Saturday, November 22, 2014

Alarm in K'taka, TN as Naidu 2.0 goes on biz hunt

Uses New State's Tax Breaks To Woo Tech, Mfg Investment
For many years after he lost office in 2004, Chandrababu Naidu would flinch when complimented on his industry-friendly approach as chief minister of united Andhra Pradesh. He seemed wary of owning up to his past, attributing his electoral loss to the pursuit of liberal economic policies that were seen to be focused around Hyderabad and ignored the rest of the state, particularly rural AP.

Back in the saddle this June, Naidu 2.0 is closer to his old avatar. His pincer raids on Karnataka and Tamil Nadu have raised hackles in both Bengaluru and Chennai, with Karnataka chief minister Siddara maiah complaining to PM Narendra Modi about the unfair tax breaks AP gets because of its `new state' status. No surprises for guessing that J Jayalalithaa had also shot off a similar missive to the PM.

That the CM of a state that's synonymous with IT and accounts for almost 40% of India's technology industry is worried about Naidu's charm offensive is a good indicator of how serious Karnataka is taking Naidu's threat.

Naidu wants to attract $2 billion in IT investments over the next 5 years to AP . He also wants to create 50 lakh tech jobs, take broadband connectivity (1,000 mbps or gigabit) to every village and make at least one person e-literate in every household. With AP chief minister Chandrababu Naidu going all out to attract investments to his state, the Karnataka and Tamil Nadu governments are panicking. Not only does Naidu want to attract $2billion in IT investments in five years, to boost entrepreneurship he plans to create one-million sq ft of incubation space by 2019.

In early November, Naidu was in Bengaluru for the nth time, meeting industry captains and entrepreneurs. He made a pit stop at Cisco's campus where he addressed employees at an all-hands meeting, perhaps the first townhall hosted to welcome the head of a local state. He shared his vision on how technology would be the backbone of his state. He also met senior executives from firms like Flipkart, First American Corporation, ITC Infotech and ABB. Besides, Naidu inaugurated the Bengaluru facility of Nutanix, one of Silicon Valley's hottest start-ups, before sitting through a session on e-governance and financial inclusion at the start-up incubator founded by American-Indian billionaire Vinod Khosla.

He visited Khosla Labs and was keen to explore the possibility of using Aadhaar at MeeSeva (at your service in Telugu), a single portal for government-tocustomer and government-tobusiness services. "He had a lot of questions on how GIS could help solve civic problems. Our whole pitch was about governing using data, about running cities using a single dashboard, and he was very impressed," Srikanth Nadhamuni, CEO of Khosla Labs, told TOI.

"He's a very forward thinking leader, an entrepreneur at heart, someone very keen on public service," said Dheeraj Pandey , foun der of Nutanix, the five-year-old, California-based company. Naidu got to know of Nutanix thanks to B V Jagadeesh, an AmericanIndian entrepreneur who grew up in Bengaluru and is an investor in a range of start-ups, including Nutanix.

Naidu's forays to Bengaluru have a specific purpose: To lure investments into the backward Rayalaseema region of AP. Naidu, in his state, is being accused of being partial to the region around Vijayawada, leaving the drylands of Rayalaseema—where his rival Jagan Reddy is strong — out of his development agenda. In TN, Naidu's focus is to get manufacturing investment to move across the border to Sri City, a special economic zone located in Tada, which is 55 km from Chennai.

Naidu is pushing Tada so that major investments that can leverage proximity to Chennai can be located here. Japanese auto giant Isuzu first zeroed in on Chennai for its India plant before opting for Sri City. Lack of industrial land and power in TN combined with access to a high-quality port at Krishnapatnam in Nellore is moving industrial projects across the border. This is naturally causing jitters in Chennai.

In fact, much to Karnataka's chagrin, Naidu got Hero MotorCorp to set up its first factory in in AP . Siddaramaiah had then said, "We offered maximum concessions to the company (tax holidays, excise duty exemption, concessions in entry tax, interest-free loan of central sales tax). But AP offered them free land. We cannot do that because other companies will also ask for it. We cannot compete with AP on this.'' Power is another plus for Naidu. With his government is promising uninterrupted power to factories, the AP-TN border area is turning attractive for industry . "Power is the elixir for industrialization. While AP is surplus, Telangana appears to be struggling on the power front, but for the recent power purchase agreement between Telangana and Chhattisgarh," TS Raghupathy , advisor to India Cements, said.

In fact, what Naidu is doing to TN is exactly what that state did to Karnataka a couple of decades ago. Between 1978 and 1985, a flurry of investments meant for Bangalore stopped just inside the Tamil Nadu border.TVS Motor, Ashok Leyland, Ti tan and several others pumped in hundreds of crores into Hosur, 40km from Bangalore.

Manufacturing investments, obviously , are big on Naidu's mind. End November will see Naidu in Japan where he will pitch for Japanese companies to set up shop in Tada, even while seeking investments for his new capital. This is reminiscent of what he did earlier. In December 1999, Naidu had flown to Bangalore and pleaded with members of the Confederation of Indian Industry to consider AP . He pitched proximity to the interstate border and assured investors of royal treatment.

"More than what he said it was his audacity to call for investments from another state that appealed to businessmen.He was the first CM to woo investors from other states. Previously, CMs only went to Delhi to showcase their states," said T Ramappa, then secretary of the Federation of Karnataka Chambers of Commerce and Industry.

Babu--as Naidu is referred to in AP--did not restrict himself to Bangalore. In the manner of a salesman, he travelled to the US and sat outside the office of Bill Gates for a few hours to meet him. The result: Micro soft set up a development centre in Hyderabad and kickstarted an IT enclave in the Nizam's city.

Many other tech firms followed although by the time they actually came up Naidu had lost polls. They included Infosys, Wipro, Facebook and Google.

Naidu also offered free land to the ISB and got it located in Hyderabad though its first choice was Maharashtra. Impressed by the upcoming Hyderabad, even US President Bill Clinton decided to drop by (as did his successor George Bush).

This time around Naidu's mission is different. Although he claims that creation of a modern IT industry in AP is also his mission, insiders know that with a large coastline, export-oriented manufacturing near the ports offers a greater opportunity.

Moreover, strapped for cash, Naidu requires a lot of investment for the new capital that he wants to build on the river Krishna across the city of Vijayawada.

"I wanted to develop Visakhapatnam after Hyderabad, but by the time the turn came I had lost elections," he says candidly.

Now Visakhapatnam — a port city with a Navy base, two ports and a significant cosmopolitan crowd — is sought to be promoted as the Mumbai of the East.

This is a trifle ambitious considering the city is still reeling from a major cyclone and being on the east coast is vulnerable to more such storms in future.

According to latest reports, Singapore is weighing Naidu's plea to help prepare a blue print for AP's capital. S M Krishna, when he was chief minister of Karnataka, went head-tohead with Naidu to attract IT investments and turn Bangalore into a Singapore. If Naidu has his way, perhaps it will be Vijayawada that will become India's Singapore.

(With inputs from N D Shivakumar in Bangalore)

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