Mint Explainer | Why does Andhra Pradesh need an investment protection law?

The Andhra Pradesh government has announced that it will soon introduce a law to protect the interests of investors who set up business in the state. Mint explains the law, the rationale behind it and the benefits it is expected to offer

What is this law proposed by Andhra Pradesh?

Andhra Pradesh chief minister N. Chandrababu Naidu recently announced that the state will come out with a new law that will protect investors who invest in the state in a bid to address concerns about continuity of policies when there is a regime change.

The law, officials said, will ensure that any new government will honour commitments pertaining to allotment of land, the price at which the land and water are offered, fiscal and non-fiscal incentives and any other promised infrastructure. It will also ensure that permission and approvals once given cannot be subjected to harsher guidelines later by the new government.

Why is there a need for this law?

Politics in the state is virulent. In 2019, when the YSR Congress Party led by YS Jagan Mohan Reddy came to power, defeating Naidu’s Telugu Desam Party (TDP), it revoked many of the decisions of the earlier government, including the Amaravati capital project. Several power purchase agreements and infrastructure contracts were cancelled, and committed incentives were unpaid. This vitiated the investment climate of the state.

Though investors returned once Naidu came to power in 2024, the fear of continuity in policies remains. The need for a structured law that prioritises industry’s needs rather than depending on weakly worded existing laws was felt.

How has the state done on the investment front?

Over the last two years, the state—powered by a business-friendly government and very attractive incentives, has emerged as one of India’s most sought-after investment destinations. Since June 2024, it has received investment commitment worth ₹22.5 trillion. The recently concluded CII Partnership Summit saw another commitment worth ₹9.98 trillion, taking the total investment received to ₹32.5 trillion. This has the potential to create 2.5 million jobs.

When is the new law expected?

According to the state government officials, the bill is expected to be introduced in the next session of the Andhra Pradesh assembly. That will be followed by public consultations to fine-tune the law and take into account the interests of all stakeholders. Once the law is passed, it will be sent to the Union government for the presidential assent. Once it becomes operational, investor protection will get legal backing. Naidu hopes that this will erase all concerns the investors may have about continuity in policies if there is a regime change in the state.

Why is Naidu seeking a central law?

An investment protection Act at a national level, according to Naidu, will enhance India’s status as one of the most attractive investment destinations in the world. He expects such a law to lead to a massive surge in foreign investment into the country. There is another reason. Though not easy, the next government can revoke the state Act by passing another law in the Assembly and getting the presidential assent. A central law, on the other hand, will be binding on all states, and no state government can repeal it even if they have a brute majority.