It was introduced as the 29th state of India in 2014. And in 2017-18, Telangana's GSDP (gross state domestic product), at current prices, stood at Rs 7,326.57 billion (a growth rate of 14.1 per cent) compared to the all India GDP at Rs 167,516.88 billion (a growth rate of 9.8 per cent). Notably, Telangana was ranked the No. 1 state in ease of doing business by the Department of Industrial Policy and Promotion (DIPP). Further, the state holds immense investment opportunities - cumulative FDI inflows (including Andhra Pradesh, PPPs, SEZs, sample registration system) from April 2000 to December 2017 totalled $14.524 billion. And, according to a recent IBEF report, 10 investment intentions were filed and proposed investments amounted to Rs 10.05 billion till January 2018.
Key drivers and projects
The services sector is the major contributor in the state; in 2016-17, it accounted for 63 per cent of the overall GSDP. While the IT and pharmaceutical manufacturing sectors are catalysing growth, other key industries include tourism, textile, mines and minerals.
Micro, small and medium enterprises (MSME) are also drivers. In 2015-2016, 3,779 MSME units were established in the state with a cumulative investment of $242.32 million. Further, the Telangana Chambers of Commerce and Industry (TECCI), in association with the School of Excellence in Economics and Finance of NALSAR University, is working to revive sick MSME Units. "We are keen to bring the wagon back on the rails in the MSME sector in Telangana," says M Venkateshwarlu, President, TECCI. For him, key economic drivers include bulk drugs, software exports, healthcare services, seeds and export of spices. "Projects like Mission Kakatiya (restoration of about 45,000 tanks), Mission Bhagiratha (bringing drinking water to every house) and uninterrupted power supply are some popular state government initiatives."
Several PPP projects are also either operational or under construction in the state (see table on key PPP projects).
Investment and exports
In January 2017, the state government signed MOUs for several investments and strategic partnerships worth $503.04 million. Further, in January 2018, it reportedly held talks with Japan International Cooperation Agency (JICA) and South Korea for investments in the second phase of Hyderabad Metro, Pharma City and Kakatiya Textile Park. "Domestic and foreign investors have already arrived in Hyderabad and are further exploring opportunities and possibilities to 'Make in Telangana', keeping in view the infrastructural facilities provided by the Telangana State Industrial Infrastructure Corporation. In addition, the region has a good climate and law-and-order situation and skilled labour," says Venkateshwarlu. What's more, implementation of the Telangana State Industrial Project Approval & Self Certification System (TS iPASS) is expected to increase investments in coming years.
The state is formulating policies and a single-window clearance system to this end.
In June 2015, the state introduced a new industrial policy to attract investments with emphasis on core manufacturing sectors. Under TS iPASS, to allot a site or areas for establishment of industries or mineral-based units, the state has stipulated the maximum time period of 15 days to issue clearances - else, it is deemed to be cleared. "As a result, 5,469 industrial units were given approvals with a total investment of $17.5 billion, providing employment opportunities to about 400,000 unemployed youth," says Venkateshwarlu. "The government's efforts are on for creating industrial parks for South Korea and Japan."
IT is one of the fastest growing sectors in Telangana, contributing about 21 per cent to the total GSDP. In FY2017, exports of IT and ITeS reached $12.74 billion. The Central Government has declared the realisation of an IT Investment Region (ITIR) near Hyderabad with the aim to generate 1.5 million direct and 5.3 million indirect jobs in the next five years. Also, under the Department of Information Technology, Electronics & Communications, the state introduced the Telangana IT Policy in April 2016. In September 2017, it also announced the establishment of an IT hub in Nizamabad district at $3.89 million. In fact, Telangana has 22 operational IT/ITeS SEZs with leading companies like Facebook, Google, IBM and Microsoft having a significant presence in Hyderabad. Further, as Jayesh Ranjan, Secretary, Department of IT, Electronics and Communication, Government of Telangana, tells us, the launch of T-Hub in November 2015 has created an energetic community of entrepreneurs to boost the success stories of start-ups in India (read full interview on page 70).
Telangana backs nearly one-third of complete pharma manufacture in the country. Hyderabad also accounts for about 20 per cent
of India's total pharma exports, as per the IBEF report. Total R&D by pharmaceutical enterprises grew 17 per cent in 2016-17.
The state also plans to set up a pharma city - a first-of-its-kind, smart ecosystem creating a new international benchmark for sustainable industrial cities û and promote PPPs in the sector. Further, the state announced investment of $16.58 billion to establish super-speciality hospitals till 2019. And, in June 2017, it inaugurated the largest dedicated medical devices park in the country. It also plans to set up a life sciences infrastructure fund with a corpus of $148.73 million, which will be used to create modular plug-and-play infrastructure for pharmaceuticals, biotechnology and medical devices.
Mines and minerals
There are over 3,000 operational mining leases in Telangana and Karimnagar, Khammam and Adilabad account for 50 per cent share in the state's mining business. Telangana coal deposits account for 20 per cent of the country's coal deposits; Adilabad, Karimnagar, Khammam and Warangal are the largest producers in the state.
The state is also in discussions with Steel Authority of India (SAIL) to establish a $5 billion steel factory on the Khammam-Warangal border. "The target for the mineral and mining sector for 2017-18 was Rs 35 billion and the state achieved Rs 37.0438 billion up to March 2018," shares BRV Susheel Kumar, Director of Mines and Geology, Government of Telangana. "The state produces about 30 million tonne of industrial minerals, 50-55 million tonne of coal and 58 million cu m of dimensional stones and building materials per annum (see table on page 68)."
Notably, the Telangana State Sand Mining Policy is regarded as a model sand regulation policy in India. Sand extraction, disposal and availability to consumers is affordable and the process is conducted through the Telangana State Mineral Development Corporation through online booking. Also, in order to reduce the impact of sand mining from streams or rivers, the state is promoting M-Sand (manufactured sand). "It has also mandated that all government departments will use 50 per cent M-Sand in engineering works," he adds.
"At present, there are 44 M-Sand units around Hyderabad and abundant scope for more such units."
Telangana has over 30 operational textile mills, as in June 2017. Continuing from the textile policy introduced in March 2015 to providing incentives to the sector, the state is working on a new textile policy to attract investments.
"The state is creating the country's largest integrated textile park, Kakatiya Mega Textile Park, spread over 1,200 acre in the first phase, and an apparel park in Sircilla spread over 100 acre," shares Shailaja Ramaiyer, Director of Handlooms and Textiles, Government of Telangana. "In addition, a large textile cluster will be coming up near Hyderabad." Telangana is the country's third largest producer of cotton. However, owing to the lack of an adequate downstream industry, over 80 per cent of the cotton produced is exported to other states as raw cotton.
"This offers tremendous opportunity for value addition through the entire textile value chain," she adds. "To tap this, the state has launched the Telangana Textile and Apparel Policy (T-TAP). The extent of facilitation, support and incentives provided under this policy has taken the country's textile sector by surprise and various national and international marquee names have already committed to investing in Telangana. We see a lot of opportunity for investment and employment generation in higher value-added textile products like technical textiles and manmade fibre-based textiles in addition to cotton."
Roads and highways: Telangana has a national highway length of 3,786 km; the overall road length was around 28,290 km in 2016-2017. "Twenty projects covering 866 km amounting to Rs 59.72 billion have been sanctioned and are in progress," says K Jalandhar Reddy, Executive Director, KNR Constructions, a Hyderabad-based company. He adds that an expenditure of Rs 13.5 billion has been incurred on these projects so far. "Besides, 12 projects of 392 km length amounting to Rs 46.75 billion have been sanctioned in 2017-18 and are in the tender stage."
Also, under the Bharatmala road network, national corridors, economic corridors and feeder routes have been planned in Telangana. Under a comprehensive Strategic Road Development Plan (SRDP), six skyways (111 km), 11 corridors, 54 junctions and 68 major roads have been proposed. KNR Constructions was recently awarded a four-laning HAM project between Ramsanpalle to Mangloor by NHAI at Rs 12.34 billion. The Centre has also sanctioned new national highways with a combined length of 2,776 km to Telangana.
"During the past two-and-a-half years, the state received approvals from the Centre to lay 2,776 km of 18 new highways," says AAV Ranga Raju, Managing Director, NCC. "The total length of the national highways will increase to 5,303 km once existing projects are completed." Meanwhile, TV Sandeep Kumar Reddy, Promoter and Managing Director, Gayatri Projects, says, "To maintain its position, Telangana needs to continue to invest in infrastructure - building, maintaining and upgrading it."
Railways and metro: Telangana had a railway network of 1,736.67 km, as of December 2016. For construction of new railway lines, the government proposed an investment of $3.10 million in 2017-18. Further, a rapid metro transit system is being implemented through PPP mode and is expected to be completed by November 2018. As Jayesh Ranjan tells us, the state has started the process of preparing the DPR of Phase-2 of the Hyderabad Metro and is working on 'multi-model transport system' with multiple integrated systems in Hyderabad city (read interview of Hyderabad Municipal Commissioner on page 74).
Airports: Telangana has one operating airport, the Rajiv Gandhi International Airport (RGIA), to which the GMR Group is adding another runway and a new terminal, expected to be completed in three years. Passenger traffic at Hyderabad Airport stood at 16.47 million for April-February 2017-18. To improve the civil aviation sector, the state proposed an investment of $3.09 million in 2017-18 and the government sanctioned an amount of $2.02 million to the Telangana Aviation Corporation. Two new airports have been proposed in Hyderabad at Jawaharnagar, Shamirpet, and Ghatkesar.
Real estate: The state has initiated a two-BHK Housing for All scheme in all 31 districts.
As per CBRE estimates, the city's overall commercial stock is about 56 million sq ft as in 2017, with leasing of over 6.8 million sq ft of commercial space and organised retail space of 2.9 million sq ft, with over 3.7 million sq ft to be released in the next few years. "This will translate into higher demand for residential complexes in and around Hyderabad," says G Ram Reddy, President, CREDAI Telangana.
He adds, "Infrastructure status, reduction in GST and PMAY schemes will help developers take up affordable housing projects. Besides, the government is planning to introduce a single-window system of clearances through a hub-spoke model." Hyderabad is expected to have office space absorption of about 7.5 million sq ft this year, its highest ever in a year, owing to robust demand from IT and ITeS, BFSI and start-up companies. "Retail and real estate have much to cheer about following the government's announcement to grant them 100 per cent FDI," adds Ram Reddy.
Telangana had completed 13 major irrigation projects with 17 ongoing projects, while medium completed and ongoing irrigation projects stood at 37 and nine, respectively, as in June 2017.
KNR Constructions is executing two irrigation projects in Telangana: the Palamuru Rangareddy Lift Irrigation Scheme (Package No.6) at Yedula, Mahabubnagar District, at Rs 6 billion; and the Konda Pochamma Sagar project at Siddipet District at Rs 8.84 billion. Gayatri Projects, too, recently started a Rs 15-billion project under the Kaleshwaram lift-irrigation project, as part of a JV.
As in February 2018, Telangana had an installed power capacity of 14,689.46 MW, of which 7,572.65 MW was contributed by state utilities, 5,079.96 MW by private utilities and 2,036.85 MW by central utilities. Thermal power was the largest contributor in total installed capacity with 8,750.95 MW, followed by hydropower with a contribution of 2,449.93 MW, renewable energy with 3,339.85 MW and nuclear power with 148.73 MW, as per the IBEF report. As of June 2017, three thermal power projects with a combined capacity of 2,680 MW are under construction. Also, renovation and modernisation (R&M) of two hydropower projects are underway and are expected to be completed by 2018-19.
The state is aiming to achieve a power generation capacity of 28 GW and in November 2017, it announced a planned investment of around $14 billion to make it a 'power surplus' state.
Smart cities and AMRUT
Warangal and Karimnagar in Telangana have been selected among the 99 cities to be developed as smart across India. "In both cities, the focus has been on development of roads, water supply network, sewerage system, solid waste management, civil construction, river or lakefront rejuvenation and digital infrastructure," says Mathew Kurian Eranat, Assistant Vice President-Corporate Ratings, ICRA. "As the tender process of projects picks up pace, these sectors are expected to witness good opportunities to participate in the implementation process."
The smart city proposal (SCP) of Warangal envisages a total outlay of Rs 27.4 billion. Of this, Rs 25.87 billion is to be spent on the retrofitting and redevelopment of 1,583 acre in Central Warangal into a smart neighbourhood.
The SCP of Karimnagar has a total outlay of Rs 17.31 billion, of which Rs 4.31 billion will be spent on pan-city solutions. "Karimnagar, too, has focused on redevelopment of its central area, covering about 2,390 acre, under the area-based development plan, at a likely spend of around Rs 13 billion," adds Eranat. Moreover, 12 cities of the state have been selected for infrastructure development under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT). The Centre has approved a budget of $8.3 billion for the first phase of the project.
SEZs and industrial infra
As in December 2017, Telangana had 151 SEZs, of which 30 are operational, 57 are notified and 64 are formally approved. The total area of notified SEZs in Telangana stood at 1,992.28 hectare as in September 2017. Moreover, the state plans to promote an industrial corridor between Hyderabad and Warangal. With the launch of the industrial policy, all clearance certificates are being issued to around 1,609 units involving an investment of $5.06 billion.
In fact, Telangana has 14 completed and operational PPP industrial infrastructure projects as in December 2017. Further, last December, the state signed an MoU with Attivo for the first dedicated original equipment makers (OEMs) park in India. Attivo will develop an infrastructure equipment manufacturing park in the National Investment and Manufacturing Zone near Zaheerabad across 500 acre.
Automobiles and auto components
Telangana has seen a good amount of auto and auto component activity in Sangareddy and Rangareddy districts and the auto plastics or sheet metal component industry has been a distinct ancillary base that has shown growth in recent times. "There is also good potential scope for tractors and implement manufacturers, which is already in the growth phase," says Sitaramayya Vetsa, Vice President, Manufacturing Operations (Automotive Division-Zaheerabad), Mahindra & Mahindra. Further, Telangana is developing a state electric vehicle policy, which is bound to attract investments from global brands.
"A strong presence in aerospace, defence and electronics further complements the auto industry by providing access to a robust supplier base of related components," adds Vetsa.
The policy on electrical vehicle (EV) is under process and will consider a slew of incentives to grow this segment, as Ranjan tells us (read interview on page 70).
The total number of tourist arrivals in Telangana, which received eight national awards for promotion of tourism and cleanliness last year, reportedly reached 53.5 million in October 2017. To encourage tourism further, the state has planned the listing of a new public limited company, Telangana State Tourism Development Corporation (TSTDC), under the Companies Act 2013.
Indeed, with all sectors and initiatives considered and the state government's clear commitment to growth, Telangana is set to write a new growth story for India.
Geographical area: 114,840 lakh sq km
No. of administrative districts: 31
Population density persons per sq km: 312
Total population: 35.2 million
Literacy rate: 66.5 per cent
Languages: Telugu, Hindi, Urdu and English
Key Industries: information technology, pharmaceuticals manufacturing, tourism, textile, mines and minerals.
- SERAPHINA D'SOUZA
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