The Hindu Business Line : `Land acquisition is a tough challenge in SEZ biz'

Mahindra & Mahindra recently inaugurated its fourth SEZ in Jaipur. Mr Arun Nanda, Executive Director, spoke to Business Line about the company's corporate social responsibility (CSR) that has led to its fourth SEZ in spite of the current controversy on the development of these zones.

How has the progress been to provide world-class business destination?

Our Chennai SEZ experience was a learning phase for us. The biggest satisfaction was that of bagging orders from top companies such as Infosys, Wipro, TVS and BMW. Infosys was able to start work in Chennai SEZ within 10 months of acquiring the land. Usually, it is not possible due to the regulatory issues within the country. We were able to hand over the land and due approvals taken from the Government at a macro level. Major clients such as Infosys and Wipro followed us to our world-class business destination in Jaipur even before the foundation stone was laid down; In Chennai, in the early days, communication to our site was a hindrance. On speaking to the State Government, we now have trains touching us every eight minutes! I think in today's IT industry, transporting people is the biggest challenge. We have now convinced the city bus service to run a service to the site. In the near future, we are going to provide housing, schools, hospitals and clubs at the site.

What has the learning curve been in Chennai?

First and foremost is land acquisition. It is a much tougher challenge than most people consider it to be. You have to take care of all the stakeholders. Secondly, the investment in infrastructure has to come upfront, because the customer wants to see the infrastructure. Most importantly, you need far deeper pockets than in real estate as in the real estate business once you have the land, the cash flow starts immediately. In this business, acquisition of the complete land is a must. One needs to put the complete infrastructure in place. It is a capital-intensive business. Everybody knows that it took us some time before Infosys signed on the dotted line. Situation has now changed as the trust factor continues to grow with us.

How did you demarcate the services (industries) with your respective business destinations in the country?

We identified the industries based on market research besides regulatory, market and land availability issues. Under the regulation, one needs a minimum of 1,000 hectares of land to get approval for a multi-product SEZ. For engineering SEZ, one needs 100 hectares but when you focus on IT and biotechnology one needs one million sq.ft. of space.

In Chennai, initially, we had 560 hectares and had to go for a product SEZ. In fact, we can take credit for the fact, that this concept of product-specific SEZs was developed by us during our consultation with the Government due to availability of land. There is always the issue, that if you want something to be successful, you have to be close to the city. And when you are close to the city, acquiring huge land masses is a difficulty in today's times, so that's why the product-specific SEZ. The biggest challenge is that of having contiguous land (complete land acquisition not leaving even an inch of land as otherwise the Customs Department won't notify the area as an economic zone).

Has the recent SEZ controversy, hampered your company's roadmap?

There have been some delays but no major problems as such. We are working pro-actively to see that we create an environment where everybody co-exists. The Chennai SEZ is quite irregular in shape but the reason we took up the project was with a social cause at the back of our minds; we have no intention to snatch away someone's home or agricultural land.

Is there any focus on expanding your operations on a global level?

We are looking at it but at a later stage, as it is important for us to do what lies in hand with us as of now.

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