SEZ – Farmers show the way…

Have you ever imagined what happens when farmers form a company?  That too developing a major real estate development project consisting of Residential, Commercial and Retail while taking care of the sanctity of a clean and green environment.

A look at the Magarpatta City on the outskirts of Pune will give you the answers to all above questions. The project stands out among many development projects which is revolutionary in its own way. The 400 Acre, Rs.5,000 crore Magarpatta City is now been looked after as a model to be followed by many others.

There have been diverse reactions to the introduction of SEZ’s over various parts of India including Mangalore. Nandigram in West Bengal saw violent protests against the acquisition of Agricultural land. In Mangalore, Land acquisition by ONGC promoted SEZ witnessed wider protests where as the land acquisition for the another SEZ located at Ganjimutt was smooth sailing for the Private operator.

Acquisition of agricultural land for Industry, infrastructure projects or urban residential complexes is nothing new. Usually the conversions happened at a fairly slow phase and in bits and pieces. In most of the cases farmers/villagers were not paid any significant amount and hardly any rehabilitation was undertaken. But thanks to the tantrums raised during the Narmada Bachao Andolan, centre has mooted a rehabilitation policy which is integrated to the land acquisition for the development projects.

Do farmers need to give up their land at petty prices to the SEZ developers or to big industrial houses that make a killing out of the land acquired by them? Not really, Magarpatta City – a sprawling 400 acre development at Pune is a superb model which is worth emulating in many parts including Mangalore. About 125 families had to stick together and pool their land which otherwise would have been sold to the real estate agents in scanty prices. The farmers formed a company for the purpose which was a significant shift form the existing co-operative structure which was famous among many in Maharastra. The farmers who were the stakeholders in the project have shares in proportion to their land holding. The farmers have reaped the benefits of forming a company and those who pooled the land are getting handsome rewards. Magarpatta City is the subject of discussions among various business schools for its unique model. (More details on Magarpatta City can be found on their website – magarpattacity.com).

There is another village which has followed the same model off late in Pune. A small industrial town which is only 20 km away from the proposed Rajgurunagar international airport has taken a new initiative along the lines of Magarpatta City. The farmers have come together to develop the area themselves as a SEZ instead someone coming and developing the area. In this way they will get all the benefits which usually go to the developer while they continue to possession of the land.

The most important factor which makes this development project a unique is, out of total 5202 acres of proposed project 2695 acres of land will be for irrigated farming while 2507 acres will be for SEZ which is currently rain fed. The farmers are planning to grow crops for export from this area while the SEZ will be given on lease basis for commercial and manufacturing units which want to set up shops. The project is commendable in many ways – considering the scale and level of skill requirements to develop a SEZ.

What is the Need of Hour and Options Available to the Farmers? The answer may not be simple. But I would say the following answers may not be wrong

1. Appropriate structures for the farmers to pool in their land resource
   
2. Visionary leadership skills

Equally significant is the change in the mind sets of the people towards industrialization and the way, in which people adapt, adjust and respond to the changes in forming the institutions/structures which will help them to realize their dreams. Leadership initiative plays a vital role in guiding the farmers in this respect.

Options available to the farmers:

1. Conversions of land use for commercial purpose (Mainly Rain fed) and pooling of land big enough to make the project economically viable
   
2. The company floated by the farmers can obtain finance by private placement or through debt. Eg: If a company formed by farmers (say for ITeS Real Estate Development Project) would like to raise some funds through private placement it makes more sense to place the shares to someone eventually become a anchor tenant or who has the expertise to do so.

Definitely we can see more company’s floated by farmers in the coming days in India including Mangalore provided farmers see the clear benefits associated.

* All the data provided is obtained from the public domain and considered to be accurate.

Rupesh Lobo, Currently working as a Corporate Finance Executive for Signature Asset Management Company Ltd in Dubai, United Arab Emirates. (). His interests are reading, travel and research. Rupesh has completed Masters in Business Administration with specialization in Finance.

Author: Rupesh Lobo- Dubai