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Monday, 19 Aug 2013
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Telangana, uncertainty to linger on for a while


The UPA government’s decision to carve Telangana state out of Andhra Pradesh has received mixed reactions from the united Andhra Pradesh people and industrialists. While the people staying in the Telangana region have expressed happiness over the fulfillment of their decades-old demand, the bifurcation of Andhra Pradesh has not gone well with the people and politicians residing in the rest of Andhra Pradesh.


Telangana, uncertainty to linger on for a while_ProjectsToday


Information Technology, Pharma and Construction sectors were the most affected sectors because of the agitation for and against the formation of Telangana state. Most of these were located in and around Hyderabad. The agitation for Telangana had forced many of the IT companies to shift their expansion plans to other states. The Construction industry was in the doldrums for the last couple of years.


The latest decision of the UPA government might have put an end to the pro-Telangana agitation, but it will take some time for the project promoters to take up new projects in this newly formed state.


Telangana, as per the current plan, will consist of 10 districts of the 23 districts of Andhra Pradseh, including Hyderabad, Warangal and Ranga Reddy. Till 2009, Andhra Pradesh was among the fastest growing states in the country. However, the political agitation for formation of the Telangana state, which aggravated since then, put the state on the back foot in terms of both growth and investment.


Even though the uncertainty about Telangana is now over, basic issues like sharing of power, water and other amenities are yet to be sorted out. These are contentious issues and are not going to be settled within a year or so. Telangana, with a share of 5,800 MW from the total 16,500 MW in Andhra Pradesh, is deficient in power.


The status of Hyderabad city is another area of concern of the industrialist. The Union government has proposed that Hyderabad will remain the common capital of Telangana and Andhra Pradesh for a period of 10 years. The Hyderabad region, which is a hub of information technology (IT) and pharmaceutical industries, has been among the largest recipients of foreign direct investment with cumulative foreign direct investment of $8.6 billion between 2000 and 2013. Further, as of June 2013, of the 1,753 projects envisaged in the Telangana region, 705 projects worth Rs 73,660 crore were in the Hyderabad district.


Being one of the highest revenue generating districts, the status of Hyderabad as a shared capital, is likely to create conflicts between Andhra Pradesh and Telangana. The distribution of resources, including power and water will be the key to the smooth operation of Hyderabad as a joint capital.


For the Andhra Pradesh government, the biggest challenge is to quickly work on the development of districts like Warangal, Nizamabad and Karimnagar. Though they have good potential to attract investment, power deficiency and lack of physical infrastructure will be the biggest hurdle in these districts which are growing as alternate investment centres to Hyderabad.


Telangana region comprises 68 per cent of the catchment area of the Krishna river and 79 per cent catchment area of Godavari river. Utilising these resources and making water available to the drought-prone districts will be a big challenge for the new state government. Another challenge will be to generate enough resources to fund mega ongoing projects like the Rs 40,300 crore Pranahita-Chevella irrigation project.


The fate of the 27 new Industrial Parks (IP), being developed by the Andhra Pradesh Industrial Infrastructure Corporation (APIIC ), now hangs in the balance as issues such as acquisition of land, and revenue and investments would have to be dealt by the respective state governments. The same issues are also expected to delay execution of the three National Investment Manufacturing Zones (NIMZs) coming up in Chittoor, Medak and Prakasam districts as Medak district will now be part of Telangana.


Given the above scenario, project investors will no doubt adopt a wait and watch policy till new governments are formed in both the states.



Manufacturing Sector Developments


  • The high powered coordination committee on industries of Goa has given clearances to eight projects
  • Punj Lloyd has bagged a contract worth Rs 358 crore for construction of a Sulphur Block
  • McNally Bharat Engineering has bagged a contract worth Rs 216 crore
  • JCB India has opened its 3S Integrated facility in Hyderabad
  • Mahindra is planning to construct a new auto assembly plant and service centre in Ghana


Infrastructure Sector Developments




Power Sector Developments


  • The Centre has formally approved the 'generation-based incentive' scheme for wind power projects
  • NTPC has proposed to set up a solar plant in Chhattisgarh
  • NTPC is planning to construct wind power projects in Maharashtra and Karnataka
  • ABB has bagged orders for a 1,320 MW coal-fired power project
  • JSPL is likely to sign an MoU with the Orissa Government for its Coal to Liquid project


Quote of the week:


N Srinicasan_India Cements_ProjectsToday

"It is true that Andhra Pradesh slowed down considerably. There is a lot of agitation because of Telangana. One has to see how well things will settle down. Definitely sales are being affected and it could have an effect on this quarter, but we are hopeful things will resolve down soon."

N Srinivasan,
Vice Chairman and Managing Director, India Cements


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