Back in the 19th century, when the country began to take its first steps towards industrialisation, a promoter company had to start from scratch, setting up not just the factories but what is today called the Rs.social infrastructure’. This included housing, schools, hospitals, shopping, basically all the elements for self-contained townships in remote locations to attract and retain talent.
Among such early townships were the erstwhile Tatanagar (now Jamshedpur in Jharkhand), Walchandnagar and Kirloskarwadi both in Maharashtra, followed by the steel townships set up by public sector units after Independence. Or those set up by the public sector oil companies, also after Independence.
The early industrial townships were private developments, built and maintained by the industrial house setting up its factory. Over time, they prospered and grew to become vibrant townships or stagnated, depending on the fortunes of the parent company.
Early in the New Year, the Maharashtra government announced its new Industrial Policy, parts of which seem to be a replay of that old trend. This refers specifically to the part in the policy allowing the creation of integrated industrial areas, or IIAs, in place of the proposed Special Economic Zones (SEZs). The idea, according to news reports quoting the state’s chief minister, Prithviraj Chavan, is to ensure that land locked up by SEZs is freed up for development
The move to introduce these changes in the SEZs was initiated in 2011 by the Pune-based Mahratta Chamber of Commerce Industries and Agriculture (MCCIA), an industry body, in its meeting with state industries minister, Narayan Rane.
The MCCIA’s director general, Anant Sardeshmukh, said, “We recommended that SEZs should be converted into integrated industrial areas, with townships and the social infrastructure needed to support it, in our meeting with Narayan Rane, the industries minister, back in August 2011. The SEZ idea had become unviable following changes in the tax regime. Moreover, the IIA proposed by the state government is aligned with the central government’s National Manufacturing and Investment Zones (NMIZs).”
The basis of the MCCIA’s initiative suggesting a change, was the central government’s plan to tax units located in the SEZ. Besides, the central government has also proposed the creation of National Manufacturing and Investment Zones (NIMZs) across the country and in August 2011, Baba Kalyani, chairman and managing director, Bharat Forge Ltd, a leading forgings manufacturer which is in the process of setting up a 4,500 ha SEZ in a joint venture with MIDC, the state’s nodal agency for industrialisation, in the Khed-Chakan area, was reported by The Economic Times newspaper as saying that these two measures, the tax and the NMIZs, would adversely impact SEZs.
Sardeshmukh maintained that this policy would free up land that was already acquired since the response of buyers for land in the SEZs was poor.
Again, taking the Bharat Forge-MIDC joint venture example, till August 2011, it had sold a single 12 acre plot of the 1,000 hectares it had acquired till then. It has subsequently acquired 1705 hectares, paying Rs.17 lakh/ha. While company officials remained unavailable, government sources indicated that this JV’s land holding could well be capped at 1705 ha. Industry believes that land holding is likely to be capped at whatever the developer already holds: there may be no further land acquisition.
There is another issue related to this change: the imminent Land Acquisition Bill slated to be introduced in the Budget session to replace the existing legislation, the Land Acquisition Act 1894. The Bill has recommended that if land is to be acquired in rural areas, the buyer will have to pay four times the state-recommended Ready Reckoner rates (and twice the Ready Reckoner rates in urban areas). This will effectively push further land acquisition off the radar.
The ready reckoner is a table used to calculate the market value of a property.
Under the SEZ policy, half the land was to be used for industrial units and the balance for housing, etc. Under the new policy, 60% of the land will be used for industry, 30% for housing and the balance 10% for commercial development. While industry has maintained that this is not a real estate play, environmentalists and activists stated that this is exactly what the SEZ policy aimed at doing.
The expectation is that the first of the conversions from SEZ to an integrated industrial area could take a couple of months. The SEZ developer will have to apply to the union commerce ministry’s Board of Approvals, which meets every month, regarding its intention to de-notify the SEZ part of the project. Once that clearance is in, it will need things like local building permissions.
The change in land use is expected to apply only to the large, multi-product SEZs which have already bought the land. The smaller IT SEZs, which were spread over 25 acres or the single product SEZ with 100 acres, are not likely to develop townships.
Rohit Gupta, associate director, agency leasing business and industrial services at Jones Lang La Salle India (JLL), a financial and professional services firm specialising in real estate services, noted that 15,000 hectares of land in Maharashtra is blocked due to SEZs. “The IIA provides an exit for 124 SEZs which have blocked land and of the total, 30% will be available for housing,” Gupta noted.
He further stated, “Maharashtra attracted the maximum number of applications for SEZs because the atmosphere in the state is conducive for investment. The integrated industrial area will provide a platform for withdrawal of 124 SEZs which have been struggling to take off and creates a platform for releasing land locked up in various parts of the state since 15,000 hectares of land is blocked by SEZs.”
After the initial euphoria from industry bodies and chambers of commerce, all appears quiet, an indication that serious work is on to implement the scheme.