AP gives 10-year VAT waiver to Foxconn facility

Hastens plan to build worker colonies near the Sri City factory, for this and other manufacturers

The Andhra Pradesh government has extended a host of incentives, including a complete waiver of value added tax (VAT) for 10 years, for a mobile telephone manufacturing facility set up at Sri City in May last year by Foxconn, the Taiwanese multinational electronic contract manufacturing company.

Sri City is 575 km from here and about 70 km north of Chennai, just off National Highway 5. The company had said it would invest Rs 100 crore at this facility, to build a capacity to produce two million handsets a year and employ about 2,000 people, mostly women, by the end of 2015. It has already been producing a number of models for various mobile phone brands, including  Xiaomi.

In addition to the reimbursement of net VAT, the government has also given for 10 years a central sales tax waiver. And, promised to reimburse the cost of training and skill upgradation of the workers at Rs 10,000 an employee.

The capacity expansion seems faster than what was originally indicated to the government. "Already, we see 2,500 people working at the facility. The company has sought for an additional space three times bigger, in the form of a ready built factory, from the Sri City management. That work is also going on in full swing," sources told  Business Standard.

The company has established the factory in the name of Rising Star Mobiles India (P) Ltd.

With the rapid pace of hiring by the company, the state government recently directed officials to find land in the vicinity to build worker colonies. "As these young boys and girls come from different villages, some closer by and some far away from the factory, it has become a problem to maintain strict time schedules for the workers. Considering this issue, the government has decided to build multi-storied apartments for workers, especially to create a necessary ecosystem for the electronic manufacturing industries here," sources said.

PATH TO A BREATHER

• Foxconn facility at Sri City grows faster than anticipated
• Andhra Pradesh government initiates plans to build worker colonies near the factory after seeing massive hiring for the factory from nearby villages
• AP government gives complete VAT waiver besides CST waiver for 10 years.
• The government also offers Rs 10,000 per person to the company towards training and skill upgradation
• Started in May last year, the company has already sought a space three times bigger than the existing one to set up new assembly lines

The Andhra government has plans to create a large mobile phone manufacturing base, with multiple clusters, to enable making of up to 20 million handsets annually in a couple of years time. It recently inaugurated a separate mobile phone manufacturing cluster near the temple town of Tirupati, with four domestic manufacturers planning to launch operations at this location.