Fibre Shift Aug2019

Attractiveness of Andhra Pradesh for Investment in Apparel Industry

Overview

Andhra Pradesh, the sunrise state is the eighth largest and rapidly urbanizing state of India. Situated on the southeastern coast with longest coastline of 974 km, the state has largest land bank among all states of India and has ample amount of water resources with four major rivers - Krishna, Godavari, Penna and Tungabhadra. The state is house to India’s 3rd largest seaport with an annual capacity of ~108 million tonnes, 6 airports and an excellent rail and road network.

The state has presence in the entire textile value chain starting from raw material to the manufacturing of apparel. Andhra Pradesh possesses a large raw material base and is one of the largest producer of cotton and the second largest producer of raw silk. Well-developed ginning and spinning facilities are spread across state that make it one of the leading producers of cotton (22 lakhs bales) with a 6 per cent share in total production of the country. West Godavari, Krishna, Guntur, Prakasam and Chittoor districts of Andhra Pradesh complete the rest of the value chain with presence of weaving, hosiery and spinning mills. Andhra Pradesh is home to over 150 spinning mills with combined capacity of ~3.6 million spindles. In addition to that, there are about 18,000 power looms.

The state has a strong raw material base and a well-established spinning industry. However, fabric and garment manufacturing industry are not developed at par with the spinning industry. The underdevelopment of these segments of the textile value chain can be attributed to the disproportionate exports of the yarn manufactured in the state. Some of the biggest manufacturers in the state include Shahi Exports, Texport Industries Pvt. Ltd., Gokaldas Exports Ltd., Page Industries, Loyal Textiles, NSL Textiles, Brandix, etc. The major manufacturing clusters in the state are in Anantapur, Chittoor, Prakasam, Guntur and Vishakhapatnam districts.

Andhra Pradesh

Some of the other factors that make Andhra Pradesh lucrative for textile and garment investments are as follows:
• The Government of India selected Andhra Pradesh as a model state for 24x7 power supply to industrial units.
• Andhra is well equipped in supplying manpower to the industry with 70% of the working population of the state ready to be employed. The government has set minimum wages for garment manufacturing industry at ~Rs. 6,300, which is one of the lowest compared to other states.
• Two of the three deep draft ports of the state, Vishakhapatnam and Gangavaram are around 40 km from the state’s major apparel manufacturing cluster.

State Government’s Initiative to boost the investment in Apparel Industry
Building upon the natural advantages of investing in Andhra Pradesh, the state government has recently launched a new policy called “Andhra Pradesh Textile, Apparel and Garments Policy 2018-23”. Under this policy, the government is offering various subsidies for textile and clothing industry, benefiting the entire value chain to attract potential investors. Apparel is one of the highly benefited category qualifying for various incentives such as capital subsidy, interest subvention, power subsidy, skill development support, wage subsidy, infrastructure support etc.

The policy has incentivized all scale of industries whether it is small, medium or large subjected to suitable financial caps. The amount of financial assistance under the policy varies depending on the investment size and is classified under three levels; Ultra Mega project, Mega project & Other projects.

Project Type Level of Investment or Employment Generated
Ultra Mega Project Rs. 500 Crores or 5,000 People
Mega Project Rs. 200 Crores or 2,000 People
Other Project Minimum 500 People

Incentives under Andhra Pradesh Textile, Apparel and Garments Policy 2018-23
Andhra Pradesh Incentives 1 Andhra Pradesh Incentives 2

Among the various incentives provided under the scheme, wage subsidy provided for workers stands out as the most attractive incentive under this scheme. Moreover, the 7 year interest subsidy could turn out to be game changer depending upon the size of the investment.

Policy Benefits for the Apparel Industry Investors
As per the benefits under the Andhra Pradesh Textile, Apparel and Garments Policy 2018-23, the below figures illustrate the incentives an investor will gain by establishing a garment unit with 500 sewing machines:

As per the above mentioned incentives, a 500 sewing machine garment factory may avail incentives of up to 65-70% of the total project cost over a course of 7 years.

policy benefits1 1

As per the above mentioned incentives, a 500 sewing machine garment factory may avail incentives of up to 65-70% of the total project cost over a course of 7 years.

policy benefits1 2
Note: The above subsidy calculation for garment factory has been done considering a standard garment business plan with industrial sewing machines such as juki sewing machine, brother sewing machine, etc.

Andhra Pradesh is all set both in terms of infrastructure and requisite resources to welcome the new investors. We, at Wastra believe that the state offers a win-win situation as for both the state and the investors. For the state, it is the opportunity to grow its economic status and for investors, it is the once in a lifetime opportunity to get maximum return on their investment while enjoying the availability of most of the factors required to achieve manufacturing excellence.

The article has been authored by Vijay Gupta, Associate Consultant and Priyam Pandit, Associate Consultant.