The SEZ Saga

What is this with India's leading conglomerates and the creation of Special Economic Zones? A week back, it was the Mukesh Ambani group-backed Mumbai Integrated SEZ that laid out its ambitious blueprint to build four cities, each of them spanning a third of Mumbai's size. And now, it is the Tata Group's THDC that has announced its foray under the Special Economic Zones umbrella.

Like every other thing that the Dhirubhai Ambani founded company has done in the past, Mukesh Ambani is betting big this time too. The initial investment outlay stands at Rs 25000 crores (in debt as well as equity), planned over a decade in Navi Mumbai and Maha Mumbai alone. The sheer magnitude of this investment betrays the seriousness and commitment behind Mukesh Ambani's ambitious plans.

The blueprint means four new mini-cities or large satellite townships with world-class infrastructure, built close to airports and national highways. Getting the buy-in from sponsors is relatively easier: the project is likely to witness potential investment of less than half the real estate costs of central business districts and upscale residential areas of other Indian metros. However, issues regarding land acquisition and infrastructure remain. The Reliance group has not yet managed to acquire the 25,000-acre land banks in the South or in the East.

The Reliance group has huge plans for the Navi and Maha Mumbai zones. It has already initiated talks for urban development planning and research with the Jurong Group of Singapore. The horizontal development — site development, common facilities and connectivity — will be conducted by the group's special purpose vehicles, while utilities like power, telecom, gas and water supply will be provided by group affiliates. The vertical development or built-up premises for offices and homes as well as social infrastructure will be either co-developed with third parties or completely handed over to outsiders. Targeted users will include manufacturing industries as well as services like warehousing, BPO and biotechnology.

It really surprises me as to how the Reliance group emerged with such a detailed plan in the design stage itself. Contrast this with the approach of one of the other large conglomerates. The Tata Group is looking to create several ‘mini Jamshedpurs’ across the country. However, the group does not seem to have identified any locations for these proposed townships. The overall idea, though, will be to maximise tax benefits available throughout these zones. So far, the group has received approval for a 3,500 acre SEZ in Gopalpur (Orissa), where Tata Steel had initially proposed to set up a 10-million-tonne steel plant, a proposal that was subsequently scrapped. Seems like opportunism?

Just a cursory glance at this does not reveal much but I have a feeling that this also betrays a fundamental difference between the two groups. The Mukesh Ambani-backed Reliance group is relying on FEW (4 proposed hubs) gigantic projects whereas the Tata Group, on the other hand, seems to be more risk averse, opting for MANY small projects instead. A risky business model pitted against a more diversified risk portfolio.

I am a big fan of the Tata Group personally, especially for the credibility they have built up in all these decades. However, just for the sheer audacity with which the Reliance group has dared to dream big and dream concrete, I am certainly not betting against Mukesh Ambani. Chiru seems to have a winner on hand this time around. :-(