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IT, pharma sectors likely to spur Telangana economy

Once Telangana comes into being as India's 29th state, its economy is likely to bank upon on the information technology (IT) and pharma manufacturing sectors. Read: Telangana dream comes true, Andhra waits for a capital

india Updated: Feb 21, 2014 16:32 IST
Telangana economy,Telangana,Telangana bill

Once Telangana comes into being as India's 29th state, its economy is likely to bank upon on the information technology (IT) and pharmaceuticals manufacturing sectors.

This will leave power production, ports, oil and natural gas to drive prosperity in the residuary state of Andhra Pradesh.

With the nearly 1,000-km long coastline, the coastal Andhra region falling in the residuary state has major private ports such as Krishnapatnam, Kakinada and Gangavaram, besides state-owned Vizag port. It can continue reaping rich harvest by way of export and import of commodities such as iron ore and coal.

However, Lok Satta Party national president and MLA Jayaprakash Narayan cautioned that the Rayalaseema region, also part of the residuary state, would be adversely hit in terms of revenue after the split.

Read: Telangana erupts in joy as India gets a new state

"While Hyderabad city (which will be joint capital of both states for 10 years before belonging exclusively to Telangana) had Rs 13,000 crore revenue surplus, Rayalaseema had Rs 7,000 crore deficit (four districts, 15 million population) during 2012-13." Narayan said.

"The proposed pay revision this year would take Rayalaseema's deficit to Rs 9,000 crore. The region will not have enough revenue to pay even staff salaries."

As much as 20,000-MW additional power capacity is targeted during the 12th five-year plan and beyond in Seemandhra (Rayalseema and coastal Andhra) region, including a 6,000-MW nuclear power plant to be set by the Nuclear Power Corporation at Kovvada in Srikakulam District.

Telangana being land-locked will have to depend mostly on road and rail for transportation.

However, as the Rajiv Gandhi International Airport at Hyderabad has necessary infrastructure for storage of drugs, pharma exports from Telangana may not face any hurdles.

Read: Hyderabad airport put on red alert after threat

Hyderabad accounts for almost 20% of pharma exports from India.

Y Harish Chandra Prasad, past chairman of CII Andhra Pradesh and chief coordinator of CoastaRayala Development, said, "Telangana has the advantage of having a readymade capital with all the necessary infrastructure and ecosystem in place. Andhra will have to search for one and build it."

But Telangana may face problems on the power front as the region largely depends on lift irrigation schemes for agriculture and drinking water, which consumes a lot of electricity, Prasad said.

"Once the KG-basin gas production picks up, gas-based power plants located in Seemandhra region will generate more power leading to Andhra Pradesh becoming a power-surplus state. The central government should create necessary infrastructure for evacuation of power, which is expected to be generated from the upcoming projects," he said.

According to experts, Telangana is likely to face power shortage of up to 2,000 MW after the state is formed.

Of the 8,924.86-MW installed capacity of state power utility APGenco, about 54% (4,825 MW) is located in Telangana, while 46% is in the Seemandhra region.

However, 52% of the capacity in Telangana lies in hydro power, which is available only when reservoirs receive good inflows, while just 48% capacity is available through coal-fired power plants.

Currently, APGenco is building 3,210-MW capacity plants. Of these, 70% (2,250 MW) is located in coastal Andhra and only 30% (960 MW) is coming up in the Telangana region.

NTPC, a state-owned PSU which has installed capacity of 4,610 MW (2,610 MW in Telangana and 2,000 MW in Andhra regions), is gearing up to add 5,320 MW in future (1,320 MW in Telangana and 4,000 MW in Andhra).

Sundeep Kumar Makthala, founder of Telangana Information technology Association, said as the uncertainty over formation of Telangana state is over, the region will attract more investments in IT sector.

"Most multinationals that wanted to invest in Hyderabad had put their plans on hold due to uncertainty all these years. Now that Parliament has cleared the state formation, investments will flow into the city," Makthala said.

However, he said since all development is likely to become Hyderabad-centric, there is a need to develop tier-II cities such as Warangal and Karimnagar as IT centres.

There is an urgent need to develop power plants in Telangana state as the IT industry needs continuous supply of power without any interruptions, he said.

The central government has recently announced formation of an Information Technology Investment Region (ITIR) near Hyderabad.

The total investment for the ITIR is likely to be about Rs 2.19 lakh crore, of which the IT/ITES (Information Technology/ Information Technology Enabled Services Sector) is projected to attract investments of Rs 1.18 lakh crore and Electronic Hardware Manufacturing (EHM) sector Rs 1.01 lakh crore.

BVR Mohan Reddy, chairman and managing director of Infotech Enterprises, echoed similar views as that of Makthala.

Read: Telangana dream comes true, Andhra waits for a capital

He said the uncertainty and associated challenges would now come to an end and, at the same time, the political stability will kickstart growth which was stalled in and around Hyderabad.

"Hyderabad will continue to grow on account of outstanding infrastructure, cost competitiveness, skills availability, etc. Seemandhra will also get benefited. The large investments in building new capital, educational institutions, and hospitals among others will help spur economic growth," Reddy said.

Given the indications, there will be a lot of physical and social infrastructure development in this region in future, which in turn would enable industrial development, he added.

Global IT giants such as Facebook, Google, IBM and Microsoft have a base in Hyderabad. The city contributed nearly 90% of the total Rs 51,000-crore IT exports from Andhra Pradesh last year.

A senior official of the ministry of commerce recently said as much as 18% of Indian pharma exports came from Hyderabad, making the city a hub for the drug industry.

Though the government has set up Jawaharlal Pharma City near Visakhapatnam (the port city that will fall under Seemandhra) in 2005, it is yet to attain full capacity in terms of number of units and production.

Petroleum, Chemical and Petrochemical Investment Region (PCPIR), for which central approval was obtained in 2008, envisages an investment of Rs 3,43,000 crore by attracting investments in infrastructure and petrochemical units in an area of 610 sq km in Visakhapatnam and East Godavari districts.

Read:Rajya Sabha gives nod, Telangana set to become 29th state

Full coverage: The Telangana tangle

First Published: Feb 21, 2014 14:57 IST