South Korean automaker Kia Motors decided to build its factory in Andhra Pradesh after Tamil Nadu politicians demanded bribes to let the company set up base in the state, a Chennai industrialist has alleged.

Kia Motors announced its $1.1 billion investment for a new factory in Anantapur district of Andhra Pradesh on April 27.

Two days later, Kannan Ramasamy, managing director at Infratech Infrastructure Services of Chennai, alleged in a Facebook post that Tamil Nadu politicians asked for "a very huge bribe" to let Kia Motors enter the state.

"As part of their local consultants, our team made a detailed study and recommended Tamil Nadu as first choice, Gujarat as the second choice and Sri City (AP) as third choice. They approached TN industries secretary and SIPCOT, and SIPCOT has enough lands to give at Oragadam complex."

"As part of their local consultants, our team made a detailed study and recommended Tamil Nadu as first choice, Gujarat as the second choice and Sri City (AP) as third choice. They approached TN industries secretary and SIPCOT, and SIPCOT has enough lands to give at Oragadam complex," he said.

A senior Tamil Nadu official, who had dealt with investors in the past, said the state tried to bring Kia but denied any knowledge of the bribery allegations.

"TN was willing to offer only those concessions that it could under its industrial policy," he said.

As any big new investor in the state would, Kia Motors demanded tax holiday, power tariff concessions and infrastructure such as roads, water, drainage, fast-track approvals, etc. for setting up the factory in SIPCOT, the industrial hotspot near Chennai.

"The TN politicians demanded 50% more than the official cost of the land as bribe," Ramasamy said in the post. "They wanted a very huge bribe for the same apart from the land."

The demand prompted Kia Motors to move its $1.1 billion investment to Andhra Pradesh, which offered sops and favourable conditions for the plant.

Andhra Pradesh has marketed itself as a dream investment destination with sops after the separate state of Telangana was carved out of it in 2014.

Many ancillary industries producing parts for the automaker would now align their investments in Anantapur.

"TN has not only lost the $1.1 billion from Kia but also the allied ancillary investments of more than the Kia figure," Ramasamy wrote.

The Kia plant will be up by late 2019. It will produce up to 300,000 vehicles a year, the company said in a statement last week.

Officials were in touch with Hyundai Motors, Kia's group company that has a plant at Sriperumbudur near Chennai. But Kia decided to go elsewhere apparently in a strategic move, the official said.

"Kia Motors was exploring a site in SIPCOT for its plant, but later said since Hyundai is already in Tamil Nadu, we would like to be somewhere else," Shilpa Prabhakar Satish, TN industrial guidance executive vice chairperson, told HT.

Chennai along with the industrial area of SIPCOT — short for State Industries Promotion Corporation of Tamil Nadu — is often referred to as the Detroit of South Asia, as automobile majors Mercedes-Benz, BMW, Hyundai, Renault-Nissan, Ford and Ashok Leyland have factories there.

But industrialists allege that the state is notorious for corruption. According to the NCAER State Investment Potential Index survey conducted by National Council of Applied Economic Research (NCAER), around 79.4% of investors surveyed listed corruption as a major concern while considering a state for investment.

Tamil Nadu topped the list as almost 71.8% of them said corruption is a "severe" problem in the state, while the rest listed it as "moderate".

The survey said 91% investors had no problem acquiring land in Andhra Pradesh; the figure was 71.8% for TN.

HT could not independently verify the Facebook post. Calls to Kannan Ramasamy and SIPCOT officials went unanswered.

(With inputs from KV Lakshmana, Chennai)