Friday, February 17, 2006

SEZ Reliance...

Reliance is in the news over the past few weeks with its SEZ plan. So, whats an SEZ? Heres some simple information about what constitutes an SEZ. In India an SEZ could be like SEEPZ. Apart from SEEPZ, there are STPs (Software Technology Parks), EPZ (Export Processing Zones) Gems export Zones and other variants.

Very simply put, A Special Economic Zone (SEZ) is a geographical region that has economic laws different from a country's typical economic laws. Usually the goal is an increase in foreign investment. (wikipedia). One obvious benefit is the tax. SEZ offer tax holidays to companies housed in them. The other, less obvious benefit is that of captive infrastructure within an SEZ. In China, for instance, SEZs have been used to create an environment that is different from the rest of the country. Shenzen, which is Chinas most successful SEZ is a case in point.

Reliance itself has grand plans with its SEZs. Its new refinery at Jamnagar will be in an SEZ. But that apart, Reliance, being Reliance is not content with the SEZ being just an EZ. The way Reliance looks at it, their SEZ may actually be as big as a small city. The advantages are obvious. Better infrastructure, better power, transport and what not. What the software campuses did in a small scale, Reliance will probably do it over an entire city. Given the local talent pool in India and the daily commute, many would move to a Reliance SEZ (or any other SEZ) to live and work, given a good option. And for companies too, they neednt decide between Bangalore and no Bangalore or some broken down town that passes off as a city; they can move straight into Reliance city.

Here are some excerpts from a story (The Reliance redux) I found in the The Indian Express:

...Reliance entry will ensure that our 15-year plan to develop Maha Mumbai and Navi Mumbai SEZ will now shrink into a 4-year development programme,’’ says the original promoter of the project, Nikhil Gandhi...

...Reliance Haryana SEZ (Pvt) Ltd is looking at an investment of Rs 40,000 crore, and a site would be selected soon. Mukesh will set up some industries in the SEZ which includes his ‘baby’ bio-technology.

In Hyderabad too, Reliance has asked the state government to allot 25,000 acres of land near Shamshabad airport for developing an SEZ exclusively for petrochemicals...

The plans are ambitious, no doubt and I see no reason why they cannot do it. With RIL India could have its first "private city" pretty soon.

7 comments:

Aadisht Khanna said...

First private city in Modern India maybe. I guess you could call East-India-Company age Madras and Calcutta private cities.

I will be very interested to see how they finance the municipal services. If they have been designed from scratch rather than evolving ad hoc as they would in 'legacy' cities, it might cut costs substantially. The actual revenue raising might be through a much more rational system of user charges based on property instead of the hodgepodge of property tax and exemptions present in Delhi right now.

The other thing I'll want to see is how these SEZs/ cities evolve and grow in the long run- i.e., will they be able to expand and still be well run, or will they fall into the Chandigarh trap- designed so perfectly that expansion is impossible?

Neelakantan said...

Actually Jamshedpur to a great extent qualifies as a private city.

Expansion will be a toughie for these guys, since they operate on say 8000 hectares of land. I am not sure if expansion will be all that possible. But you are right, user charges et al will be interesting to see. But in any case it will be more efficient (I hope)

Aadisht Khanna said...

I had forgotten about Jamshedpur until after I commented.

I wonder if real estate development MoUs in India include options to develop neighbouring parcels of land. I think this is used in other countries to provide for expansion.

Neelakantan said...

The Bangalore Mysore freeway project planned got stuck on this fundamental point (courtesy Deve Gowda et al) and the SC judgement allowed work to proceed only sans the real estate option.

Politicians are too closely involved in real estate in India, especially good real estate - its easy if its rocky land in AP or coastal reclamation in Navi Mumbai. Otherwise real estate MoUs are a good way to ensure progress in infrastructure.

Anonymous said...

GOI is under the inflence of affluenet builder lobby. Reliance always managed to get tax free status for all its projects. When small businesses pay all taxes and get finance at 30% or so rate, promoting few families is scandalous.

r said...

how abou this?
http://www.frontlineonnet.com/stories/20060630003711300.htm

r said...

please note that this not about anti-globalization or anti-market, infact the issue here is the right of people to their land - basically, a capitalistic principle which was originally a part of our constitution but was withdrawn(the reason, originally was to deprive pre independence rajahs of teir land, but since then has been used against farmeres and tribals).