Wednesday, October 21, 2009

Project Muddles and Puddles......

Scanning the sheets of Kerala's dailies or surfing through reports on the many malayalam news channels that crowd the airwaves of God's Own Country over the last week or so, one would be forgiven that it is raining mega-projects in our State. There's been talk of half a dozen giant projects ranging from deep-water ports to huge IT parks. Totalling well over Rs 20,000 Crores (US$ 4 Billion) in investment and creating over 200,000 jobs between them. The only catch is that while some projects are on an upswing, others are heading south and overall the picture for development doesn't look too good.

After a year of going from bad to worse, Vizhinjam's stars seem to be shining brighter for a change. The State Cabinet has sanctioned an allocation of nearly Rs 450 Crores for the development of supporting infrastructure for the Rs 8000 Crore deep-water port and container transshipment terminal. This would primarily involve  the development of road and rail connectivity as well as the provision of electricity and water supply to the port. NHAI has already consented to build the 2 Km of road needed to connect the port site with the NH-47 while the Indian Railways are examining the proposal to build the 8 Km partly-elevated rail corridor to connect the port to the main railway line at a cost of Rs 180 Crores. Power and water would be supplied by the KSEB and KWA respectively for which moves are already afoot. And to top it off, it's been reported that the Maritime and Port Authority of Singapore (MPA) has expressed an interest in Vizhinjam. (Malayalam news link).

But while there is light at the end of the tunnel for Kerala's biggest infrastructure project, there is one mean and persistent shark still circling around. And entering on cue has been the bogey of this project, a company rather dramatically called Zoom Developers. After having managed to scuttle the last tender for the project through a protracted legal battle, it has now come back claiming that till its suit against the rejection of its bid is settled, the tender process cannot be restarted. They don't seem too confident of the outcome of that suit, since the company has simultaneously asked the High Court to include it in any upcoming bid! In the meantime, they have also managed to forget to attend the project meeting for their supposed project in Kalamassery which supposedly includes a 100-floor version of the tower of Babel. It's high time that the State conducts an investigation of Zoom's real motives and capabilities and black-lists them for once and for all.

Technocity, the other mega-project on the Government's list has also been having a less-than-ideal year so far, starting with the lack of response to its first outing due to the slightly poor timing - a week or so after the financial tsunami swept across the world in late September 2008. After dragging on for almost two years, the land acquisition for the 450 acre, Rs 6000 Crore project seems to be limping back on track, just in time as the IT business space market bottoms and rebounds from depths where billion dollar companies were committing hara-kiri by getting perfectly good IT SEZs denotified (I guess the Ministry of Commerce had to write the rules for that in a hurry!) In a sure sign that things are moving again, the State Cabinet approved the Rehabilitation policy for the Project Displaced Persons of the project. That this decision should have been taken 18 months ago is another matter, which would have avoided the delays in land acquisition due to public resistance. Of course, the powers-that-be would argue that there would have been little demand anyway, but the fact of the matter is that the bid for the project, conceptualised in August 2005, should have been held at least by March 2008. All this while, the interest on the Rs 350 Crores borrowed by Technopark from commercial banks for the land acqusition has started to accrue.

But the crucial missing piece is the marketing effort to get 450 acres and a potential 15 million sq.ft. of space absorbed by the market, which is still experiencing gluts in the Tier 1 markets. To garner the nearly Rs 6000 Crores needed to develop Technocity fully. The Government is still very much caught up in its day-dream of starting "IT parks" in every district and panchayath. While there is a simple strategy that can be adopted for building on the strengths of Kerala's IT/ITES industry till it is competitive at least on a national level before branching out, the Government seems oblivious to it, even when that strategy has been elucidated and door delivered to them. Indeed, there has been a pretty public round of back-slapping and mutual appreciation over the inauguration of the first tiny bit of the IT park at Koratty (Thrissur). I hope those who have been bowled over the speed with which the space was lapped up will remember that the sum total of that space is about 1% of Technopark today. At this rate, we will take about 200 years to reach where Bangalore is today, with a total 20 times the space of Technopark.

What is needed is the clear realization that while it is a political necessity to have an IT park, or at least a foundation stone of an IT park, in each and every district and assembly constituency, there must be clear prioritization and focus of effort to get the anchor projects such as Technocity, Technopark Phase III and the expansion of Infopark in progress. Otherwise, we will end up with a lot of spokes while the hubs wither away in the meantime. The commencement of work on Phase III is a step in the right direction. However, the Government does need to understand that only major projects like Technocity and Phase III can bring in the major IT firms, that in turn can generate the sort of numbers of jobs that are expected from the IT sector. To put things in perspective, it would take 8-10 district level parks to stack up against a Technocity-sized project. And there too, it is unlikely that any of the smaller parks would attract a high-quality investor like an IBM or Accenture who would demand the facilities of a major park.

The curious part is that the sudden impetus to push Technocity forward may be partly due to the expected demise of a project that has been the darling of a section of the media and an albatross around the neck of the Government for quite some time. Yes, I am speaking of that "City" alright. In an absolute inversion of Manorama's pet theory of June 17,2009, it now is likely that the death throes of the agreement with Dubai-based promoters could spur the Government on to push ahead more quickly with Technocity and other major projects so that their development scorecard reads okay on the whole. Similarly, a couple of other "City"s also seem to have bitten the dust, one on environmental grounds, the other because the High Court forbade any non-industrial use on land received from a PSU. Of course there is the risk that any investor landing up at Technocity, as in fact a number of domestic and global firms have evinced interest over the past few weeks (I had the chance to meet with the CEO of a top global developer in Trivandrum two weeks ago), may be sent packing northwards to stand in for the vanishing sheikhs. But on the whole, such debacles may get the Government to focus more on projects that are on a true PPP basis where it has a much greater degree of control and where the level of transparency is much better.

Now that we have realised that Kerala's "mega" projects are in some sort of muddle or the other, perhaps it is time to take stock of what worked and what went disastrously wrong.  Technocity's troubles have been primarily because of a lack of Government focus and the failure to operationalise KSITIL, the Special Purpose Company floated in 2007 to develop the project. "Smart" City ran into trouble when the promoters started paying more attention on the 12% of freehold land intended for residential development than to the 88% of leased land meant for developing IT space. Sobha bust its bottom when it ran into stiff environmental resistance because somehow it bought land right in the middle of a mangrove forest. So what can we learn?

1. Independent due diligence to be done by the Government even on private projects, if they are asking for major exemptions. No exemptions to be granted to critical environmental issues which could have been avoided at another location. This will also prevent a real-estate project like the Elbit-Salarpuria township being re-packaged as a "Knowledge City" to attract incentives. (The project involves only a couple of office towers, not an SEZ, and making up less than 20% of overall area, most of which is devoted to premium apartments)

2. PPP projects to be operated as profit-centers with a certain degree of administrative and financial autonomy.

3. A uniform policy to be created for the land-use in mixed-use developments. Today, the IT Policy spells out that 70% of land area has to be used for Processing (IT) use. This should be uniformly followed. Freehold not to be allowed in any PPP project with a significant Govt. equity holding and receiving major benefits (?)

4. Separate incentive policy for mass housing/townships being developed next to major industrial facilities. Incentives could lesser than those for the commercial/processing components. For example: 100% stamp duty exemption for processing facilities and 50% for the associated residential components.

5. A well located land bank is an absolute necessity.

6. A time-bound, mutually agreed schedule for the project with exit clauses and arbitration provisions if there is a major discrepancy in meeting milestones. This will prevent a repeat of the log-jam with the "Smart" City project where three years have been wasted in haggling and time-wasting tactics by the promoters.

Kerala needs major projects like Vizhinjam, Technocity and the expansion of Technopark and Infopark but we have neither the space nor the resources to let a plethora of wanna-be mega-projects run amuck. The best course of action is to weed out the unworthy projects even before they reach the Single Window Clearance or PPP stage and to focus all available resources on projects whose feasibility and viability are beyond question and which are firmly in the PPP structure. Then perhaps, even if we don't see 200,000 jobs being created in the next two years, we may see the figure reached within the coming decade. That, in itself, will be a momentous achievement for Trivandrum and Kerala.

On a separate note, this blog has received honorable mention in an article in The Hindu about blogs on development. Thanks to all of you for your support and contributions which have helped make Trivandrum Rising noteworthy!

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