Andhra Pradesh’s Investment Incentives for 5 Top Industries

Andhra Pradesh is among the top foreign direct investment (FDI) destinations in India, with an inflow of US $2.9 billion of foreign investment in 2018.

This investment – along with supportive government policies and a business friendly environment – has the state industrialize quickly. The industries that have most benefitted are biotechnology, information technology (IT), textiles and leather, automotive and auto components and agriculture, among others.

The state’s Industrial Development Policy, 2015-20 offers a host of incentives to new industrial units in these sectors, apart from offering land and measures to make doing business easier.

Entrepreneurs and companies looking to set up or invest in Andhra Pradesh should review these incentives to see if they are eligible as part of their market entry planning. It is advisable to compare these schemes available in other Indian states before scheduling site visits and meetings.

1. Agriculture

Andhra Pradesh is a predominately agro-based economy wherein agriculture and allied sectors contribute about 30 percent of the state gross domestic product (GSDP).

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The state is a leading producer of cotton, rice, mango, papaya, lemon, tomato, chilli, turmeric, eggs, fish, and prawns. It is also among the top states in seafood exports accounting for about 25 to 30 percent of India’s total seafood exports.

Andhra Pradesh has over 3,000 food processing units that produce bread, oilseed meals (edible), breakfast foods, biscuits, confectionery, including cocoa processing and chocolate, oil expellers and refining, malt extract, protein isolates, high protein foods, weaning foods, ready to eat food products and other processed foods.

Special incentives

The Andhra Pradesh Food Processing Policy 2015-20  provides for reimbursement of the Non-Agriculture Land Assessment (NALA) tax for the produce purchased directly from the farmers, 100 percent reimbursement of stamp duty and transfer duty on purchase or lease of land, and reimbursement of power consumption charges for fish and shrimp processing units.

In addition, the government offers capital subsidy and interest subsidy to new units, export incentives, concession in quality certification, and reimbursement of state goods and services tax (SGST) to micro, small, and medium enterprises (MSMEs), as well as large industries for five to seven years.

The state government has also introduced a set of initiatives under its food processing policy that ease the compliance procedures for new and existing food processing companies.

2. Textiles

Andhra Pradesh is a leading textile processing center. The state’s labor force has a strong skill base in weaving and textile related skills. It is also a major producer of hides and skins in the country, which accounts for 10 percent of the country’s raw material.

Special incentives

Last year, the state government approved a new Textile, Apparel, and Garments Policy, 2018 -23 to increase investment in the sector. The policy offers capital subsidy on the eligible fixed capital investment (FCI) with a maximum prescribed limit for weaving units, knitting units, processing units, technical textiles, standalone garmenting, and apparel units, among others.

It provides an additional subsidy of 50 percent of FCI for environment-friendly units – or businesses that set up effluent treatment plants.

Other benefits available for textile units include skill support in the form of a one-time grant for training employees, power cost reimbursement, and incentives for hiring local workers.

3. Automobiles

Global automotive and auto-component manufacturers have their production units in Andhra Pradesh, including Isuzu, Kia, Ashok Leyland, Apollo Tyres, Hero Motors, and Bharat Forge. In 2018, Kia motors set up its first Indian manufacturing unit in Anantapur district.

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Special incentives

The Andhra Pradesh Automobile and Auto Components Policy, 2015-20 provides for a 50 percent capital subsidy (up to INR 50 lakh or US $70,902) to all units of mega-integrated projects for building and common infrastructure. It also offers a 75 percent reimbursement of gross SGST for ten years or 100 percent equivalent of the capital expenditure made by these units in the first seven years.

In addition, investors can avail 75 percent reimbursement on patent cost, 50 percent tariff subsidy on water supply, and 50 percent reimbursement on quality certification, subject to a maximum limit set by the government.

Further, to encourage automobile manufacturing and exports in the state, the government is developing a number of infrastructure projects that link ports and airports with automobile manufacturing units.

These include auto clusters and automotive suppliers’ manufacturing centers in Anantapur, Nellore, and Chittoor districts that are in close proximity to Chennai, Bengaluru and major ports of Krishnapatnam and Chennai port.

4. Information technology

The information technology (IT) sector is one of the major growth engines of Andhra Pradesh.

Since its bifurcation from Telangana, the Andhra Pradesh government has taken a number of initiatives to promote its IT industry and make the state a leading destination for investments in IT.

These initiatives lay emphasis on the development of infrastructure, including IT industrial regions (ITIR), IT parks, and mega IT hubs.

Special incentives

IT companies in the state are eligible for full reimbursement of stamp duty, transfer duty and registration fee, a five percent interest subsidy for a period of seven years, a 20 percent investment subsidy to select entities and a 10 percent capital subsidy up to INR 5 crore (US $709,225).

Further, the IT industry can avail reimbursement on patent filing cost, expenditure incurred for obtaining quality certification, as well as technology and market support from the government.

The state government has also launched designated parks (DTP) under its Designated Technology Park Policy 2017-20 that rolls out incentives on providing office spaces for IT companies.

5. Drugs and pharmaceuticals

Andhra Pradesh is a pharmaceutical hub with companies involved in the manufacturing of active pharmaceutical ingredients (APIs), formulations, contact research organizations, contract-manufacturing companies, as well as those in biosciences, bio-equivalency, and clinical trials having production units in the state.

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The state pharma industry is worth US $1 billion and houses over 200 pharmaceutical units. Some of the key pharma players in the state include Matrix Labs, Hetero Drugs, Divi’s Labs, Natco Pharma, Neuland Labs, Gland Pharma, Granules India, MSN Labs, and Sri Krishna Pharma.

Special incentives

Pharmaceutical companies in the state are eligible to avail power cost reimbursement for up to five years, three percent interest subsidy for five years, as well as financial assistance in innovation and applied research and development.

In addition to these fiscal benefits, the state government has set up a guidance cell to assist and advise business units on regulatory compliance and procedures in the pharmaceutical industry.

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