Company Out to Build City of 1 Million

FAIZABAD, India _ In this sleepy village two hours’ drive from New Delhi, water buffalo laze in the town pond and sari-clad women negotiate the rutted earth streets carrying on their heads metal trays stacked with cow dung patties, a local fuel.

But Faizabad _ like several dozen similar towns around it _ is about to get a remarkable makeover.

Reliance Industries Ltd., one of India’s largest private companies, is in the process of buying nearly 25,000 acres of wheat fields and small brick kilns around Faizabad with the intention of building a new Indian metropolis.

The planned city, 25 miles long and expected to draw a million residents within 10 years, will include a massive new duty-free industrial manufacturing zone, more than 2,000 acres of private housing, malls, schools, parks, hospitals, post offices, police stations, a PGA-caliber golf course, a monorail link to New Delhi, a huge Disney-style theme park, a massive power plant, an airport and much more _ all privately planned and built with private funding, company officials say.

Reliance’s main interest is developing an industrial park, in line with a national effort to create Chinese-style duty-free “special economic zones” capable of attracting new foreign investment, boosting exports and creating jobs. The company, which built its fortune with refineries and fiber optic cable, earned $2 billion in profit last year.

But in a nation where disastrous shortages of basic infrastructure _ roads, power, water, airport capacity _ are a major disincentive to investment, and where cities are struggling to find places to accommodate tens of millions of rural migrants, building a whole new city just seemed to make sense, Reliance officials said.

“Rather than asking the government to develop infrastructure for us, we are offering to develop it for them,” said Ajay Nijhawan, coordinator of the $25 billion project, which Reliance hopes will rival successful duty-free zones in Shanghai, Dubai, Hong Kong and Singapore.

Such an effort might be expected to upset Faizabad’s locals, who stand to see their wheat fields bulldozed into parking lots and shopping malls. Family attachments to land run deep in largely rural India, and government attempts to expropriate land for a similar industrial project in West Bengal state earlier this month left 14 dead after police opened fire on protesting farmers.

Faizabad’s farmers, however, smile when a Reliance vehicle pulls into town. Rather than confront protesters, the company has offered farmers $50,000 an acre for their land, about 10 times the land’s former value. That is $1 million for an average 20-acre rural plot.

“I’m very happy. I’m in favor of this,” said Ramesh Sharma, 43, whose family is worth $2.4 million after he and his two brothers turned over 48 acres to Reliance.

Using the cash, they have made huge investments in fixed-rate government bonds, bought 70 acres of land in a neighboring district, bought property in New Delhi and invested in two house plots and five stores in Jhajjar, a nearby town.

A brand new white Tata Safari SUV is now parked next to the family’s water buffalo pen, and a flashy green Suzuki Swift car sits by a pile of cut silage, sending neighborhood kids scattering in surprise when it’s car alarm _ an unusual noise in Faizabad _ goes off.

Even the poorest of Faizabad’s farmers believe they’re getting a good deal. Dayanand, 50, a subsistence farmer who goes by only one name, sold the three acres of land he farms with his two brothers for $150,000, enough to buy at least six acres elsewhere and a large truck to start a trucking business.

“If we waste this, things won’t be better. But I feel rich,” said the gap-toothed farmer, a smile crossing his deeply creased face.

In nearby Jhajjar, the close sizeable town to Faizabad, farmers who until recently owned only three sets of clothes went on a recent spending spree. But area officials say the region’s nouveau riche have for the most part shown signs of using their newfound wealth well.

In a nation where heavy farmer indebtedness has led to suicides, growers in the Jhajjar region have paid off their loans and are now attending investment seminars run by Reliance, the Haryana state government and local banks, which have gotten $34 million in new deposits in the past five months, Nijhawan said.

Most farmers have opted to spend their cash on new land elsewhere, start businesses or put the money in government securities which, at 10 percent interest a year, could give them an annual income 20 times higher than that they used to make farming.

“This is bringing farmers into the mainstream,” said Satyender Duhan, an earnest state official who is effectively the mayor of the Jhajjar region. “I’ll never claim that everybody’s happy, but the majority of people certainly are.”

The area has seen some protests over the project, led largely by political opposition figures looking to rally personal support _ some after selling their own land to the project, Duhan said. But an opposition movement has been hard to build in a region where farmers outside Reliance’s footprint are clamoring to be let in.

“It’s beyond their dreams what they are getting,” Duhan said of the farmers.

Critics of the Reliance project, and about 100 other, smaller planned special economic zones around the country, argue that such projects should be sited in the most remote, underdeveloped and unproductive regions of India, in an effort to spread the country’s growing wealth and protect its farmland.

Other critics, including Kashiram Rana, a member of parliament who is surveying farmers about the planned zones, say taking up agricultural land for industry represents a food security threat in a nation with 16 percent of the world’s population but only 2 percent of its land.

The country’s Ministry of Finance also is wary that the federal tax breaks offered such zones will cost the country $5 billion a year in potential tax revenue. The breaks include a 100 percent exemption on corporate income taxes over the first five years and a 50 percent break the second five years.

Haryana’s state government similarly has offered the Reliance project tax-free status in perpetuity and 1,500 acres of land in exchange for a 10-percent stake in the massive development. The state also will use its powers of eminent domain to forcibly buy land from holdouts if Reliance acquires at least 75 percent of what it needs from willing sellers.

But India’s Prime Minister Manmohan Singhhas insisted special economic zones are a key part of India’s drive to rapid industrialization, and the Ministry of Commerce says they could draw tens of billions in new investment and help create a half million new jobs.

Reliance officials admit that their planned city, which will run most of the way from Jhajjar to Gurgaon, a New Delhi suburb, is not exactly in a remote region and is still awaiting final federal approval.

But almost all the successful duty-free zones around the world have been sited within an hour’s drive of a major city, they argue, to take advantage of at least some existing infrastructure and to help them attract skilled manpower.

Reliance, though, plans to build plenty of its own attractions at its new, as-yet-unnamed city. Urban planners called in from China and Dubai are helping draw up plans for a community with green belts, top-notch hospitals intended to attract international medical tourists, broad-lawned residential subdivisions the firm hopes will be attractive to employees of top international companies, a massive power plant to generate consistent electricity _ a rarity in urban India _ and broad avenues capable of handling the country’s growing crush of cars.

Basic infrastructure alone will cost $5.6 billion, Reliance officials say.

The company has so far acquired about 40 percent of the land it needs for the project and hopes to start building within five years. It also has started providing supplemental teachers to public schools in Faizabad and other villages and is making plans for vocational training centers with the aim of preparing farm-village children for other kinds of work in the city that will soon engulf their homes.

“I don’t want my people being the coolies and (security) guards” in Reliance’s city, said Duhan, who grew up in the region and has pressed hard for training centers.

Farmers in Faizabad, though, say they believe industrialization is India’s future, and projects like Reliance’s will help many in the region as land values rise and job opportunities broaden.

“We’re happy. Before we didn’t have money, and I had four sons who did nothing,” said Mani Devi, 56, a Faizabad mother of five. “Now,” she said confidently, “Reliance will give them jobs.”

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(c) 2007, Chicago Tribune.

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PHOTOS (from MCT Photo Service, 202-383-6099): INDIA-BOOMTOWN

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