Small landowners get govt nod to jointly develop special zones

Written by Arun S | New Delhi | Updated: Jan 31 2009, 05:39am hrs
Sezreport
Tough times call for innovative measures. At a time when funds for special economic zones (SEZ) are drying up and big companies are facing opposition while acquiring large tracts of contiguous land for such projects, the Centre has, for the first time, allowed small landholders to jointly develop an SEZ.

The IT SEZ, to come in Noida, has a lead developer (Wellgrow Infotech Pvt Ltd) owning 4 hectares, and three other small joint developers owning only a little over 2 hectares Vansh Software Developers Pvt Ltd (2.409 hectares), Panacea Townships Pvt Ltd (2.024 hectares) and Abloom Infotech Pvt Ltd (2.024 hectares)making the total size of the SEZ 10.457 hectares.

The commerce ministrys board of approval (BoA) has asked all the four developers to build on their respective plots of land as per the norms under the SEZ Act and Rules. The rider, however, is that to get the approval, separate plots of land owned by different parties should be contiguous and the total area must meet the minimum land area requirement of a particular type of SEZ. Each of the small landholders will also have to meet the stipulated minimum net worth requirements.

The approval for this SEZ project was given in accordance with the provisions of the SEZ Act and rules. We looked at the contiguity of the land and the net worth of the developers. Now each developer will be jointly and severally liable for developing the SEZ, an official told FE.

The move, leading to a paradigm shift in the manner in which SEZs are being developed, would result in the creation of several mini-SEZs within a big SEZ jointly developed by small landowners with holding of as little as 2 hectares who were often the main opposition to the land acquisition for such projects. It would also reduce risks involved in a single developer developing and marketing an SEZ.

Earlier, in most cases, the big players would arm twist or coax the small landholders to sell/transfer their land to them to build an SEZ. The big companies would then at the most make the small landholders co-developers by leasing out a portion of the total land to develop infrastructure for the SEZ. However, since co-developers have no free hold over the land, they have lesser status than a developer who can dictate terms to them as per the co-developer agreement.

But after the recent decision of the BoA, small landholders can hold on to the ownership title of their land and be joint developers of the SEZ. This would mean that there would be lesser incidents like that of Raigad and Singur, where the fight was about acquiring large tracts of land from many small landowners for industrial projects.

However, considering the complications involved in monitoring such an SEZ, the BoA decided that the entire SEZ will be a processing zone (where industrial units are located) and that it will now have any non-processing area housing social amenities.

Without this rider, each developer could have asked for a separate processing area and non-processing area for their part of the zone. This would have forced the government to appoint more customs field officers at each entry and exit point, resulting in a monitoring nightmare. But with the rider, there will now be only one exit and entry point.

It throws open tremendous opportunities for small landholders who can now share the risk of development and marketing of the SEZ with other joint developers, however big or small they are. I see that the BoA is keeping in mind today's economic environment and is progressively evolving the SEZ policy, said Tapan Sangal, senior manager, PricewaterhouseCoopers said.

Also, since there are more freeholders of the land, the value of each plot will be more than in the case where the plots are leased out, he said. However, the downside of such an approval is that the government authorities would have to now get involved in more paperwork and due diligence of each of the small players who want to be developers, an industry source said.