The leftist misfit

In Buddhadeb Bhattacharjee, the progressive Chief Minister of WB, we get to see a helpless reformist that doesn’t enjoy the support of his party colleagues.

After Mamata Banerjee, the Trinamool Congress leader managed to stop work on Tata Nano project at Singur, now it’s the turn of real estate major DLF to push the CM with “act-fast-or-else-we-move-out” language. DLF has plans to develop 4840 acres at Dankuni, 20 kilometres from Kolkata at a cost of Rs.330 billion. It has paid Rs.2.7 billion to the state government as advance, but only 20 acres have been acquired so far.

Recently while meeting corporate leaders in WB, to a question on “government-sponsored bandhs” and “Opposition-sponsored bandhs,” the Chief Minister replies: “I do not support any bandh. I agree it is not helping anyone...But unfortunately as I belong to one party and they call a strike, I keep mum.”

Then he added, to loud applause: “But I have finally decided that next time I will open my mouth.” Woof! This is spunk.

Could this be the man the WB can afford to disgruntle? It’s difficult to make up our minds who has erred in this whole drama. Have the govt. acted in haste in allowing these industries to acquire farm lands of poor farmers? Have they not been offered the right prices? Have the jobs offered in these projects adequately compensated for the loss of farm income for those land owners? And finally, what else does Mamata want?

Buddha is too right to remain a leftist misfit. Mamata didi looks more left than right. She should join the Left and Buddha should leave WB and head for Gujarat, Maharashtra or other industry friendly states if he wishes to feel welcomed (Read “CPI(M) distances itself from Buddhadeb's remarks “ topic)

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Republic of SEZ?

Vinayak Chatterjee and his team sweat it out to bring up a status report on SEZs in Business Standard. Excerpts -

Bare facts : 207 zones spanning 26,825 hectares have been notified under SEZ Act, 2005. Another 246 zones spread over 30,900 hectares have been given formal approval and further 136 zones over 33,500 hectares have been accorded approval in-principle. Total area over 91,225 hectares - enough to comprise a mini Republic of SEZs with separate passports and visa requirements...? Might as well be.

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They also check some facts out -

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IT and BPOs at the forefront: accounting for 66 per cent by number, and about 15 per cent by area — of notified SEZs (excluding their share in multi-product/service zones. Implications for commercial real estate space outside SEZs?

Five coastal states Gujarat, Andhra Pradesh, Maharashtra, Karnataka, and Tamil Nadu, in that order hoard as much as 90 per cent of the total notified area. Gujarat and Andhra Pradesh, having the largest concentration of private ports hold over 60 per cent notified area. Development imbalance?

Applicant profiles indicate excessive non-manufacturing (white collar) job creation than blue collars. One of the main argument behind widespread displacement was the rationale that it will create significant job ops for both skilled and unskilled workers. Now that assumption gets beaten. Nearly 70 per cent of the direct employment created by exporting industry will be in ‘white-collar' services sectors. Specifically, the IT sector will account for nearly 5.5 million of the total employment across all notified SEZs.

Utility supports: Currently notified SEZs require more than 15,000 mw of power generation capacity, 2,500 million litres per day of water supplies, and logistical capacity to handle nearly 1 million TEUs of export traffic annually. Tough call given the precarious predicament of power sector now.

Cost-benefit debate: Notified SEZs project a pre-tax profitability of nearly Rs 2000 billion ($47 billion) annually. Nation to forego nearly Rs 660 billion ($15.53 billion) of yearly tax revenues (or Rs 440 billion if MAT is enforced). Further SEZ developers aim for tax benefits totalling to Rs 350 billion for their initiatives. So what could be the sacrificial lamb when so much of revenues are foregone? Something is gotta’ give!

Why not government go the UMPP model, taking upon SEZ development upon itself before letting it go private – just as they did for UMPP?

I see something else. IT companies coming into SEZ over time will be shrewd real estate managers. Later when their own outsourcing businesses face a downturn (India can’t be the world’s outsourcing hub forever), they can develop these large tracts of land and glistening towers and cash out handsomely. If you agree with me, Infosys at Rs.1900 and TCS at Rs.900 are pretty cheap buys now because they are a play on IT + precious real estate. Get nibbling them as they relocate (oops, sorry, they are not allowed to relocate existing units!) ....errr, when they start moving in, one by one, leaving a shell behind that is ready possession, plug and play…
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Asset base

You just need one puff on higher margins to get hooked. Then it becomes a habit that you can’t kick. Indian IT vendors like Infosys, TCS, Wipro, Satyam have all been addicted to this margin fixation.

Even stock markets gave them a higher PE multiple of 25-30x owing to their phenomenal growth fueled by these margins. Sustaining that growth seems a bit difficult since dollar depreciation, wage escalation and higher visa costs are taking a heavy toll.

If one goes by the acreage of real estate assets developed by these vendors during their growth years, the value of which is now many times over, they won’t lose too much sleep over stagnating margins.

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Between an SEZ here and an SEZ there…in China

When the people of Uttar Pradesh elected Mayawati’s BSP with a thumping majority (overthrowing Mulayam Singh’s Samajwadi Party), her first item in the agenda for governance was a given – review all SEZ cleared by the Mulayam Singh, the former Chief Minister of the State.

In one of its most significant decisions since assuming power, the Mayawati government in UP has announced its intention to refer the allotment of 1,200 acres of land to Reliance Anil Dhirubhai Ambani Group for setting up an SEZ, to the Union government for review.

I also had a lookback at Nandigram riots in West Bengal (over Tata's SEZ) where the Left rules – for several decades now.

I was reading Vinnie's post on instant Chinese cities (Thanks Vinnie, for the pointer) and felt a bit wistful. How long would it take for our people to learn from our enterprising neighbors?

Excerpts from NatGeo article -

“In 23 minutes, they designed an office, a hallway, and three living rooms for factory managers. On the top floor, the workers' dormitories required another 14 minutes. All told, they had mapped out a 21,500-square-foot (2,000 square meters) factory, from bottom to top, in one hour and four minutes. Boss Gao handed the scrap of paper to the contractor. The man asked when they wanted the estimate."How about this afternoon?"

The contractor looked at his watch.

It was 3:48 p.m.

"I can't do it that fast!"

"Well, then tell me early in the morning."

That’s how they do it in China. We bloody well understand and fast…

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