IT, pharma sectors likely to be backbone of Telangana

Post bifurcation of Andhra Pradesh, the information technology and pharmaceuticals manufacturing sectors may become backbone of Telangana economy, leaving power production, ports and oil and natural gas to play a pivotal role in driving prosperity in the residuary state.

With nearly 1,000 km-long coast line, the coastal Andhra has major private ports such as Krishnapatnam, Kakinada and Gangavaram, besides state-owned Vizag Port and can continue to reap rich harvest by way of export and import of commodities such as iron ore and coal.

Lok Satta Party national president and MLA Jayaprakash Narayan, however, cautions that Rayalaseema region, part of residual Andhra Pradesh (the other part being coastal region), will be badly impacted in terms of revenue after the division.

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"While Hyderabad city (which would be joint capital of the two states for 10 years before being exclusively of Telangana) had Rs 13,000-crore (Rs 130-billion) revenue surplus, Rayalaseema had Rs 7,000-crore (Rs 70-billion) deficit (four districts, 15 million population) during 2012-13.

“The proposed pay revision this year would take Rayalaseema's deficit to Rs 9,000 crore (Rs 90 billion).

“The region will not have enough revenue to pay even staff salaries," Narayan said.

As much as 20,000 mw additional power capacity is targeted during the 12th five-year plan and beyond in Seemandhra region, including 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.

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

Hyderabad almost accounts for nearly 20 per cent 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 ready made capital with all necessary infrastructure and eco system.

"Andhra will have to search for one and build."

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 become a power-surplus state. The central government should create necessary infrastructure for evacuation of power which is expected to generate from the upcoming projects," he said.

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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 per cent (4,825 MW) is located in Telangana, while 46 per cent is in the Seemandhra region.

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

Currently, APGenco is building 3,210-MW capacity plants.

Of these, 70 per cent (2,250 MW) is located in coastal Andhra and only 30 per cent (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).

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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 of the multinationals who want to invest in Hyderabad have 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.

He, however, said since all the development becomes 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 near Hyderabad.

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

BVR Mohan Reddy, Chairman and Managing Director of Infotech Enterprises, echoing similar views as that of Makthala, said the uncertainty and associated challenges will now come to an end and at the same time the political stability will kick start 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 provide spurt in economic growth," Reddy said.

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"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 per cent of the total Rs 51,000 crore (Rs 510 billion) IT exports from Andhra Pradesh last year.

A senior official of Ministry of Commerce recently said as much as 18 per cent of Indian pharma exports come from Hyderabad, making the city a hub for drug industry.

Though the government has set up Jawaharlal Pharma City near Visakhapatnam (the port city which will come 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, for which central approval was obtained in 2008, envisages an investment of Rs 3,43,000 crore (Rs 3,430 billion) by attracting investments in infrastructure and petrochemical units in an area of 610 sq kms in Visakhapatnam and East Godavari districts.