Investor fears deepen in Andhra as LuLu too says #ByeByeAP — ‘business climate anxious’

Abu Dhabi’s LuLu Group has pulled out of a Rs 2,200-cr project in Andhra Pradesh and made its disapproval of Jagan Reddy government’s move public.

Andhra Pradesh CM Jagan Mohan Reddy | ANI Photos

Hyderabad: During the assembly elections in Andhra Pradesh earlier this year, the YSR Congress Party came up a #ByeByeBabu campaign, and Y.S.R. Jagan Mohan Reddy ousted N. Chandrababu Naidu from power. Six months on, Naidu’s TDP is promoting a new hashtag campaign — #ByeByeAP — as its comeback at YSR Congress.

At a time when Andhra Pradesh is vying to become a business destination even after losing Hyderabad to Telangana, a series of decisions by CM Reddy in the last six months, reversing whatsoever strides his predecessor Naidu made in the previous five years on the investments front, has hurt the investors’ faith in the state, say industrialists.

#ByeByeAP, the hashtag on microblogging site Twitter, points to some Indian and international firms either withdrawing from AP or cutting down on their investment plans in the state.

Abu Dhabi-based LuLu Group, which last week announced withdrawal from its Rs 2,200-crore project in the state, is the latest to join the bandwagon.

‘Participated in a transparent process’

LuLu was roped in by Naidu and allotted about 14 acres of sea-facing prime realty in Visakhapatnam for the construction of an international convention centre, shopping mall and a five-star hotel, providing nearly 7,000 jobs. Naidu, who was holding AP’s investment summits from a makeshift convention centre at the same spot, wanted the project to showcase Andhra and Visakhapatnam as a convention and shopping hub.

But the Reddy government has cancelled the agreement with the LuLu group citing “non-transparent” procedures followed by the Naidu government.

“We had participated in a very transparent process and were awarded the land on lease. Though we had incurred huge expenses towards initial project development… we agree to the AP government’s decision to revoke the project’s land allotment,” said a statement from Ananth Ram, India director, LuLu group.

Earlier this month, Reddy cancelled an agreement with the Singapore consortium of companies to develop a start-up area, planned in an area of 1,691 acres, to serve as the financial hub of new Andhra Pradesh capital Amaravati.

While Singapore minister S. Iswaran maintained that their companies remain interested in opportunities in AP, LuLu Group made its disapproval of Reddy’s decision public.

“Given the current scenario, we have decided not to invest in any new projects in AP,” Ram said.

The exit of Lulu and Singapore consortia from AP comes amid reports that Reliance Industries has withdrawn from its proposed Rs 15,000 crore electronics manufacturing hub near Tirupati, and that Adani group is downsizing its Rs 70,000-crore proposal of a data centre and tech park in Visakhapatnam.

The TDP has alleged that ventures like the Rs 12,000-crore healthcare and hospitality project of Abu Dhabi’s BRS Ventures, Rs 24,000-crore paper plant in Prakasam district by Jakarta based Asia Pulp & Paper and Rs 2,000-crore ancillary units of Kia Motors are also exiting AP because “of the hostile approach of Jagan towards companies Naidu brought in”.

‘No clarity on what to expect’

Industrialists term the business climate in Andhra Pradesh as worrying.

“Jagan seems focussed now on fulfilling his populist promises. There is no clarity from the government as what to expect from them on the industry side and this has made the business climate here anxious,” said a Visakhapatnam-based industrialist who didn’t wish to be named.

Reddy’s decisions on the industries and investment front also have the central government worried.

Following his June decision to renegotiate the Power Purchase Agreements (PPAs) made in the renewable energy sector, Union Minister of State for New and Renewable Energy R.K. Singh wrote to Reddy cautioning that it would be against law to cancel PPAs and “if contracts are not honoured, investments would stop coming in”.

Reddy alleged that tariffs were fixed inappropriately by Naidu at a steep price with private solar power firms resulting in huge losses for the state’s power distribution companies. Reports said global financiers in the clean energy sector have warned India of dragging AP to international arbitration if the issue is not resolved.

Union Jal Shakti Minister Gajendra Singh Shekhawat too had earlier expressed concerns over Reddy cancelling Polavaram project contracts to invite fresh bids.

“It is not for us to comment why some projects are moving away. We expect the government to bring out a friendly and streamlined industrial policy soon to instill confidence (among the local businessmen and foreign investors alike),” said Prakash Rao, president of the AP Chambers of Commerce and Industry Federation.

‘No one is going away’

Speaking to ThePrint, Rajat Bhargava, Principal Secretary, Industries, Infrastructure & Investment, Andhra Pradesh, sought to quash such apprehensions.

“No industry or investment is going away nor is the government against any company or group. We are in talks with the Adanis, Reliance etc. Even cancellation of Vizag land is not a decision against LuLu but the procedures adopted previously,” said Bhargava.

“There is a need to bring in transparency in the state’s industrial policy to make it corruption free,” the IAS officer said.

He said the Reddy government Friday notified the setting up of the AP maritime board for rapid development of the port sector and industrialisation all around. Bhargava added that Andhra Pradesh has also inked a preliminary deal with Veera Vahana Udyog to set up a Rs 1,000 crore electric bus manufacturing unit in Anantapuram district.