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Why IT companies are looking to set up facilities in Andhra Pradesh [Software & Services] [Times of India]
[January 01, 2013]

Why IT companies are looking to set up facilities in Andhra Pradesh [Software & Services] [Times of India]

(Times of India Via Acquire Media NewsEdge) HYDERABAD: Andhra Pradesh plans to spare information technology companies from the crippling power cuts that all others are subjected to, an unprecedented step as the Congress government attempts to shore up the state's image as an investment destination which has been tattered by political instability and a separatist agitation. The proposed move, which has to be approved by Andhra Pradesh's electricity regulator, is the first such by any state in India.

The cost of special treatment for IT companies may not be very high for the government because the sector consumes about 6% of the state's electricity. But in terms of perception, it could be a winner because Andhra Pradesh is home to companies such as Microsoft, Google, Facebook, Tata Consultancy Services, Infosys and Wipro. At 53,000 crore, Andhra Pradesh is the fourth-largest software exporter in the country, accounting for a one-eighth of total exports.

"The move is aimed at improving the state's brand image, keeping in view the fact that several major multinationals operate here and also the employment generation in the sector. We hope this will send positive signals to the multinationals to go ahead with their expansion plans in the state," said Ponnala Lakshmaiah, the minister for information technology.

Moreover, a senior government official said, that because of the regional unrest disturbing operations frequently, several mid-sized IT players have shifted a sizeable part of their operations to neighbouring states.

India's fourth-largest state by area and economic output has faced frequent shutdowns because of the agitation for a separate state of Telangana. Hyderabad, the capital, which accounts for bulk of Andhra Pradesh's economic activity, is in the Telangana region in the northwestern part of the state.

V Rajanna, a vice-president at TCS and head of the IT and IT-Enabled Services Industry Association of Andhra Pradesh, welcomed the proposed move, saying it would help save the money which was being spent on diesel generators to keep operations running. He estimated that electricity costs because of using diesel had risen by more than 50%.

The managing director of a mid-sized IT firm, who did not want to be identified, said that small and medium-sized companies' margins were affected to the extent of 200 basis points because of their dependence on diesel gensets. The exemption from power cuts, he observed, was not a concession but something that the government had committed to in its Information Technology Policy by promising cheap and uninterrupted electricity supply.

Andhra Pradesh has also been affected because of the disruption of gas supply from the Krishna-Godavari fields operated by Reliance Industries. Gas-based power stations are operating at less than one-fourth their capacity and state itself has a shortfall of 2,000 megawatt during peak time, or about one-sixth of demand.

The Confederation of Indian Industry, too, was pleased with the plan. Suchitra Ella, the head of CII in the state, hoped that the exemption would be a stepping stone for other industries to obtain similar measures. "Immediately after exempting IT, the government should consider similar exemptions to small and medium enterprises in manufacturing, before extending such positive measures to all other sectors in phases." (c) 2013 Bennett, Coleman & Company Limited

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