Mumbai: India’s Reliance Group, controlled by billionaire Mukesh D. Ambani, will invest Rs30,000 crore ($6.8 billion) on building a trade zone on the outskirts of the commercial hub of Mumbai.
The project, being set up as two adjacent special economic zones on more than 14,000 hectares, will not be part of Reliance Industries Ltd., said Dilip Chaware, spokesman for Navi Mumbai Special Economic Zone, part of the Reliance Group.
India has sought to emulate China’s success at building up its manufacturing sector by setting aside special economic zones to encourage investment. Companies are given tax and other incentives to set up facilities in the zones to provide jobs and boost economic growth.
“Although we call it a special economic zone, it is going to be a city,” Chaware told reporters in Mumbai on 19 February. The entire project combines the two adjacent zones of Mumbai and Navi Mumbai. “The project will be floated by companies that are part of the Reliance Group.”
Reliance Industries, India’s biggest company by market value, was downgraded by two of India’s biggest brokerages, including Motilal Oswal, rated the second-best local brokerage in 2006 by Asia Money polls, in November on concern about lack of information on new ventures.
The information addresses some analyst concerns that flagship Reliance Industries would invest in the project.
Clarity on Plans
“Reliance’s plans for the Mumbai special economic zone were not very clear late last year,” said Ballabh Modani, an analyst at Batlivala & Karani Securities Pvt. “The company has only recently confirmed that it will not be part of the project.” Batlivala & Karani has a “buy” rating on the stock.
Reliance Industries is building a similar-sized economic zone in north India. Mukesh Ambani wants to take advantage of the tax breaks offered by the Indian government to attract private funding for infrastructure.
The Mumbai Special Economic Zone, planned next to the Navi Mumbai zone, is expected to attract investments worth Rs3 trillion from industries including banking and finance, jewellery making units and biotechnology companies expected to set up businesses there, Chaware said.
Mukesh Ambani’s associate Anand Jain will be chairman of the two companies, Mumbai Integrated SEZ Ltd. and Navi Mumbai SEZ Pvt., formed to execute the project, Chaware said.
He declined to name the Reliance-owned companies that would be part of the project. The new city is expected to house 1 million people and create twice the number of jobs, he said.
Land for Zones
The group has been sanctioned 1,600 hectares of the 4,000 hectares needed for the Navi Mumbai Special Economic Zone. It is negotiating with farmers to acquire land for its adjacent 10,000-hectare Mumbai Special Economic Zone.
The project will need investments worth Rs30 billion for a port, Rs10 billion for building water systems, Rs50 billion for building a 2,000 megawatt power project.
Separate companies will be formed to fund each of the projects, Chaware said.
The Reliance Group has offered to buy land from farmers and landowners at Rs2.5 million a hectare, saying this is 10 times the compensation decided by the Indian government.
Farmers will also be given 12.5% of land in proportion to their original holding as part of the compensation, he said. Reliance has also offered to train and employ one person per household in the 45 villages from where land will be acquired.
The plans by Reliance and other companies will require the government to give its approval for the zones. The government was forced to delay approvals for the zones earlier this month after allies raised concerns on land acquisition and protests from farmers over inadequate compensation for acquired land.