are
in the pipeline in the tourism sector by International
Management Group and Emaar Properties.
Foreign Direct Investment is an important driver
of industrial performance. An autonomous body
“AP Invest” has been created for needs assessment
Non-metals
Source: Projects Today, Feb 2004
and road mapping of FDI and to give special care
in providing timely clearances and assistance for such
units and also to remove the administrative obstacles
and managerial impediments.
Potential hubs for investment
Biotech
Andhra Pradesh is shifting its focus to one of the most
promising industries of the future, biotechnology, seen
as a high growth potential industry in India. With its
vast resources the state can create a good environment
for biotech companies. The state’s advantage is its vast
reservoir of human resource at a reasonable cost,
wealth of R&D institutions, centres of academic
excellence in biosciences. A vibrant pharmaceutical
industry and fast developing clinical capabilities,
collectively point to a promising biotechnology sector
and have placed the state favourably in the global
market.
Tourism
The travel and tourism industry is well on its way
to becoming one of the most powerful sectors and is
anticipated to generate nearly 338 million jobs by
*
Source: Projects Today as of Feb 2004. Projects Today classifies projects
as ‘nascent’, ‘planning’, ‘partially completed’ and ‘under execution’.
For the purposes of the above estimation, nascent and planning stage
projects have been aggregated.
**
Kakinada Indian Oil LNG Consortium includes Indian Oil Corporation,
Cocanada Port and Malaysian Petronas
2005 with an annual growth rate of 4.8 per cent. The State Government has formulated an exclusive
Acknowledging this potential, the Government tourism policy to translate its tourism potential into
is focusing on tourism for generating greater reality, highlighting attractive destinations and to
employment and achieving higher economic growth. make it a tourist friendly state.

PROFILE OF KEY PLAYERS IN ANDHRA PRADESH
Computer Associates (CA)
Computer Associates is one of the leading providers
of IT management solutions and services. Since its
inception in 1997, CA in India has been involved in
providing software products and services with offices
in all the major cities, in 2003-04, the turnover of the
company stood at US$ 64 million approximately.
The development centre at Hyderabad supports CA
products and technologies in collaboration with other
global CA development centres.
Conagra
Conagra, a leader in the food business, (the third
largest in the world and second largest in USA) has
entered into a joint venture with ITC Agro. Agro
Tech Foods Ltd is a US$ 240 million company with a
dominant market position in the edible oils and
branded foods sector under the flagship brand
Sundrop. With an initial investment of US$ 23 million,
the company established a R&D centre to adapt the
Conagra technologies to Indian conditions. The
company has brands like Sundrop, Healthy World,
ACT II and Rath as part of its portfolio.
D.E. Shaw India Software
D.E. Shaw India Software Private Ltd is a member
of D.E. Shaw & Co, LP’s Global Information
Technology Group. Established in Hyderabad in 1996,
D. E. Shaw India is involved in the development
of Internet-based services that include Juno Online
Services Inc. (the world’s first free e-mail service)
and Far Sight Financial Services. D.E. Shaw India
focuses on distributed object-oriented computing,
quantitative analysis, advanced database programming,
web-based computing and network administration.
Dr Reddy’s Laboratories
Dr Reddy’s Laboratories is a successful pharmaceutical
organisation set up in 1984. The group’s companies,
Dr Reddy’s Laboratories Ltd and Cheminor Drugs
ANDHRA PRADESH PAGE 23
Ltd, have world class expertise in the development
and manufacturing of organic intermediaries, bulk
pharmaceuticals, finished dosages, diagnostics and
biotechnology. The company is the first Asia-Pacific
pharmaceutical company outside Japan to be listed
on the New York Stock Exchange. These companies
have been the first to sponsor drug research in the
Indian pharmaceutical industry under the aegis
of Dr Reddy’s Research Foundation. The revenues
of the company stood at US$ 414 million with a net
profit of US$ 51 million in 2003-04.
Electrolux
The Swedish white goods giant Electrolux has
entered into a joint venture with Voltas to
manufacture state-of-the art refrigerators at their
factories in Hyderabad and Nandalur. The Electrolux
Group in India is a market leader in the refrigerator
segment with its three brands-Electrolux, Kelvinator
and Allwyn. Electrolux has a capacity of 350,000
compressors per annum and operates with a
workforce of over 3,800.
General Electric (GE)
GE Capital International Services, a wholly owned
subsidiary of General Electric Company, launched IT-
enabled services facilities ranging from data entry to
transaction processing to high-end financial and
software services in Hyderabad in 2003. GE India has
22,000 employees in total with about 5,000 present
in Hyderabad. GE India Development Centre
(GEIDC) in partnership with Satyam is the largest
development centre outside the US which is involved
in design and development of new products.
GVK Group
GVK is a US$ 700 million business conglomerate with
a diversified and transnational presence. The group
commenced its operations with involvement in the
construction of the Nagarjuna Sagar Dam in the
1960s. The group has interests primarily in
construction and power and has diversified into
hospitality, petrochemicals, manufacturing, finance and
infrastructure projects. It has now ventured into
the field of life sciences, IT infrastructure and
non-conventional energy.
HSBC
HSBC Group, one of the world’s largest banking
and financial services organisation set up its global
back-office operations in Hyderabad in 2000. It
has two offices in Hyderabad with a workforce
of 4,500 against a global strength of 8,000. The first
centre at Hi-Tech City processes back-office work
for HSBC Group subsidiaries in the UK. The group
plans to invest US$ 11 million in the upcoming
Visakhapatnam project.
IBM
IBM India Ltd, a subsidiary of IBM Inc., was set up
in 1999. IBM is the only company in the world that
offers end-to-end solutions to customers, from
hardware to software, services and consulting. IBM’s
presence in Hyderabad includes ‘IBM School of
Enterprise Wide Computing’, opened at Indian
Institute of Information Technology (IIIT) in 1998.
The company plans to set up a disaster recovery
centre with a data bank at Hyderabad.
Kirby Building Systems
Kirby Building Systems, a company based in Kuwait,
has set up a unit for the manufacture of pre-
engineered steel near Hyderabad at a cost of
US$ 12 million with an installed capacity of 40,000
million tonnes. The company has developed light
weight steel structures that are capable of
withstanding the severest combination of seismic
and cyclonic forces.
Krafts Foods
Krafts Foods, a world leader in the manufacture
of food products, has set up a unit for the
manufacture of a sugar-based soft drink with an
investment of US$ 18.4 million in 2001. The company
has plans to take up an agronomy project with
an investment of US$ 74 million.
Microsoft India
Microsoft India, the 100 per cent subsidiary of the
world’s largest US based software firm Microsoft
Corporation, was set up in 1990. Microsoft operates
with 4,000 retailers selling their products across the
country and 100 certified retailers as Microsoft
Hardware Stores. Microsoft India has its development
centre at Hyderabad oriented towards product
development and also plans to set up its R&D facility
in the city with an investment of US$ 35 million.
Motorola
Motorola in India had revenues of over US$ 350
million in 2003-04, with about 2,000 employees
across its business units. Motorola India Electronics
Ltd established its first software development facility
devoted entirely to software development
at Hyderabad, integrating its subsidiary, Advanced
Platforms Organisation. The Indian Institute
of Information Technology (IIIT) at Hyderabad
was founded with Motorola as one of the
collaborators. Motorola School of Communication
Technology has been established in the campus.
Nagarjuna Group
The Nagarjuna Group, founded in 1974, has grown
to become one of the largest business houses in India
with an asset base of US$ 1 billion and employee
strength of over 10,000. It has a strong presence
in sectors like agri-business, power generation,
refineries, Information Technology and financial
services. The group has three companies under
its flagship, Nagarjuna Petroleum Corporation Ltd,
Nagarjuna Fertilisers & Chemicals Ltd and Nagarjuna
Electric Generation Ltd.
Oracle
Oracle India Private Ltd, a subsidiary of Oracle
Corporation, the world’s largest enterprise
software company, was established in 1993. In 1994,
it became the first major US software company to

establish development centres at Hyderabad and
Bangalore, to support its product development
strategy for global markets. The Hyderabad centre is
involved in application design & development and
application product support.
Sanghi Group
The Sanghi Group is a leading south Indian industrial
group with its operations primarily based at Hyderabad.
The group is a textile major with expansion plans in
cement and captive power generation. The Sanghi
Group has achieved an asset base of US$ 450 million.
The group operations are based in Sanghi Nagar, a
self contained industrial township, 28 km from
Hyderabad.
Satyam Technologies Ltd
Satyam is the leading software exporter in the state
among STP units. Satyam Infoway part of the Satyam
group of companies, is at the forefront of providing
end-to-end electronic commerce solutions. Satyam’s
development centres in India, USA, UK, UAE,
Canada, Singapore, Malaysia, China, Japan and
Australia serve over 300 global companies, including
101 of the Fortune 500 companies.
Singareni Collieries Company Ltd (SCCL)
Singareni Collieries Company Ltd, incorporated
as a public limited company in 1920 became
a government company in 1956. The company
is engaged in coal mining operations in Andhra
Pradesh. The reserves stretch over 350 sq km
on the Pranahita Godavari Valley with proven
deposits of 7,944.4 million tonnes in 2004.
ANDHRA PRADESH PAGE 25
Tecumseh
Tecumseh, a compressor manufacturing company,
entered India through acquisition of Siel Compressors
Ltd, Hyderabad. It has one of its plants in Hyderabad
manufacturing 400,000 compressors per annum, the
first and largest facility in the country. The unit caters
to air-conditioning and commercial refrigeration
applications and is ISO 9001 and 14001 certified.
Virtusa
Virtusa Corporation, formerly known as eRUNWAY
Inc., a leading provider of global technology innovation
services, deploys mission critical enterprise-class
products and solutions. The company started its
operations in 1996 and has two advanced technology
centres in Hyderabad. 45 per cent of the company’s
global revenues are generated from the Hyderabad
centre. The company is a provider of outsourced
software engineering services and has delivered over
500 product-class enterprise solutions. The company
plans to invest US$ 11 million to expand its
operations.
Visakhapatnam Steel Plant (VSP)
The Visakhapatnam Steel Plant is one of the
foremost steel plants in India, producing high
quality standards of steel and allied products.
VSP enjoys the reputation of being one of the least
cost producers of high quality steel in the country.
The sales turnover of Visakhapatnam Steel Plant was
US$ 1.3 billion in 2003-04, registering a rise of
22 per cent over the previous year. The labour
productivity at 262 tonnes/man year has been the
highest among Indian integrated steel plants.
DOING BUSINESS IN ANDHRA PRADESH
Obtaining approvals

An indicative list of approvals with timeframe for setting up business in Andhra Pradesh

List of approvals and Departments Estimated time

clearances required to be consulted for clearance
(in days)

Building approval Municipality / UDA / TCP* 7

Power feasibility State Electricity Board 7

Power Connection State Electricity Board 23

Panchayat Clearance Gram Panchayat 7

Factories Clearance Factories Department 7

Commercial Taxes Sales Tax Department 7

Water and Sewerage Clearance Pollution Control Board 7

Water Connection HMWS & SB** 23

Pollution Clearance Pollution Control Board 60

Financial Clearance State Finance Development Board 21

Land Acquisition Municipality / UDA / TCP 15

Land allotment in Industrial area Municipality / UDA / TCP 7

Alienation of Government land Municipality / UDA / TCP 15

Conversion of land for Industrial Municipality / UDA / TCP 45

purpose

UDA: Urban Development Authority; TCP: Town and Country Planning

*

HMWS & SB: Hyderabad Metropolitan Water Supply and

**

Sewerage Board
Source: Commissionerate of Industries and Commerce
 ANDHRA PRADESH PAGE 27

Cost of setting up business

An indicative table on cost of setting up business

in Andhra Pradesh

Manufacturing
Land (US$ / hectare)* 373,416
Labour cost (US$ / man year)** 1,573

Services
Occupation costs
(US$ / sq ft / year) 18.4

Employee cost (US$ / man year)***

Software developers 6,383
Team leads 14,893
Architects 21,276.5
Project managers 31,915

Common heads
Cost of capital**** 10.57
(Prime lending rate, per cent)

Electricity (US cents / kWh)*****

Metropolitan Area 9.1
Non Metro Area 9.4

*
Land cost has been estimated by computing the average cost
of land at various Industrial Parks in Andhra Pradesh.
**
Source: Indiastat.com
***
KPMG Analysis on costing for an IT venture in India
****
Estimated by computing the average Prime Lending Rates
of prominent public sector, private sector and foreign banks in India
*****
Source: www.indiastat.com
Note: Exchange rate used is INR 47 per US$
Contact for information Confederation of Indian Industry (CII)
Information on markets and opportunities for
State Government Website investment in Andhra Pradesh can also be obtained
www.ap.gov.in/ from Confederation of Indian Industry which works
with the objective of creating a symbiotic interface
Andhra Pradesh Industrial Development between industry and government.
Corporation Ltd (APIDC)
Andhra Pradesh Industrial Development Corporation Confederation of Indian Industry State Office
Ltd was established in 1960 by the Government of 1-11-252/9, Regal House
Andhra Pradesh for planned development of medium Plot No 7
and large scale enterprises in the state, offering a Moti Lal Nehru Nagar
wide range of financial and consulting services. APIDC Begumpet
promotes the process of industrial development Hyderabad 500 016
undertaken by the Government. It has an authorised Tel +91 40 27765964
capital of about US$ 24 million and paid up capital Fax +91 40 27766116
of US$ 21 million. Email cii.hyderabad@ciionline.org
Web www.ciionline.org
Andhra Pradesh Industrial Development Corporation Ltd
Parishrama Bhawan
5-9-58/B, Fateh Maidan Road
Post Box No 1049
Hyderabad 500 004
Tel +91 40 23235253-56
Fax +91 40 23235516
Email apidc@ap.gov.in
Web www.apidc.org
DISCLAIMER
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IBEF neither recommends nor endorses any specific products
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and nor does it assume any liability or responsibility for the
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IBEF shall in no way, be liable for any direct or indirect
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 The India Brand Equity Foundation is a public-private partnership
between the Ministry of Commerce & Industry, Government of India and
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is to build positive economic perceptions of India globally.

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c/o Confederation of Indian Industry
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August 2005