Business Today

Are SEZs the future cities?

Sprawled across hundreds of acres, India's Special Economic Zones promise to become booming microcosms of industrial, commercial and residential complexes. Will these become our new cities?

By Shalini S. Dagar | Print Edition: August 26, 2007

The year: 2012; the time: 6.30 a.m. Radha, 35, a homemaker-cum-working woman gets up, cooks for the family, drops her children off at the neighbourhood school and then walks to office just 10 minutes away-all by 8.00 a.m. Her morning chores are a breeze. And why not? Pressurised water supply is available on tap, literally, 24x7; voltage fluctuation and load-shedding are words she hasn't used in half a decade; water-logged streets with rotting garbage are nightmares she has long forgotten; and grocery shopping, medical check-ups, and visits to the bank or the movie hall are not energy-sapping struggles any more. And best of all, everything is within walking distance.

Unitech Infospace Gurgaon: An artist's impression of how its IT SEZ may look
Is this a dream? You bet it is. It's a dream being sold by the private sector which is pitching for large-format Special Economic Zones (SEZs). And urban Indians won't mind lapping it up. After all, reality is much too stark. Waking up in the morning to dry taps is a fairly common experience for many urban Indians, as is the sight of overflowing garbage, waterlogged drains and streets, bumpy, potholed roads and senseless traffic. Indian cities have degenerated into "living hells" as Prime Minister Manmohan Singh puts it very aptly.

The reasons are well known. In-migration, well in excess of what the cities were planned to handle, is the main one. As a result, there is unbearable strain on urban infrastructure and services. Yet, despite their squalor, the cities hold the promise of livelihood. So, the pressure on Indian cities is only expected to aggravate as the country, and, indeed the world, hurtles towards rapid urbanisation.

According to 2001 census estimates, the level of urbanisation in India is likely to rise to 32 per cent (433 million urbanites in a total population of 1.34 billion) by 2021, up from 27.8 per cent in 2001. And the Eleventh Plan predicts that nearly 36.8 million additional people will move to urban areas in India during 2007-2012-that's 7-8 million people per annum.

So, what are the solutions? Regeneration of existing cities is one option that the government is exploring in a series of reform-linked funding measures through the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). Under this, it plans to spend nearly Rs 50,000 crore on infrastructure and service projects in 63 cities across the nation over seven years, starting 2005. "To some extent, JNNURM will put life back into our existing cities," says Kavas Kapadia, Professor and Head (Department of Urban Planning), School of Planning and Architecture, Delhi.

Yet another option that is available is fresh development-integrated townships-that avoid the mistakes of the past. In the post-Independence period, there are not too many examples of this sort of development, barring Chandigarh.

Now, with the opening up of the real estate sector to foreign direct investment (FDI) and the formulation of the SEZ policy, where nearly half the designated area can have supporting infrastructure, a new opportunity may be in the offing. "Perhaps, large SEZs will be the answer," says Rajeev Talwar, Group Executive Director, DLF, adding that these new mini-cities will ease the pressures on the existing urban centres as well.

The Big Ones

Of the SEZs that have in-principle approval, these are the biggest

 Developer Location Type Area (Hectares)
Reliance SEZ Maharashtra Multi-product 10,000
DLF UniversalGurgaon, HaryanaMulti-product  8,097
Omaxe Alwar, Rajasthan  Multi-product6,070.4
New Kolkata International Dev. Haldia, West Bengal Multi-product 5,000
Emaar MGF Gurgaon, Haryana Multi-product 4,000

Reliance's Haryana SEZ, which is one of the more ambitious SEZ projects, till date, is likely to cover an area of over 10,000 hectares. Its water requirements of 10 million litres per day and power requirements of 400 mw match those of any small city. The company is already tying up water and power supplies through arrangements with the local government or through captive production. Ditto for drainage, solid waste disposal and communications needs.

In that sense, SEZ projects will be unlike anything seen in Indian cities where infrastructure and services invariably follow urban growth. In creating infrastructure beforehand, they will be taking a leaf out of the books of the Chinese SEZs. Incidentally, despite JNNURM, no Indian city really offers scope for creating urban infrastructure on such a grand scale.

Ro Shroff, Principal, Callison Architecture, a us-based architecture firm that has designed a few SEZ projects in India, agrees that SEZs are, indeed, the future for a developing nation with a sizzling economy such as India. "Developers receive more latitude and flexibility not only in design and planning but also in the mix of products (they can offer). There are also greater incentives and fewer encumbrances than in a conventional development," he says.

But not everybody agrees with that. Part of the reason why many will demur is that many large SEZ proposals have a significant real estate component; this has led to allegations that the entire SEZ initiative is really a thinly-disguised land grab on a massive scale. However, that is an essential fallout of banking on the private sector to invest in infrastructure.

As Shroff points out, in China, where the SEZ concept first became enormously successful, it was the government that spent billions of dollars on infrastructure development in a few selected regions. This investment then culminated in highly developed areas like Shenzhen, which was transformed from a sleepy fishing village in 1982 to a bustling metropolis of 10 million people today.

In India, when these large SEZs come up, they will become world-class urban islands in a sea of poor or sub-optimal facilities. Then, as Kapadia rightly points out: "Large SEZs will upset the social fabric of the regions in which they come up."

Is there a way out then? Kapadia believes that the solution is to keep the SEZs small till they prove successful in India. He, for one, feels that the JNNURM offers more hope for urban India than SEZs.

Shenzhen SEZ: From a sleepy fishing village in 1982 to a bustling metropolis of 10 million people

Anuj Puri, Chairman and Country Head of real estate consultancy, Jones Lang Lasalle Meghraj, says that if the issue is viewed only through the prism of urban impact, then integrated townships that are coming up on the peripheries of smaller towns are more likely to have a greater impact than SEZs, where the tax incentives cloud the issue.

Fortunately it is not yet an "either-or" choice. Promod Mitroo, Director, Veolia Water India, points out that it could simultaneously be both-urban regeneration of existing cities can happen alongside the setting up of new urban settlements either as part of SEZs or otherwise. Veolia has been involved in improving water supplies in several Indian towns. On the JNNURM, he says: "It is a fantastic programme not just conceptually but in the manner in which it is being implemented."

Urban Indians, meanwhile, continue to live in hope as they steer past yet more piles of garbage on their daily commute to work.

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