SEZ - Special Economic Zone

Introduction

India - Emerging Market Heavyweight
TThe largest democracy with population in excess of 1 billion presents the world's biggest middle class consumer market of 300 million people. It has a vibrant manufacturing and service sector. The country provides highly skilled and costeffective workforce. The country with ready access to South-East Asia, East Asia, the Middle East and Africa provides good opportunities in infrastructure development.

India has progressively opened up the economy to effectively face new challenges and opportunities of the 21st Century. To compete in the global market the Government of India ("GoI") has liberalized export policies, licensing of technology and implemented tax reforms providing various incentives. As a result in 1999- 2000 exports rose to USD 38 million and FDI inflows to nearly USD 3.6 billion.

SEZ Policy - Towards Creation of Zones of Excellence
The Special Economic Zone ("SEZ") Policy, announced by GoI enables the creation of SEZs in the country, with a view to provide an internationally competitive and hassle-free environment for exports. These zones are designated duty-free enclaves, and are deemed foreign territories for the purpose of trade operations, duties and tariffs. The Policy offers several fiscal and regulatory incentives to developers of the SEZs as well as units within these zones. In addition to the incentives offered by the Central SEZ Policy, the Government of Maharashtra ("GoM") has announced a State SEZ Policy which offers several additional incentives to the units within these zones.

Details of SEZs Approved

Maharashtra - The Preferred Industrial Destination
Maharashtra, the leading state of India, is the economic powerhouse. It has more than 23,000 working factories and nearly 1 million factory workers with 94 major industrial estates. Its per capita gross output is 2.5 times the national average and per capita income is 55%, which is more than the national average. Maharashtra contributes upto 22% of country's net value added and 30% of software. Mumbai, the capital city of Maharashtra, is the commercial capital of the country. It houses two largest stock markets of the country and 70% of all stock market transactions take place in Mumbai.

During the last decade Maharashtra received investment worth Rs. 1,686 billion (around USD 33 billion) and 392 foreign direct investment proposals worth Rs 94.6 billion (around USD 2 billion) UK, Italy, France, Germany and Mauritius are major investors in the state. Infrastructure, auto components, engineering, chemicals, rubber, petroleum, software etc are the sectors in which FDI is concentrated. Maharashtra has the highest rate of implementation of investment projects at 48%. Maharashtra has country's highest power capacity of 14,000 MW. Maharashtra is the first state to formulate a specific policy for the development of SEZs.

Navi Mumbai - SEZ
Powerhouse of Economic Activity
One of the largest SEZs in India is being set-up in Navi Mumbai ("New Bombay") Maharashtra. City & Industrial Development Corporation of Maharashtra ("CIDCO") - a company entirely owned by the GoM - is the nodal agency for the development of the SEZ. Significant progress has already been made. CIDCO has the SEZ land in its possession, and has already obtained all necessary approvals from the State and Central Governments. An Ernst &Young (formerly Arthur Andersen) led consortium - has prepared the business plan for the project. McClier of US a world renowned architectural and master planning firm has prepared the concept plan and has commenced the master planning excercise for the SEZ.

Strategic Location
The Navi Mumbai SEZ (NMSEZ) is spread over an area of around 50 square kilometers. NMSEZ has inherent locational advantages on account of its proximity to Mumbai - India's financial and commercial capital. The SEZ has access to well-developed road and rail linkages as well as one of India's largest and most modern seaport - Jawaharlal Nehru Port Trust ("JNPT"). The zone is also located in close proximity to other large industrial areas, providing access to several feeder industries. Further, its location on the Pune-Mumbai-Thane knowledge corridor provides it with instant access to skilled manpower in the region.

State-of-the-Art Infrastructure
Units within the SEZ would have access to worldclass infrastructure and services. Units can choose between land plots, flatted factories and built-up office space. These facilities would be ready-to-use with all basic infrastructure and services in place. Other infrastructure in terms of convention centres, recreational facilities and social amenities are also proposed. The NMSEZ project is proposed to be executed through a Special Purpose Vehicle ("SPV"). CIDCO proposes to transfer land development rights and existing infrastructure in the SEZ area to the SPV. CIDCO proposes to develop the project jointly with strategic partners who could assist CIDCO in the planning, development and marketing of the SEZ to potential tenants. CIDCO also proposes to offer management control and majority equity stake (51-74%) in the SPV to the strategic partner(s).

Scalable Development Plan
The total area available for development of NMSEZ is around 4,377 hectares (ha) (including 1,850 ha of regional park zone). The capital cost of the entire project is estimated at Rs 26 billion (around USD 520 million). CIDCO envisages a scalable development plan wherein the project can be developed in viable phases to optimise the project returns.

CIDCO is currently in the process of determining the optimum development phasing plan. CIDCO proposes to finalise the development phasing plan in consultation with the prospective strategic investors. CIDCO proposes to transfer land development rights in a phased manner (in accordance with the development phasing plan) which will be linked to achievement of agreed upon development milestones.

Government of Maharashtra Support
The project enjoys full support from Government of Maharashtra ("GoM"). The following initiatives have been taken by the state government to kick start the project and position NMSEZ as the leading SEZ in the country.

	Appointment of CIDCO as the nodal agency for development of the project.
	Set up regulatory framework to promote development of SEZs in the state.
	Setting up of a high level committee headed by the Chief Secretary to expedite the JV partner selection process.

CIDCO as co-promoter
CIDCO's presence as a co-promoter to the project would provide NMSEZ with an existing administrative setup that would help implement the project effectively, as well as provide easy access to a quasi-government body that would facilitate the interaction between NMSEZ and the GoM.

Special Economic
Zone Policy

As part of its continuing commitment to liberalisation, GoI has, over the last decade, adopted a multi-pronged approach to promotion of foreign investment in India. The SEZ policy introduced in the Export-Import ("EXIM") Policy effective April 1, 2000, is the GoI's most aggressive and far-reaching initiative to date aimed at attracting foreign investment to India. The Policy enables the creation of SEZs in the country with a view to provide an internationally competitive and hassle-free environment for exports. Several incentives have been offered under the policy to industrial units that are likely to be set-up in the SEZs as well as the developers of such SEZs.

The SEZ Policy - Towards hassle free business opportunities
SEZs are defined as 'delineated duty-free enclaves and are deemed foreign territories for the purposes of trade operations, duties and tariffs'. An SEZ may be set-up in the public, private, or joint sector and/or by a state government, subject to compliance with the Policy and guidelines issued by the Ministry of Commerce ("MoC"). The policy requires the minimum size of an SEZ to be 1000 hectares.

Within these zones, units may be set-up for the manufacture of goods, provisioning of services, and other activities including processing, assembling, trading, repairing, reconditioning, making of gold/silver, platinum jewellery etc. The Policy allows 100 per cent foreign direct investment ("FDI") in most manufacturing activities. The government is also looking at removing sectoral FDI caps in all sectors for units located in SEZs.

In order to ensure that the SEZs lead to an improvement in India's competitiveness and export potential, the government has laid down certain nominal qualifying conditions for units within an SEZ.

Every unit in an SEZ is required to make a minimum investment of Rs 5 million (around USD 100,000) towards plant & machinery

Units within SEZs are required to be net foreign exchange earners, cumulatively in the first five years of operation. However, no minimum net foreign exchange earning or export performance requirement has been laid down.

Trading units within SEZs are required to ensure a turnover of at least USD 1 million within five years from commencement of operation.

The SEZ Policy allows unlimited access to the Domestic Tariff Area ("DTA"). In addition to the unlimited access, the Policy allows units within SEZs to undertake jobwork for the DTA, without payment of any duty, as well as for temporary removal of goods into the DTA or to other SEZs/ STPs/ EOU zones. However, access to the DTA, is subject to the following:

•	Access to DTA would be subject to achievement of positive foreign exchange earning and on full payment of customs duties.
•	Trading units within SEZs are not permitted to sell goods in the DTA.
•	SEZ units will need to maintain year-wise accounts of all sales in the DTA.

Units that are setup within these zones are entitled to import all types of goods that are required for operations, including capital goods, whether new or second hand, (except those prohibited under the Policy), without payment of any duties. In addition, the Policy allows interunit transfer of goods between SEZs, without any customs scrutiny. Further, duty remission will be available on destruction of goods within the SEZs. Units have also been permitted to dispose obsolete goods on payment of the applicable customs duties.

In order to encourage development and supply of specialised services and components, the Policy allows manufacturers and service providers who contribute to exports indirectly, through supply to export-based units, to locate their units within the SEZ area. Further, individual non-exporters can also enjoy SEZ benefits provided their entire production is channelised towards the manufacture of items that will be exported. However, their entire production needs to be consumed within the SEZ zones.

Further, units within the SEZs have been allowed to pay for all their transactions, including payments for inter-unit transactions and suppliers, in dollars, except for domestic expenses like salaries.

The GoI in its EXIM policy 2002-2007 has permitted the setting up of Overseas Banking Units ("OBU") in the SEZ. OBUs are exempted from CRR and SLR norms laid down by the Reserve Bank of India (RBI). This would allow units and developers to raise cheaper capital from the international market. In addition units in the SEZ's are permitted to undertake hedging of commodity price risks. SEZ units are exempted from External Commercial Borrowing (ECB) restrictions as laid down by the RBI.

The SEZ policy is GoI's most significant thrust towards achieving export competitiveness and attracting significant FDI investments, and provides several additional incentives in comparison to similar schemes in the past.

These incentives have been listed below:

Benefits to units

Tenants within the SEZs can procure goods required for setting up of units, from domestic or foreign markets, without payment of any customs/import duties.

No requirement of minimum net foreign exchange earning, as percentage of exports.

SEZ units to have unrestricted access to the domestic markets, on payment of applicable taxes/duties.

Duty-free material is permitted to be utilised over a period of five years, unlike EOU/EPZ schemes where the period is limited to one year.
Reservation policies for Small-scale Industries ("SSIs") would not be applicable within the SEZ zones, enabling units within the SEZ to engage in industries that have traditionally been reserved for SSIs.
Profits from operations within the SEZ zones can be repatriated freely, without any dividend balancing requirements.
The SEZs would have a simplified monitoring and administrative setup

• All activities of SEZ units shall be through self-certification procedures.

• Central authority for approvals/ performance of units within the SEZs will vest with the Development Commissioner (DC) of the SEZ..

• DC to have the administrative control of the SEZ. All imports allowed on the basis of self-certification. No routine examination of export and import cargo by the customs department.

Sub-contracting of part of production abroad permitted, subject to certain conditions and restrictions.

100 per cent FDI to be allowed under the automatic route in the manufacturing sector. The GoI is also looking at removal of sectoral caps for FDI investments in other sectors.

100 per cent of export earnings can be retained in the Exchange Earners Foreign Currency ("EEFC") accounts. Such export proceeds can be brought back into the country within a period of 365 days.

100 per cent of foreign exchange receipts from customers can be retained in the form of credit.

However, units will need to maintain year-wise accounts on forex inflow by way of exports and other receipts and all forex outflow on account of payment of dividend, royalty, fees,etc.

Benefits to developers

Developers of SEZs will be granted full autonomy to develop townships within SEZs. Allocation and pricing of land, facilities and services in SEZs are not governed by existing regulations.

Goods or services required by developers for the development of the zone can be procured from the DTA, without payment of any duty. Specified goods could also be imported at concessional rates of duty.

SEZ developers would be accorded infrastructure status, and thereby entitled to claim all concessions and incentives available to infrastructure players, under the Income Tax Act.

In order to improve the attractiveness of Maharashtra-based SEZs, GoM is committed to provide several incentives to potential investors and tenants. A comprehensive list of incentives available under Maharashtra's SEZ Policy is provided in the state SEZ policy.

The Key Policy measures have been summarised below:

Developers of SEZs as well as all industrial units within the SEZs would be exempt from all state and local taxes including Sales Tax, Purchase Tax, Octroi, Cess. etc, in respect of all transactions made by such parties.

In certain cases, exemption from state taxes might not be possible due to implementation constraints.

Units located in the SEZ's are exempted from payment of Stamp Duty and Registration Fees till 31st March, 2006.

Exemption of electricity duty for a period of 10 years (in the case of Navi Mumbai SEZ).

State policy allows Independent Power Producers ("IPPs") to be established within the SEZ, establish dedicated provision of power to the SEZ including generation, transmission and distribution, besides fixing tariffs for the zone. Such IPPs are permitted to establish grid connectivity in case of standby arrangements, subject to their entering into a separate agreement with Maharashtra State Electricity Board on mutually agreeable terms.

Within SEZs, where IPPs are not established, units are permitted to establish captive power plants.

Greater procedural flexibility to units within the SEZ.

• Single-window clearance to be providedto units within the SEZs for various approvals/clearances required from the GoM.

• All clearances required from the Maharashtra Pollution Control Board, to be granted by the Empowered Officer of the Board working under the administrative supervision & control of the designated DC of the SEZ.

• State Government's powers to accord environmental clearances to be vested with the DC.

• Prior permission of the DC required for the conduct of inspections by state agencies.

• GoM will take appropriate steps to declare SEZs as Industrial Townships to enable the SEZs to function as self-governing, autonomous municipal bodies.

Powers of the Labour Commissioner, GoM, have been delegated to the designated DC.

All industrial units and other establishments in the SEZs have been declared as 'Public Utility Services' under the provisions of the Industrial Disputes Act-19.

Navi Mumbai -
City of the 21st Century

Navi Mumbai is a modern township spread over an area of around 350 sq. km., and been planned, designed and developed by CIDCO. CIDCO has developed high-quality infrastructure facilities in the Navi Mumbai area including housing complexes, industrial infrastructure, business districts, road & railway linkages, educational and recreational facilities, etc.

The township has been developed as a series of nodes with high-quality housing infrastructure available at most nodes. Further, social infrastructure for the township has also been developed in terms of hospitals (2200 beds capacity), gardens (175 nos.), community centres (20 nos.) and over 80 playgrounds. Other infrastructure like fire stations, police stations, etc. is also in place.

Navi Mumbai is well connected to Mumbai both by wide roads and mass rapid rail systems. Travel time from Mumbai's central business district at south Mumbai varies from 45 minutes (water transport) to 60 minutes (road/rail transport). India's busiest domestic and international airport Chatrapati Shivaji International Airport - is just 90 minute drive from Navi Mumbai.

The township is also well connected to other parts of the state through railway and road networks. In terms of rail infrastructure, Navi Mumbai has six rail corridors and an independent mainline rail terminal connecting the city directly to other parts of the country. Several national and state highways pass through the township. India's first expressway - the Mumbai-Pune Expressway as well as the Konkan Railway, that connects Central India to North Karnataka and Goa, passes through Navi Mumbai. These linkages enable ready access to other industrial areas in Pune, Thane, Vapi, Nagothane, Kalyan, Bhiwandi, Nashik, Dombivili, Ambernath, Rasayani and others. In terms of sea linkages, Navi Mumbai has access to one of India's largest seaports - JNPT that lies within the boundary of Navi Mumbai.

In addition to the existing infrastructure, several new projects are on the anvil. These include a proposed new international airport, which is to be located at Navi Mumbai (estimated project cost around USD 2 billion). The airport has already been approved by the State Government and is in advanced stages with respect to Central Government approval. Other proposals include the proposed sea-link between Mumbai and Navi Mumbai which will land in the SEZ (estimated project cost around USD 1.5 billion).

The development of these planned facilities is likely to be accelerated on account of demand generated due to the SEZ Project as well as fiscal incentives offered by the State Government.

The township has adequate power and water facilities. The total installed power generation capacity in Navi Mumbai is around 960 MVA with a planned capacity of over 1500 MVA by 2010. There is adequate water supply for the region as well. CIDCO has developed its own dams in the area - with an existing capacity of 150 MLD and a planned capacity of around 465 MLD by 2005.

In terms of living standards, Navi Mumbai scores over Mumbai on account of the low level pollution, de congested residential areas and high proportion of open spaces and green belts. In comparison to Mumbai, the township has significantly lower living costs, owing mainly to the optimal land and infrastructure costs.

Currently, Navi Mumbai has a population of around 1.2 million people, which is projected to reach 2 million by 2008.

NMSEZ is spread over an area of approximately 4,377 hectares (around 44 square kilometres), and comprises of four zones, Dronagiri, Kalamboli, Ulwe and the regional park zone (RPZ) of 1,850 ha. In addition, 300 hectares of land adjacent to the port is proposed to be contributed by JNPT. CIDCO has already acquired the land in the zones of Dronagiri, Kalamboli and Ulwe. Land in the RPZ area has not been acquired.

NMSEZ is the only new SEZ in India where the land (except the RPZ area) is in possession of the project sponsor. This significantly reduces the possiblity of any regulatory delays on account of land transfer and improves time to market for the SEZ.

Certain zones in the SEZ area like Dronagiri and Kalamboli have been partially developed. The existing development includes basic infrastructure such as access roads, master water supply and sewerage network, and a few commercial and residential complexes. However, no development has commenced in the Ulwe zone. The RPZ is proposed as a green belt and no industrial activity is envisaged in this zone. This zone could be utilised for recreational activities and proposed infrastructure in the zone includes a club house, golf course and other recreational facilities amenities.

NMSEZ - Best positioned
SEZ in India

An analysis of NMSEZ's strengths and the available opportunities brings out the attractiveness of NMSEZ as an investment destination for potential tenants and investors. The analysis has been conducted by the Ernst & Young led consortium on the basis of factor considerations (availability of raw material, labour, infrastructure, policy incentives, and competition from international and local SEZs, etc.

Strengths

Infrastructure
Proximity to international and domestic transportation infrastructure.

JNPT, which is adjacent to NMSEZ, is India's largest and most modern seaport providing necessary linkages to the international markets. Further, the SEZ is in proximity to Mumbai Port, which is also a major port in the country.

Chhatrapati Shivaji International Airport at Sahar, is 60/90 minute away. Further, the second Mumbai International Airport is planned to be set up by 2010, which will give a boost to air-cargo-linked industries.

Well-connected road and rail linkages - National Highways (NH3, 4, 8, 9 & 17) link the area to the rest of the country.

Water transport, linking south Mumbai to NMSEZ is expected to boost accessibility to the area.

With convenient rail, sea, road and air linkages, NMSEZ is best placed to create a world-class trans-shipment hub in Navi Mumbai. This would divert a lot of existing traffic from Mumbai and nearby areas to the SEZ, increasing avenues to earn additional revenues.

Proximity to Mumbai and Navi Mumbai

Proximity to international and domestic transportation infrastructure.

Jawaharlal Nehru Port, which is adjacent to NMSEZ, is an efficient container port providing necessary linkages to the international markets. Further, the SEZ is in proximity to Mumbai Port, the largest port facility in the country.

Chhatrapati Shivaji International Airport at Sahar, is 60/90 minute away. Further, the Navi Mumbai International Airport is expected to be set up by 2007-08, which will give a boost to air-cargo-linked industries.

Well-connected road and rail linkages - National Highways (NH3, 4, 8, 9 & 17) link the area to the rest of the country.

Water transport, linking south Mumbai to NMSEZ is expected to boost accessibility to the area.

Proximity to Mumbai and Navi Mumbai

Access to trading centres - Mumbai is a regional and national trading centre for many products (e.g. gems and jewellery).

Access to cheap and skilled manpower- Navi Mumbai is located on the Pune- Mumbai-Thane knowledge corridor, and has access to skilled manpower from reputed national and international educational institutes including engineering and technical colleges, management institutes, etc. Further labour costs in the region are significantly lower than those in other developed countries, thereby providing outsourcing opportunities.

Access to social infrastructure - CIDCO has developed the residential areas in Navi Mumbai and Belapur region. These residential units are ready for occupation.

Access to huge urban markets - Mumbai, Navi Mumbai and Pune, with a population base of approximately 15 million are within the catchment area of the SEZ.

Access to finance - NMSEZ's proximity to Mumbai, the commercial centre and financial capital of the country, will provide unlimited access to capital, for the units located in NMSEZ.

Infrastructure availability

The Navi Mumbai region has adequate power generation capacity.

Water from CIDCO's own dams is available in plenty.

Internal infrastructure such as water supply pipelines and internal roads, etc., has already been developed within Dronagiri zone.

Existence of international and national transport infrastructure along with the significant internal infrastructure that is already developed provides a head-start to NMSEZ as compared to other local SEZs.

CIDCO as co-promoter
CIDCO is a premier town planning & development agency in India, and has established itself as an excellent infrastructure provider over the years. CIDCO has been instrumental in the development of Navi Mumbai. CIDCO is a special planning authority for a number of other urban areas in Maharashtra.

Due to its long-standing experience in township development and the success of the Navi Mumbai township project, CIDCO has been invited by several other Indian states to provide consultancy services on city/township development.

Due to its expertise in town planning as well as its success in Navi Mumbai, GoI has appointed CIDCO as the nodal agency for the planning, development and marketing of NMSEZ.

CIDCO's presence as a co-promoter to the project would provide NMSEZ with an existing administrative setup that would help implement the project effectively, as well as provide easy access to a quasi-government body that would facilitate the interaction between NMSEZ and the GoM.

Proximity to other industrial areas
Proximity to well-developed industrial areas such as Ambernath, Belapur, Dombivli, Kalyan, Nasik, Nagothane, Pune, Thane, Taloja, etc., provide excellent linkages with support industries and suppliers of intermediates, to the units that would come up within NMSEZ.

Miscellaneous

Climatic conditions are favourable in Maharashtra for growing fruits, vegetables, flowers which ensure abundant supply to agro-based industries.

Maharashtra's long coastline of 720 km and river length of 3200 km could be leveraged to boost the exports of marine products.

Opportunities

Industrial units in India are increasingly looking out for industrial estates and integrated facilities, where infrastructure facilities are on par with international standards.

There is an increasing trend among unorganized sectors to move to integrated facilities in order to get cluster and common infrastructure benefits. Such industries include Gems & Jewellery, Biotech, Information Technology, toys and leather. These sectors can reap the benefits of clustering. NMSEZ will be catering to the specific needs by building specialized enclaves for these sectors.

There is an increasing trend worldwide for developing trans-shipment facilities in order to achieve transportation efficiencies. JNPT has the potential and is also being positioned as a trans-shipment port. Given NMSEZ's access to airports, road & rail networks as well as JNPT, there is significant opportunity for NMSEZ to position itself as a transshipment hub.

Several infrastructure facilities like the airport project, sea-link project, water transport terminals, extension of railway network, etc., are planned to be developed in order to cement NMSEZ's position as a leading industrial township.

Navi Mumbai
Special Economic Zone

NMSEZ - Land and location, characteristics and existing development
Zones in the SEZ area have different characteristics in terms of location (proximity to port, residential complexes/townships, etc.) and land characteristics (soil characteristics, terrain, etc.). Further, development has commenced in certain zones. Detailed description of the land and location characteristics of each of these zones are provided as under:

Dronagiri
The Dronagiri zone is spread over an area of 1,777 ha and is located at the southern tip of Navi Mumbai. The site is located to the east of Uran town, and is bound by the Karanja Creek on the south-east. Residential areas are located to the west and north-west of the zone, while the JNPT port area and township are located towards the north of the zone. The zone is adjacent to the JNPT port, and is located farthest from the central business districts of Belapur, Nerul and Vashi. Due to its proximity to the port, this zone is ideal for port-based industries.

The topography includes a hilly region towards the west of the zone. Owing to its peculiar topography rainfall in this region is rather heavy. In order to ensure proper drainage of the area, CIDCO has constructed holding ponds in the area to allow water to accumulate during high tide and heavy downpour. During low tide, water from the holding ponds flows back into the sea.

The zone is characterised by loose soil with lowbearing capacity, and black stiff clay. Construction work could, therefore, require pile foundation.

Basic infrastructure has already been developed in the zone, and around 350 ha (20 per cent of land) has already been sold. In addition, around 90 ha is currently being used for commercial purposes.

JNPT area
The JNPT area of around 300 ha lies to the northeast of the Dronagiri zone, and is bound by the Navghar industrial area to the south. A marshalling yard is also proposed to the south of this zone. This area is located next to JNPT port as well, and is ideally suited for port-based industries.

The characteristics of this area are similar to those of the Dronagiri zone. Some parts of the area could require landfill. The soil characteristics in the JNPT area are similar to that of the Dronagiri zone.

Kalamboli
The Kalamboli zone is spread over an area of 350 ha. The zone lies on the eastern tip of Navi Mumbai and adjoins the Taloja MIDC area. The zone is located to the east of the existing wholesale iron and steel market and is easily accessible by road from Thane, Ambernath, Taloja and the rest of Navi Mumbai. The Diva-Panvel railway line (Konkan Railway) touches the periphery of the zone. Further, the zone is located at a distance of one kilometer from the National Highway ("NH") 4 and the Mumbai-Pune Expressway and is connected to these highways by a eight-lane road. The zone is also in close proximity to the suburban railway line connecting Mumbai to Panvel. When compared to the Dronagiri zone, the Kalamboli zone is closer to CBD Belapur. Due to its excellent linkages with other areas, the zone is ideal for manufacturing and trading activity

The Kalamboli zone is part of a low-lying alluvial bowl and is characterized by non-marshy land requiring negligible landfill. There are some undulating strips of land sloping towards west. The zone is characterized by coastal saline soils with high-bearing capacity, and is most suitable for construction activity. Due to the above characteristics, the cost of development in the Kalamboli zone is expected to be the lowest among all zones.

Nodal development of the outskirts of the zone, in terms of access roads, etc., has taken place. However, there is no development within the zone itself.

Ulwe
The Ulwe zone is spread over an area of 400 ha. The zone is situated along the south- western waterfront of the Central Business District of Navi Mumbai and extends towards the new Nhava Shava Docks (JNPT) to south. The proposed rail link between Belapur and Uran also passes through the zone. In addition, the zone is adjacent to the proposed water terminals, and is closest to south Mumbai in terms of travel times. The proposed second international airport for Mumbai is located near Ulwe.

Due to the zone's proximity to residential areas, lower commuting time from Mumbai and the proposed new international airport, this zone is best suited for service industries like OBUs, IT, biotech, airport related activities, etc.

The zone comprises undulating and marshy land that is primarily used for paddy cultivation. Considerable landfill could be required prior to any developmental activity. Therefore, development/construction costs in Ulwe are likely to be higher.

Development Phasing Plan
CIDCO proposes to develop the project in viable phases. The indicative development phasing plan as envisaged by CIDCO is provided below:

	Phase I: Minimum 1,000 ha of land located in the Dronagiri zone
	Phase II: Balance land located in the Dronagiri zone and 400 ha of land located in the Ulwe zone
	Phase III: 350 ha of land located in the Kalamboli zone

CIDCO proposes to finalise the development phasing plan and the indicative time frame for development of all the phases in consultation with the prospective strategic investors.

Project Implementation
Structure

The NMSEZ project is one of India's largest SEZ projects spread over an area of around 50 sq. km. Successful implementation of the project would be contingent upon the participation of players with relevantskills, availability of adequate financing for the project, and strong support of the State and Central Governments with respect to policy level decisions.

The basic elements in the successful implementation of the project would include:

	Ability to attract strategic and financial investors as well as lenders for the project.
	Land and internal infrastructure development by the SPV or through EPC contractors for various infrastructure facilities like roads, water supply pipelines, power generation, transmission and distribution, construction of flatted factories, buildings, etc.
	Co-ordinating with other service providers, e.g., telecommunications, gas, etc.
	Effective marketing of the project to tenants - both within and outside India.
	Implementation of the project within budgeted cost and time.
	Operation & maintenance of infrastructure.
	Administration and regulation of the area.

As a first step towards equipping the project team with requisite competencies, CIDCO is planning to actively involve a strategic partner in implementation, operation and maintenance, marketing and management of the NMSEZ project. Apart from the strategic partner, the success of the project is dependent on various other participants including JNPT and GoM each bringing their expertise to the project.

The implementation structure for the NMSEZ project would have to ensure allocation of roles and responsibilities for each of the participants in line with their competencies, while meeting their expectations from the project and addressing their concerns. Based on an analysis of the objectives and concerns of various stakeholders, key issues that determine the project structuring have been identified. These include:

	Role of the State: CIDCO and other bodies.
	Private sector partnering: One or more strategic partners.
	Land development and provision of services: One or multiple companies.
	Services to tenants: One point interface or multiple service providers.
	Mechanism of transfer of CIDCO assets to SPV and payment for the same.
	Overall management and administration of the SEZ.

Based on detailed discussions with several market participants, the GoM and CIDCO, the following project implementation structure is proposed for the SEZ project:

	The project would be implemented as a joint venture between CIDCO and a single strategic partner or a consortium, with majority control being held by the strategic partner or consortium. Financial investors could hold a minority stake in the project.
	CIDCO would transfer land development rights to the SPV, and the SPV would issue equity to CIDCO as part-compensation for the transfer of development rights and assets.
	The SPV shall be the single point of contact for the tenants, and shall be responsible for the timeliness and quality of the service provided. Certain services, like port services by JNPT, could be provided directly to the tenants. The SPV would also be responsible for collection of bills, complaints and redressals. However, the final service structure, for provision of various services to units within the SEZ, would be determined by the strategic partner in consultation with CIDCO.
	The Development Commissioner shall have administrative control over the SEZ. Further, he would interact closely with the SPV management, and act as facilitator between the SPV and the government. CIDCO, the strategic partner and the financial partners would have representation on the board of the SPV, in proportion to their holding in the company.

The proposed services matrix for the NMSEZ, along with the key participants, are shown below. The GoM shall play the overall role of providing policy level support to the service providers as well as the SPV.

Administration of SEZ

The overall administrative responsibility for the SEZ shall vest with the designated DC of the SEZ. The DC shall function as a quasigovernment body, and shall perform all the functions as laid down in the Handbook of Procedures, Vol. 1. As per the SEZ policy, powers of several state & central government departments, including the Labour Commissioner, Pollution Control Board and many others shall vest with the DC, thus making the DC the single, point authority for the SEZ. The SPV management will work in close coordination with the DC.

Organisation Structure

The NMSEZ organization will not have a static nature. As the development of the zones progresses along the planned phases the focus of the organization will change. This change will have to be supported by appropriate internal changes in its design.

The first phase will begin with the formation of NMSEZ and will have land and infrastructure development as its main focus. This will essentially require a project-based approach with the existence of mobile teams that move across zones to execute development projects. At the same time the organization will have to market aggressively to make its presence felt and value proposition known to attract tenants. This phase is expected to continue till 2003.

The second phase will begin when the focus shifts to utilisation of the developed infrastructure. This phase will bring and even increased focus on marketing with the objective to sell the entire capacity available. At the same time the organization will be efficiently operating its established infrastructure capabilities and continuing to build where required. Exemplary services standards will be maintained by the organization to ensure its business facilitation services are amongst the best. The organization structure required here would be similar to that of a Utilities company.

The third phase will begin when the infrastructure is more or less utilised and the focus is on community development. Once the organization has let out all the established capacity the focus would be on running the facilities and services smoothly for the industiral, commercial and residential areas. The organization will then have a culture that engrains high standards of service quality and auto-pilot performance. With a balanced focus on industrial needs and social needs the organization would come close to resembling a municipal organization.

List of facilities available
to Units within SEZ

Based on the demand projections as well as the zoning of industries in the SEZ, it is anticipated that certain industries would require flatted factories as well as fully-developed office space. Therefore, plotted land, flatted factories and builtup office space could be developed within NMSEZ, for use by units within the SEZ. These facilities would be ready-to-use with all amenities.

However, these facilities shall be developed on the basis of anticipated demand and type of industries to be located in each of the zones/ sub-zones.

Plotted land could be available to units on longterm lease (either 30 years or 50 years), whereas flatted factories and office space could could be available for 10-year leases. Pricing for various facilities within NMSEZ takes into account the following factors:

	Comparable prices in other competing SEZs and industrial areas, e.g., Shenzen, Jebel Ali, competing Indian SEZs and MIDC estates.
	High cost of developing world class-readyto- use infrastructure.
	High cost of land development and construction activity in the zone.

Several world-class facilities would be provided to units set up within the SEZ. A brief list of infrastructural and service facilities that would be available in the zone is provided below. A more comprehensive list would be finalised on submission of the master plan by the planners.

	Choice of facilities: Units would have a choice of facilities including plotted land, flatted factories and built-up office area. Plotted land shall be available to units on long-term lease (either 30 years or 50 years), whereas flatted factories and office space would be available on 10 years' lease. The units would also have a choice of pricing options including upfront payments, annual lease rentals, or a combination of both. The pricing for various facilities shall be competitive and will be based on the prevailing land rates in Navi Mumbai, and the cost of construction. The unit would have the freedom to select the product offering, and the pricing option that best meets its requirement.
	Well-developed road network: Main roads within the zone and internal roads connecting the various units to the main roads would be constructed. In specific areas, the roads would be wide enough to enable movement of heavy vehicular as well as freight traffic. Further, the roads would enable easy connectivity among the port, airport and the SEZ area.
	Abundant water supply: CIDCO has its own dams in Navi Mumbai which have adequate capacity (currently 150 MLD, expansion to 465 MLD currently in place, expected to be completed by 2005) to meet the water requirements of the SEZ area. Raw water would be supplied by CIDCO to the SEZ periphery. A network of pumping stations and water pipelines would be constructed within the zone to enable uninterrupted water supply to units within the SEZ price.
	Sewerage and water treatment: Sewerage and water treatment plants would be constructed within the SEZ. A network of pipelines would also be developed inside the SEZ.
	Solid waste removal and effluent treatment: As polluting industries are not allowed in NMSEZ, effluents could be minimal. Effluent treatment plants, along with tankers, dumpers and trucks for waste disposal, has been budgeted.
	Uninterrupted power supply: Currently, it is envisaged that the SEZ area would source power from the grid, with adequate stand-by power facilities to ensure uninterrupted power supply to units within the SEZ. Transmission and distribution of power within the SEZ would be the responsibility of the SPV. Transmission station, distribution sub-stations and electric cabling would be constructed within the zone. Due to the nature of industries that could setup units within the SEZ, the demand for power in the SEZ is likely to be very high. Therefore, generation of power within the SEZ is being considered, and CIDCO is in discussions with a few large power companies for the same. The cost of such power plant has not been considered in the project cost, as it will be sub-contracted to an EPC contractor.
	Telecommunication and piped gas facilities: These facilities would be provided through EPC contractors and would be implemented through separate SPVs. Currently, CIDCO is discussing with various telecom service providers as well as piped gas providers. However, it is envisaged that the NMSEZ SPV would be the single point of contact, in terms of bill collection, and redressals.
	Transportation and security: The NMSEZ SPV would provide transportation within the zone. Security services for various establishments and offices would be provided as well. However, these services would be provided through service arrangements with third parties.
	Recreational infrastructure: Recreational facilities like golf course, sports complex and a Clubhouse would be located within the zone. It is envisaged that these facilities would be developed and managed by third parties.
	Commercial infrastructure: Commercial infrastructure including shopping complexes, restaurants, convention centre and guest houses are also proposed within the SEZ. However, the development and management of these facilities would be outsourced to third parties.
	Township infrastructure: Other infrastructure like fire stations, police stations, medical centres, customs houses, bus stops and shopping complexes would be constructed in the SEZ.
	Gardening and beautification: Adequate attention would be given to open spaces, gardens and trees within the SEZ area. Landscaped gardens would be developed and trees would be planted along the main roads and internal roads.

Consultants assisting CIDCO
with the SEZ Project

A team of consultants have been assisting CIDCO at various stages of the SEZ project. CIDCO has appointed consultants for the feasibility study, business plan, joint venture partner search as well as master planning for the Navi Mumbai SEZ project. The various consultants assisting CIDCO and their roles have been detailed below.

Feasibility Study
Tata Economic Consultancy Services ("TECS") was appointed during 2001-02 to evaluate the feasibility of the Navi Mumbai Special Economic Zone. TECS has wide ranging experience in financial feasibility studies for various infrastructure projects in India.

Business Plan and J V Partner Selection Process
CIDCO appointed a consortium comprising Ernst & Young (formerly Arthur Andersen), CRISIL Infrastructure Advisory Services and Chesterton Meghraj to prepare the business plan for the SPV and provide assistance during the JV partner selection process.

Master Planning
CIDCO has appointed McClier (an AECOM company) of the United States as master planners for the SEZ project. McClier is a multinational company with significant experience in master planning, design and planning of infrastructure projects in various parts of the world.