With a new policy in place, Andhra Pradesh can provide the much needed impetus to its electronics industry
Andhra Pradesh (AP) is home to more than 300 electronics hardware units that manufacture electronic boards and devices. In addition to the presence of large PSUs such as Electronics Corporation of India Ltd (ECIL), Bharat Electronics Ltd (BEL), Hindustan Aeronautics Ltd (HAL), Bharat Heavy Electricals Ltd (BHEL), etc, the state also has a number of testing and development facilities. Some of the key electronics markets in AP are located in Visakhapatnam, Hyderabad, Vijayawada, Samalkot, Kakinada and Anakapalle.
With India striving to make its electronics and hardware industry touch US$ 400 billion by 2020, this is a good time for the states to develop their manufacturing bases—something Andhra Pradesh is ready to do with its new Electronics Hardware Policy in place.
Andhra Pradesh was the first Indian state to announce and implement the Electronics Hardware Policy, which stated that all electronics hardware projects promoted by the government would source 20 per cent of the value of their requirements from small and medium enterprises (SMEs).
Government initiatives
The state government has been actively promoting its manufacturing sector by announcing several incentives and schemes to boost the industry. According to Venkat Vedire, vice president, sales and marketing, Nanobright Solar Technologies, with its newly announced state electronics policy, Andhra Pradesh will create a vibrant electronics manufacturing hub in the state.
To give a fresh impetus to building up the infrastructure required to turn AP into an electronics manufacturing hub, the state plans to convert the existing Fab City and Aeronautical SEZ into Centres of Excellence.
AP government has also planned to set up a 400 acre electronics hardware cluster in the Maheshwaram area, near the Fab City in Hyderabad. The proposal has been approved by the state’s Information Technology and Communications department, and is awaiting a nod from the Andhra Pradesh Industrial Infrastructure Corporation (APIIC).
With Central government assistance, the first Brownfield clusters will come up near Anantapur in Andhra Pradesh, where computer hardware products like desktops, laptops, notebooks, mobile handsets, liquid crystal displays, electronic components, semiconductors, and solidstate memory products will be manufactured.
AP government also plans to create a common fund under public-private participation to promote design, manufacturing, assembling and innovation, and a single window system will be set up for clearance of projects.
The government has also promised startups and micro enterprises a 10 per cent subsidy on capital equipment for technology upgradation, besides a 25 per cent subsidy on lease or rentals of up to Rs 0.5 million a year for three years.
Informs Rajiv Venkatraman, managing director, Precision Electronic Components Mfg Co, “The state policy is being tuned to set up new infrastructure and attract more companies. This would drive investments into the state. The policy has received positive response from the industry but there are some areas for improvement, such as the exit policy for labour, which associations in the state are planning to take up with the government.”
High growth areas
The state has good potential for the electronics companies. “Several verticals are growing fast in the state. There is also a good market for electronics in the solar and lighting industries for charge controllers, battery chargers, LED drivers, intelligent lighting control devices and remote monitoring units. The National Solar Mission has certainly fuelled the growth of these markets,” says Venkat Vedire.
Adds Vijay Kumar Gupta, managing director, Kwality Photonics P Ltd, “AP has evolved into a good base for the solar industry over the years. The state enjoys a good location with some major customers for the electronics industry present here, like DRDO.”
Besides a number of multinational companies based in AP, giants like Samsung, Hitachi, Huawei and Solartech of Taiwan have expressed interest in setting up manufacturing units in the state after the government announced a slew of measures to boost manufacturing.
Advantages offered
Once the clusters are ready, more than 90 per cent of the units are expected to shift their base to these clusters.
Says Vijay Kumar Gupta, “With the industrial cluster coming up, the electronics sector will benefit a lot. This is a step in the right direction.”
Excellent infrastructure, global connectivity through sea ports and airports, and availability of skilled manpower are some of the other advantages the state offers.
Adds Rajiv Venkatraman, “AP has the distinction of having industrial parks not too far from the main city, unlike other states where these parks are usually situated on the outskirts. Also, urban townships are located close to these parks; so the skilled manpower working there does not need to stay away from the main city.”
Challenges faced and some solutions
Acute shortage of power is a major problem faced by the electronics industry. This puts pressure on the profit margins as companies have to spend a huge amount on power backup systems. However, according to Rajiv Venkatraman, this problem is temporary and will get resolved in a year or so, with the government taking the necessary action.
Moreover, issues like custom clearance complexities and high cost of bank finance are a cause for concern, apart from the dependence on imports for components. “Many components are being imported from overseas, and the customs and excise duty on them make it very difficult to be competitive in the market. AP needs more local electronic component ancillary units that can support the growth of hardware industries,” says Venkat Vedire.
Despite the incentives announced by the AP government for the benefit of the electronics industry, experts suggest a few additional measures that will help the industry grow further. These include the incubation of design centres in premium engineering colleges; partnership between engineering colleges and industries to jointly develop products and solutions that address India’s needs; more financial incentives from the state and Central governments to manufacture components locally; strengthening focused electronics R&D centres in the government engineering colleges and institutions to foster product innovation; skills development; and establishing the required ecosystem to encourage more local electronic manufacturing units in the state.
By Nitasha Chawla
