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INVESTMENT OPPORTUNITIES IN ANDHRA PRADESH

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INTRODUCTION

Andhra Pradesh (AP) is located in the Southern peninsula of India and has a coastline of 974 km. It is one of the 29 states of India, with the cities of Vijayawada and Hyderabad as its capitals. The new river-front proposed capital in Guntur district is Amaravati, which is under the jurisdiction of APCRDA. The state is the eighth largest state in India covering an area of 160,205 km2 (61,855 sq mi). Andhra Pradesh, state in southern India, bordered on the south by Tamil Nadu state, on the west by Karnataka state, on the north and northwest by Maharashtra state, on the northeast by Madhya Pradesh and Orissa states, and on the east by the Bay of Bengal. The state is divided into 13 administrative districts. AP has a population of 4.95 crore and is growing at a decadal growth rate of 9.21 per cent. The state has a literacy rate of 67.4 per cent, and sex ratio of 997 females per 1,000 males. It is endowed with a variety of physiographic features ranging from high hills, undulating plains to a coastal deltaic environment. Andhra Pradesh is recognized variously for its legendary dynasties, temples, beautiful language - Telugu, lacquer toys and beautiful weaves, rich literature and the vibrant Kuchipudi. Andhra Pradesh has often been called the "food bowl of the south." The state is home to India's largest tiger reserve, in the Nallamai forest. Andhra Pradesh has attracted a large number of investors for setting up their operations in the State. They have set up industrial units in diverse fields like information technology, agro-processing, automobiles, textiles, drugs and pharmaceuticals, etc. The State is also a home to many large public and private sector companies. It is considered as the hub of industrial activity in South India.


Geography and Climate

Andhra Pradesh is a beautiful state that thrives in natural products. It lies between the latitudes of 12.41° to 22° N and longitudes of 77° to 84.40° E. Its neighbouring states are Tamil Nadu, Karnataka, Chhattisgarh, Maharashtra, and Orissa. Geographically, Andhra Pradesh is bestowed with two mighty river systems of Krishna and Godavari. Its varied topography ranging from the hills of Eastern Ghats and Nallamallas to the shores of Bay of Bengal supports varied ecotypes, rich diversity of flora and fauna. The state has two regions Coastal Andhra and Rayalaseema. Andhra Pradesh essentially observes tropical type of climate though small variations can be experienced with altitude and pelagic influence. Like any other place in India, this too, enjoys three seasons-summers, monsoons, and winters. Andhra Pradesh Climate is generally hot and humid. The major role in determining the climate of the state is played by South- West Monsoons. But the winters in Andhra Pradesh are pleasant. In summer, the temperature generally ranges between 20 °C and 40 °C. At certain places the temperature is as high as 45 degrees on a summer day. The summer is followed by the monsoon season, which starts during July and continues till September. This is the season for heavy tropical rains in Andhra Pradesh.


Economy

The "Economy of Andhra Pradesh" is known for its stability and consistency. Andhra Pradesh has a well-developed traditional industry owing to the availability of wide range of natural resources.  Andhra Pradesh is blessed with a very strong economic structure which is heavily dependent on "Agriculture" and "Livestock". The growth in the state of Andhra Pradesh was mainly driven by agriculture, industry and service sectors. The priority areas of the state in the economy include Food processing, Software Export, Financial Services, Electronics, power, Textiles and Tourism.  Andhra Pradesh has a very diverse geography which led to a very diverse economy. It is also a specialist in defence services and pharmaceuticals, and is a major producer of steel, cement and sugar. Services have come up rapidly in recent decades, and its capital, Hyderabad, has become one of the biggest centres of information technology in India, including major campuses of Microsoft and Genpact. Andhra Pradesh is one of the economically sound states of India which draws a substantial amount of profit from "Agriculture" and "Livestock". The state earns a considerable amount of profit from the "Livestock" business which involves nurturing and rearing of cattle in an enclosed area for commercial purposes. The Department of Agriculture takes care of the needs of the owners of the "farms" that houses many domesticated animals. The Government of Andhra Pradesh organizes many workshops for the owners to enlighten them on the various modern methods of rearing animals in a sophisticated and healthy way.  Economic growth is to improve the well being of people by increasing the disposable income and purchasing power of all the people.


Agriculture Development

Among the various states of the country, Andhra Pradesh is an agriculturally important state in India. Agriculture is the backbone of the economic structure of Andhra Pradesh. Andhra Pradesh (AP) is one of the largest states in India, with agriculture providing the major source of income for about 60 per cent of the population even though it contributes only 19 per cent state GDP. "Andhra Pradesh is a suitable place for private investments in agriculture and allied sectors as the state have sufficient land, water and other resources for development".  With an economy mainly based on agriculture and livestock, Andhra Pradesh is an exporter of many agricultural products and is also known as "Rice Bowl of India". Agriculture is the main occupation and 60 percent of population is engaged in agriculture and related activities. Rice is the major food crop and staple food of the state. Andhra Pradesh is blessed with a suitable weather to produce varieties of crops. The farmers of Andhra Pradesh practice multiple cropping patterns to increase the growth of the agricultural production. Some of the important crops that are grown in abundance in the state are: wheat, jowar, bajra, maize, minor millet, coarse grain, many varieties of pulses, oil seeds, sugarcane, cotton, chilli pepper, mango nuts and tobacco. Crops used for vegetable oil production such as sunflower and peanuts are popular.


 

BUSINESS SECTORS


Agro and Food Processing

The food processing industry in India is a sunrise sector that has gained prominence in recent years. Availability of raw materials, changing lifestyles and relaxation in policies has given a considerable push to the industry's growth. This sector is among the few that serves as a vital link between the agriculture and industrial segments of the economy. Strengthening this link is of critical importance to improve the value of agricultural produce; ensure remunerative prices to farmers and at the same time create favourable demand for Indian agricultural products in the world market. A thrust to the food processing sector implies significant development of the agriculture sector and ensures value addition to it. There has been diversification of Indian diets away from food grains to high value products like milk and meat products and vegetables and fruits. The increasing middle-class due to rapid urbanization, increasing per-capita income, increased participation of women in urban jobs and impact of globalization has been largely responsible for the diet diversification in India. The agro food processing industries in the State are: - bread, oilseed meals (edible), breakfast foods, biscuits, confectionery, including cocoa processing and chocolate, oil expellers and refining, malt extract, protein isolates, high protein foods, weaning foods, ready to eat food products and other processed foods.

 

Bulk Drugs and Pharmaceuticals

The pharmaceutical industry in Andhra Pradesh, which has been playing a vital role in strengthening India's economic growth, is quite optimistic on the growth prospects despite the fact it has been lagging due to regulatory hurdles and lack of government encouragement to attract new investments in the recent past. Andhra Pradesh has grown into a pharma hub for bulk drugs basically for two reasons. Historically because of Indian Drugs and pharmaceuticals Ltd (IDPL) and secondly because of entrepreneurship and availability of adequate talent pool in the state. Pharmacy companies have increased spending to tap rural markets and develop better infrastructure. The market share of hospitals is expected to increase from 13.1% in 2009 to 26% in 2020. Indian pharmaceutical industry is third largest in the world and is one of the most developed industries. The industry today can boast of producing the entire range of pharmaceutical formulations, i.e., medicines ready for consumption by patients and about 350 bulk drugs, i.e., chemicals having therapeutic value and used for production of pharmaceutical formulations. Indian pharmaceutical industry today is ranked world class, in terms of technology, quality and range of medicines manufactured. From simple headache pills to sophisticated antibiotics and complex cardiac compounds, almost every type of medicine is now made indigenously. The State offer excellent opportunities for the growth of pharmaceutical industry in the country, due to availability of trained and skilled manpower; good infrastructure as well as research and development facilities.


Mining & Mineral Industry

Minerals constitute the back-bone of economic growth of India as it has been generously endowed with minerals. Andhra Pradesh is the second largest store house of mineral resources in India. Andhra Pradesh has huge reserves of key minerals such as coal, limestone, slabs, oil and natural gas, manganese, asbestos, iron ore, ball clay, fire clay, gold, diamonds, graphite, dolomite, quartz, tungsten, steatite, feldspar, silica, etc. In fact, the state is estimated to have one-third of the country's total mineral wealth. Andhra Pradesh is well known globally for variety of rocks & minerals and called as 'Ratna Garbha', a State endowed with variety of minerals. Many of the ancient travellers and historians have mentioned about ancient mining of Gold, Diamond, Base Metals, and Precious Stones etc. There are 2,039 Mining leases and 9052 quarry leases for Major minerals (Industrial Minerals) and Minor Minerals (Construction Minerals) with an extent of 1,02,376 hects and 30,736 hectares respectively and 35 Reconnaissance permits (Gold, Diamond, Base metals, Precious metals). The mineral consumption is increasing due to promotion of various industries and manufacture of mineral based products. State produces about 100 to 110 million tonnes of industrial minerals and 200 million cubic meters of dimensional stones and building material. A.P. stands 1st in Barytes and Limestone production in the country. The state stands first in value of minor mineral production and second in total value of mineral production in the country; contributing about 9 to 10 percent to the country's mineral value production.


Tourism

Andhra Pradesh is the best tourist place. There are number of tourist places in the state covering historical structures, Heritage & Culture, Arts & Crafts, Cuisine, Fairs and Festivals. Andhra state has clocked with around 100 million domestic tourists in India, because of pilgrim tourists places like Tirupati, Srisailam etc. Andhra Pradesh Tourism Development Corporation (APTDC) is a state government agency which promotes tourism in Andhra Pradesh, describing the state as the Koh-i-Noor of India. Andhra Pradesh has a variety of tourist attractions including beaches, hills, caves, wildlife, forests and temples. Visakhapatnam city has many tourist attractions such as Kailashagiri park near the sea, Visakha Museum, Indira Gandhi Zoological Park, the INS Kursura (S20) Submarine museum, the Dolphins Nose, and the Lighthouse. Tourist spots at Vijayawada include Prakasam Barrage, Kondapalli Fort, Krishna River, Bhavani Island and many more parks in the city. Rajahmundry city, located on the banks of Godavari River is one of the main attractions of the state. Andhra Pradesh is truly a land of beauty and opportunity. It represents Indian culture and heritage in all its glory. It is famous for its pearls, chudi bazaar and unique biryani the world over. Beaches, hills, wildlife and forests, forts, historical monuments, Buddhist sites, national parks and bird sanctuaries are the major attractions of the State. Besides, the statue of Lord Buddha with a height of about 60 feet has been erected on the Gibraltar rock in the Hussainsagar Lake, which separates Hyderabad and Secunderabad cities.

 

Manufacturing Sector in Andhra Pradesh

Food products

Beverages & tobacco

Cotton & Jute Textiles

Electrical & Electronics

Glass products

Wood products

Paper products

Leather Products

Chemical products

Rubber, Plastic, petroleum & Coal products

Metal products & Auto components

Machinery & equipments

Transportation equipment

Miscellaneous industries


FEW OTHER PROJECTS

 

Honey Bee Farming

"Bee keeping" is one of the oldest traditions in India for collecting the honey. Some people raise bees for a hobby, others do it for a business. As a business, it could raise enough to support a small family. If you have the interest or resources to start a honey farm, explore the possibility of getting into business with it. If you have decided to pursue the project, be sure you have the farm, vehicles and the equipment needed to start the business. For a small farm, you would need bees with queen, brood chamber, honey containers, honey boxes, attire (hat, veil, and overalls), and hive tool, scratcher for unsealing the honey, manual or motorized extractor, and freezer for storing honey. Honey bee farming is become popular due to its market demand in national and international markets as well. Not only the farmers make a sweet dividends but beekeeping also help increase agriculture productivity through pollination. Honeybees also produce honey, bee wax and royal jelly thus giving additional benefits to the farmers.

Steps to know before starting a Honey Bee Farming Project:

1.      The first step is planning a beekeeping project is to become familiar with the bee-human relationship in your area where you want to set up.

2.     Research honey production standards that might be applicable to you. Feeding bee's artificial pollen could be an issue in your state.

3.      It is advised to work with local beekeepers especially if you have no experience working with bees. If you are taking care of a small honey farm full-time, you can do it alone, but hire someone to help you extract honey when the time comes.

4.     If you are just beginning with bees, plan to work with just 1 or 2 individuals in the area.

5.     The kind of honey produced depends on what they are fed. Different flowers, because of their different complex sugar ratios, produce different flavours of honey. The most commonly used plants by larger honey producers is canola. Experiment on different kinds of flowers, to see the results. You could specialize in producing a certain kind of honey for a niche market.

6.     To market hive products, identify any local agent or deal with already established market. Find out with other beekeepers for marketing ideas. Farmers can also get in touch with local department of agriculture.


 

Dairy Farming

Anyone who knows the money-making aspects of cows and has a love for taking care of them can find an enjoyable and lucrative business in starting a dairy farm. If you have love for animals such as cows and recognize their money-making capabilities, then you can start a dairy farm business. You can make money off milking cows and selling them off to big dairy companies, or sell them off as your own products if you can afford the processing equipment. In India, one of the biggest commercial businesses in rural areas is "Dairy Farming". Dairy farming is a large unorganized sector in India and a major source for livelihood in rural areas. In an effort to bring in structure into the dairy farming industry and provide assistance for setting up dairy farms, the Department of Animal Husbandry, Dairying and Fisheries launched the "Venture Capital Scheme for Dairy and Poultry" in 2005.

In an effort to further strengthen dairy farming in India, the "NABARD" (National Bank for Agriculture and Rural Development) subsidy for dairy farming was launched. The objectives of the scheme include:

1.      To achieve best production in milk by modernizing the dairy farm.

2.     To achieve the best breeding by rearing good quality calf.

3.     To promote setting up of modern dairy farms for production of clean milk.

4.     To bring about up gradation of quality and traditional technology to handle milk on a commercial scale.

5.     To market and reach the milk distribution even interiors of villages.

6.     To support and introduce modern technology for doing dairy business in commercial way.

The following types of persons and association of persons are eligible for receiving the NABARD Dairy Farming Subsidy:

Farmers

Individual Entrepreneurs

NGOs

Companies

Groups of unorganized and organized sector etc.

Groups of organized sector include Self Help Groups, Dairy Cooperative Societies, Milk Unions, Milk Federations, etc.

 

Equipments

Dairy farms are one of the more expensive businesses to operate and start. You need to have some elaborate equipment in order to pull the business off properly. Some of the more important dairy farm equipment includes:

Tractor: An important equipment for pulling machinery around. Most of the other equipment cannot be operated without this.

Hay baler: Responsible for producing bale that is then fed to the cows. Each round bale produced by this machine is enough to feed 25 cows a day.

Combine: The machine used to harvest crops for feeding to the cows, or for selling off. If you plan to grow your own cow feeds, you would need this definitely.

Storage buildings: These buildings are useful for storing the feeds and the plants that you grow in your farm. There are also specialized buildings that are designed to store cow's manure, as they are good fertilizers for the crops.

Milking equipment: This will help make your life easier. Having automated milking equipment in your dairy farm will help cut the time required for you to produce milk from your cows, rather than doing it by hand.


Poultry and Layer Farming

Poultry farming has proven to be very lucrative; hence you might have been tempted to start one as a form of business and source of income. Egg farming is a pricey business venture, but it has its rewards. Eggs are always in demand, the market for organic eggs is growing, and at the end of their run, you can sell your laying hens to organic chicken merchants who process chicken meat. Generally, poultry farming means, raising various types of domestic birds for the purpose of producing foods like eggs and meat. Nowadays, most of the people are using the poultry as the synonym of chickens. Because chickens are the widely raised poultry birds. Along with chickens' ducks, geese, turkeys, guinea fowl, quails, peacock etc. are also popular domestic poultry birds. In India, various types of poultry birds are being raised from a long time ago. The largest number of poultry population in India is found in Andhra Pradesh.

Benefits of Poultry Farming:

1.      Commercial poultry farming in India has created and still creating profitable business opportunity for the Entrepreneurs.

2.     Poultry farming business can provide a great employment source for the job seeking people.

3.     All types of poultry product have a great demand in the market inside India. And there are no religious taboo about consuming the poultry meat and eggs.

4.     Required initial investment is not too high. You can start with small scale production and elaborate it gradually.

5.     Bank loans are available throughout the country.


Selection of proper location for Poultry Farming:

 

1.      Try to setup the farm in rural areas that is slightly far from the city. Because, land and labor are relatively cheaper in rural areas.

2.     Select a chaos and noise free calm and quiet place.

3.     The area of the land depends on the number of birds and farming system. Free range farming system requires more land than intensive system.

4.     The chosen area must have to have fresh and pollution free environment.

5.     Never setup the farm in rented land. Because, in rented land the land owner can force you to leave his land at anytime. So, it would be better if you are the owner of the land.

6.     While selecting land, ensure a great source of sufficient amount of fresh and clean water.

7.      The selected area must have to be free from all types of harmful animals and predators.

8.     Suitable transportation system is a must.

9.     Presence of a suitable market near the farm will be effective. You will be able to buy necessary commodities and sell your products easily in the market.



 

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Annexure 1:: Cost of Project and Means of Finance
Annexure 2:: Profitability and Net Cash Accruals
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Annexure 16 :: Raw Material Cost per unit
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Annexure 20 :: Packing Material Cost Per Unit
Annexure 21 :: Employees Expenses
Annexure 22 :: Fuel Expenses
Annexure 23 :: Power/Electricity Expenses
Annexure 24 :: Royalty & Other Charges
Annexure 25 :: Repairs & Maintenance Exp.
Annexure 26 :: Other Mfg. Expenses
Annexure 27 :: Administration Expenses
Annexure 28 :: Selling Expenses
Annexure 29 :: Depreciation Charges – as per Books (Total)
Annexure 30 :: Depreciation Charges – as per Books (P & M)
Annexure 31 :: Depreciation Charges - As per IT Act WDV (Total)
Annexure 32 :: Depreciation Charges - As per IT Act WDV (P & M)
Annexure 33 :: Interest and Repayment - Term Loans
Annexure 34 :: Tax on Profits
Annexure 35 ::Projected Pay-Back Period And IRR