Hero MotoCorp to set up Rs 2,200 crore plant in AP, Karnataka loses battle

Two-wheeler giant Hero MotoCorp is likely to set up its manufacturing plant in Andhra Pradesh. The Andhra Pradesh government has rolled out a red carpet welcome by allotting 600 acres to the vehicle manufacturer.

The two-wheeler maker is expected to pump in Rs 2,200 crore in the green field manufacturing facility.

The move of the Andhra Pradesh government has seen as a major setback for Karnataka as the two-wheeler maker has first approached the Karnataka government to establish its production plant in Dharwad district.

Earlier the Karnataka government has cleared a land parcel of 500 acres besides extending several sops including the ones related to Value Added Tax (VAT) and stamp duty rebates on land transfer. But the Karnataka government’s incentives failed to attract Hero MotoCorp as Andhra Pradesh Chief Minister N Chandrababu Naidu, who is known as tech savvy, is understood to have wooed the two-wheeler maker with bumper discounts.

Even the newly created Telangana state and Tamil Nadu too have tried to attract investment from Hero MotoCorp, but Andhra Pradesh has succeeded in the race. As a first step, Naidu has cleared the land at Sri City Integrated Industrial Park in Chittoor district.

The decision was taken at the country’s first ever e-cabinet meeting held on Monday night by Naidu. Seen as an industry friendly chief minister, Naidu is leading the government of residual Andhra Pradesh, which was split into two states before recent elections as Telangana. The residual part of Andhra Pradesh is called as Seemandra, where Chittoor district housing Sri City Integrated Business Park is located.

According to sources, the Andhra Pradesh government plans to create direct job opportunities for 3,000 people and indirect employment opportunities for more than 4,000 through Hero MotoCorp’s investment.  The government is likely to extend concession including Central Sales Tax (CST) to Hero MotoCorp. The state government will pay CST for the investors as it would help to woo more major industrial investments. Besides, the AP government is also expected to offer 100 percent exemption on Value Added Tax (VAT). The two-wheeler maker will also get power subsidy and other incentives as available under the existing industrial policy, the sources added.

According to sources in Andhra Pradesh, this is the first major automotive investment attracted after the new government has been formed in residual Andhra Pradesh. Even the e-cabinet, in which the decision on Hero MotoCorp, that was convened on Monday, has attracted the attention of global industrialists. In the four-hour long paperless e-cabinet meeting, the ministers were allowed only to carry their i-Pads and not any files.

During his recent visit to Delhi, the sources said, chief minister N Chandrababu Naidu succeeded in convincing Hero MotoCorp’s top-rung officials to choose Andhra Pradesh as its manufacturing base for South India. The proposed plant is expected to have an annual production capacity of 1.8 million units.

The Hero MotoCorp project comes as a fillip in Andhra Pradesh’s endeavour to draw automakers to invest in the state. It may be recollected that Isuzu Motor India will commence production at its new plant at Sri City in Andhra Pradesh from 2016 with 70 percent localisation. The company has committed an investment of Rs 3,000 crore for the greenfield manufacturing facility.