Telangana state gets green light

Written by BV Mahalakshmi | Hyderabad | Updated: Aug 1 2013, 02:14am hrs
The Congress party on Tuesday finally bit the bullet on the Telangana issue with its highest decision-making body approving the idea of a separate Telangana state, after getting an endorsement from its political allies. The Congress Working Committee (CWC) in its resolution to the government, has proposed that Hyderabad would be the common capital for the two states for a period of 10 years after the formation of Telangana.

The decision to carve out Indias 29th state, while seen fraught with political risks for the Congress, has kept Andhra Pradeshs business community on tenterhooks and many say that investors would prefer to wait and watch, both in terms of fresh investment or expansion of existing projects. Already, the real estate sector in Hyderabad has felt the biggest impact of bifurcation demands with land prices remaining stagnant as transactions have dwindled, say realtors.

The decision to form a new state was not an easy decision, Congress general secretary Ajay Maken told reporters after the CWC meeting. He added that some of the essential demands such as sharing of river water, power distribution and safety of residents would be addressed.

Whether it is an amicable solution or an inevitable solution, the bifurcation is real for now. All that we need is an industry-friendly climate, said Srinivas Ayyadevara, president, Federation of Andhra Pradesh Chambers of Commerce (FAPCCI). There could be initial hiccups essentially the industries in the state are not politically inclined but depend on industry-friendly policies, bank loans and other tax incentives by which ever government comes, he said.

Hyderabad being made the common capital does not come as a surprise as it is one of the highest revenue generating districts of Andhra Pradesh. The BN Srikrishna report had said that 75% of the sales tax collected in the state comes from Hyderabad.

Professor Rajesh Chakrabarti, executive director, Bharti Institute of Public Policy, Indian School of Business (ISB), agrees that there will be initial nervousness post the bifurcation. It will be eventually Telugus versus Telugus. It depends on the sociology of both the places and all the investments which have happened in the state will not down shutters immediately, he said.

He explained that those businesses which depend on government funding such as tenders, etc. may have to find new homes depending on the region and wait for fresh investments.

Voicing a similar note on the economic impact, other industrialists of the state also say that there will not be major exodus. The IT industry in Andhra Pradesh, which stands fourth with exports and domestic revenues amounting to R52,000 crore last year, was not perturbed with the bifurcation of the state.

Many global and domestic companies such as Microsoft, Google, Yahoo, Facebook, Infotech, ADP Wilco, Broadridge, Oracle, Tech Mahindra and many more are only seeking industry-friendly climates, said Venugopal, director, STPI (Hyderabad). Till date, we have not seen any IT or ITeS companies shifting out of Hyderabad over the bifurcation issue, he said. However, since there is not much of expansion activity in areas such as Vijayawada and Tirupati, we are looking into possibilities of asking the existing IT companies to expand in these regions as well, he said.

According to a few political analysts, Telanganas future will be imbricated with the national elections. Andhra Pradesh has 42 parliamentary constituencies. According to the calculations, the Congress party has definitely worked out on a formula ahead of the elections. As per the plans, the actual formation of the state is expected to be completed by early next year.

The Cabinet will share its plans with the President and the Andhra Pradesh legislature will be asked for insights. The PM will then set up a committee to negotiate consensus between the leaders from the three regions of the state for issues on sharing of revenue and water. Both Houses of Parliament will have to then pass the resolution for the creation of a separate state.

The five-decade struggle for a Telangana state was forced in 2009 by the Telangana Rashtra Samithi (TRS), headed by K Chandrasekhara Rao. In response, in December 2009, the Centre said it was sanctioning statehood. But within days, the government backtracked which led to violent protests in the other two regions Coastal Andhra and Rayalaseema.

However, the only sector which is bound to have a sizeable impact is the real estate segment. One of the leading developers outside Hyderabad feel that the Telangana may erode business confidence amongst realtors. The real estate in Vizag, especially in the residential sector, is multiplying and so are the investments. It is just the right time to invest in property in Visakhapatnam as this is the upcoming IT hub on the east coast of the country, the realtor said.

In the last few months, land prices in Hyderabad have been stagnant as there have been not many transactions, say property dealers in the city. The city faces a hazy situation till the T-Bill is introduced in the Parliament. Following this confused mode, property dealers opine that the few companies which had entered into agreements are also going slow on the deal-making process. Both corporates and individual customers prefer to wait and watch the situation for some more time, said a city-based real estate dealer.