Jagan govt trashes reports on Kia shifting plant from Andhra to Tamil Nadu

Report said Kia was considering relocating Andhra plant due to policy changes

Jagan Mohan Reddy AP CM Andhra Pradesh Chief Minister Jagan Mohan Reddy | Twitter handle of Andhra Pradesh Chief Minister

The Y.S. Jaganmohan Reddy government of Andhra Pradesh has denied reports that claimed South Korea's Kia Motors was in talks with to shift its plant from Andhra Pradesh to Tamil Nadu. "News report of Kia Motors shifting from Andhra Pradesh is not true. KIA and the state government are working together. We strongly condemn the news," said Rajath Bhargava, special chief secretary of Industries,  Investments and Commerce in Andhra Pradesh. 

The statement comes less than 24 hours after Reuters, citing a senior Tamil Nadu government official, reported that Kia was in talks to move out a $1.1-billion plant out of Andhra Pradesh, only months after it fully opened, due to policy changes last year. “(Kia) are facing problems (in Andhra Pradesh), they have been in preliminary negotiations with us ... There is a secretary-level meeting next week, we might have more clarity then,” Reuters reported citing the official. 

However, Kia had stated that it aims to utilise the full capacity of its Andhra plant “before considering further expansion”. “We do not have any plans to shift the manufacturing facility from the current location,” it said, without commenting on any policy concerns or talks with Tamil Nadu, which are at an early stage.

Reportedly, Kia is being represented by executives at its sister company Hyundai Motor, the Tamil Nadu official added. All of Hyundai's car production facilities in India are housed in Tamil Nadu. 

After the construction spanning more than two years, Kia inaugurated the plant in December last year.  It has an annual capacity of some 300,000 units and created 12,000 direct and indirect jobs.

Anti-investment policies

However, Kia was reportedly caught off guard in July after the new state government in Andhra mandated companies to reserve 75 per cent of all jobs for locals from the state, making it much harder for the company to find suitable employees.

The Jagan government, which was elected to power in May, 2019, has been in the limelight for reversing major business decisions taken by the previous Chandrababu Naidu government. He has been receiving flak for disengaging previous contractors and redrafting Naidu-era projects, thus hindering developmental work in the state, which is already handicapped by the loss of Hyderabad to Telangana. These include the reversal of  several development projects in Amaravati. Jagan administration has sought cancellation of 21 wind power purchase agreements with clients of Suzlon Energy and Axis Energy. Earlier the government scrapped Rs 3216 cr Polavaram hydel project deal and the Machilipatnam deep water port deal.

In November, the Gulf-based Lulu Group vowed not to invest in Andhra Pradesh again after the Jagan government cancelled the land allotted by the previous TDP government for setting up an international convention centre in Visakhapatnam.