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July 27, 2001
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AP sees red as global consultants fail to attract investment

George Iype in Hyderabad

Six international consultants hired by Andhra Pradesh Chief Minister N Chandrababu Naidu last year to boost investments in the state have failed to attract any major foreign companies to invest in the state.

Angry at the raw deal that the state has received at the hands of the prestigious global consultants, the Andhra Pradesh government has asked them either to explain their failure or pack up.

The consultants on Naidu's firing line are Ernst & Young, KPMG, PricewaterhouseCoopers, A F Ferguson & Co, Mega Ace Consultancy, and Alpic Finance.

It was at the chief minister's initiative that these global investment consultants were appointed to help the government shore up investment in various sectors.

Naidu had then claimed that their appointment was meant to ensure smooth flow of domestic and foreign investments into crucial sectors in Andhra Pradesh.

According to the Naidu government's brief to the consultants, Ernst & Young was to attract investments in agro-food processing and biotech, PricewaterhouseCoopers in mining, minerals, electronic hardware and telecom, KPMG in auto and auto components, AF Ferguson & Co in bulk pharmaceuticals, Mega Ace Consultancy in apparel, textiles and leather, and Alpic Finance in insurance and finance.

In the last one year, what these consultants have done is to submit detailed reports on how to lure investment to their respective sectors. But none of them has actually managed to bring the much-needed foreign investment to Andhra Pradesh, official sources said.

Officials said that the government has been paying Rs 50,000 to each consultant every month, apart from the reimbursement of actual expenses incurred by them.

As per the agreement, these consultants were to get one per cent of the effective investment into the state as incentive.

"We had assigned them the task of preparing suitable proposals to attract investment in seven key sectors. Their duty was to speed up the rate of investment to Andhra Pradesh so that we could overtake Tamil Nadu and Karnataka in terms of the total number of industries being set up," a senior state industry ministry official told

But he said the state government has not so far received any major companies to invest in Andhra Pradesh through the global consultants.

"It looks like we have simply wasted money and time on them," the official commented.

The official said that Chief Minister Naidu is very upset with the attitude of the consultants that he has pulled them up and asked them to explain why they have not been successful in their respective areas.

Ernst & Young, KPMG and A F Ferguson & Co are said to have complained to the Andhra Pradesh government that one of the reasons for their failure to attract investment was the excessive bureaucratic hassles that exist in the state administration.

Industry ministry officials, however, deny the allegation.

"The investment process in the state is simple and prompt. Our Centralised Documentation and Clearances Centre helps entrepreneurs and business houses to clear their investment proposals within seven days," a senior official pointed. The Centre has cleared nearly 2,000 investment proposals in the past four years, he stated.

"We made a mistake by hiring these prestigious consultants," he added.

Meanwhile, state government officials pointed out that the industries department of Andhra Pradesh recently managed to rope in two major projects to the state without any help from the consulting agencies.

The two projects are in the petroleum field. While the Indian Gasohol has submitted a proposal worth Rs 300 billion to set up a 25 million tonne capacity petroleum refinery project at Machilipatnam, the BPH Petro World has proposed to set up a Rs 100-billion refinery in the state.


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