An Act to protect investors from political changes? All eyes on Andhra Pradesh’s ambitious Investment Protection Act

For investors committing thousands of crores to projects that may take years to take off, a change of government can bring more than a change in political leadership. It can mean uncertainty over incentives, approvals and policy commitments. Andhra Pradesh Chief Minister N. Chandrababu Naidu wants to address that concern with a proposed Investment Protection Act, seeking to make investment commitments binding beyond the tenure of the government that made them.

The announcement at the CII Partnership Summit in Visakhapatnam is part of a larger effort to position Andhra Pradesh as a state where investors can expect not just incentives and infrastructure, but policy continuity.

Chandrababu Naidu has announced plans to bring in an Investment Protection Act to safeguard investors against political vendetta, arbitrary decisions and policy reversals. The bill, which is in the final stages of preparation, will be brought in the Andhra Pradesh Assembly, most likely in the next session.

The proposal is aimed at addressing a longstanding concern among investors—what happens to their projects, incentives and approvals when governments change? Large industrial projects involve substantial capital commitments and take years to become operational. Companies need confidence that assurances given by one administration will not be withdrawn by its successor. “The state would prepare a Bill, pass it in the Assembly and send it to the Centre. The legislation is expected to provide a framework for protecting investments and ensuring continuity in government commitments,” Naidu said while speaking at the CII Partnership Summit in Visakhapatnam.

The proposal comes alongside another initiative, particularly an escrow mechanism for the timely payment of incentives to industries. Under the proposed arrangement, a portion of the state’s tax collections equivalent to incentives due would be transferred to an escrow account. This would allow companies to receive their dues without repeatedly approaching government departments or depending on individual interventions.

Andhra Pradesh is also considering a Speed of Doing Business Act to reduce administrative delays and make project implementation faster. For the TDP government under Naidu, the two-day CII summit was not to discuss the ease of doing business, but rather the speed of doing business.

The timing, apparently, assumes significance, with Andhra Pradesh attracting investment commitments worth ₹22.6 lakh crore since June 2024, of which projects worth ₹17.2 lakh crore have received approvals and work orders already. The challenge now is to translate these announcements into factories, jobs and economic activity.

However, several details of the proposed Investment Protection Act remain unclear. Sources say that the Act will cover land allotments, tax concessions, power subsidies and regulatory approvals to ensure that the existing investments are protected. However, it remains to be seen how a state law can prevent future governments from changing policies in response to economic or environmental considerations. The effectiveness of the legislation, again, will depend on its provisions, enforcement mechanisms and dispute resolution process. A law can provide continuity, but cannot remove every uncertainty associated with investment.

Despite this, the message from the two-day CII summit is clear, with the Naidu government committed to competing not merely through subsidies, ports and infrastructure, but also through policy stability. For Naidu, the real test will be whether the state’s investment promises can withstand not just bureaucratic delays, but changes in political leadership.