The plans of India's biggest private sector company by market capitalization, Reliance Industries Ltd (RIL), to create special economic zones (SEZs) at Jhajjar and Gurgaon in Haryana seem to have run into trouble over issues related to land acquisition, with land owners in the area demanding around three times the amount the company is willing to pay because land prices have increased since late 2006, when the company made its offer.

"We require around 25,000 acres for our SEZs. While we are in possession of around 9,500 acres, the owners of the remaining land are demanding around Rs1 crore per acre, which is more than the notified rates (the rates fixed by the company) of around Rs38 lakh per acre (including annuity). This is a huge headache for us," said an RIL executive, who didn't wish to be named because he is not authorized to speak to the media.

SEZs are industrial enclaves that come with fiscal and other benefits. Companies wishing to set them up have to take an initial approval from the government, acquire the land, and then have the SEZ "notified", which means the units based there are eligible for the fiscal benefits.
RIL had originally planned one SEZ at Jhajjar, but after the government capped the size of such zones at 12,500 acres, the company decided to create two adjacent SEZs.

The company's other SEZ at Raigad in Maharashtra has run into trouble over the rehabilitation and resettlement package announced.

The Haryana SEZs are expected to require an investment of Rs25,000 crore and have provisions for a cargo airport and a 2,000MW power plant.

The land acquisition rates offered by Reliance Haryana SEZ Ltd, the company formed by RIL to develop the SEZs, is Rs22 lakh per acre and Rs30,000 per acre as annuity for a period of 33 years, resulting in a total payout of Rs38 lakh per acre.

Reliance Haryana SEZ is a joint venture between Reliance Ventures Ltd, a subsidiary of RIL, and the Haryana State Industrial and Infrastructure Development Corporation Ltd (HSIIDC), the state's industrial development agency. While Reliance holds a 90% stake in the SEZ arm, the rest is with HSIIDC.

"While HSIIDC transferred 1,086 acres to Reliance Haryana SEZ Ltd, we were able to acquire 8,414 acres as per the rates specified by us. We cannot concede to the demands made by farmers, as even if we make the Rs1 crore per acre payment in one case, we will set a wrong precedent for others," said the RIL executive.

"Land purchase is a time-consuming process and there are marginal holdings. We are purchasing land directly from each individual farmer. The work of purchase of land is going on smoothly as per the guidelines. We intend to develop the SEZ in a phased manner. The first phase of 440ha (or 1,087 acres) has already been notified by the government of India and Haryana, and development process has already started," said a Reliance Haryana SEZ spokesperson in an email response.

Shailendra Tokas, a real estate broker who has handled some deals for the Haryana SEZ, said: "Property prices have increased over the past two-and-a-half-years and farmers are not satisfied with the rates given by Reliance. The other area of conflict is HSIIDC's land, which was acquired from farmers at government rates and then transferred to Reliance for the SEZ."

Manoj Jain, a construction analyst with Asit C Mehta Investment Intermediates Ltd, which offers composite brokerage services in debt and equity products, said: "The whole SEZ issue is politically driven. There is no clarity on the issue. Land owners demanding high prices is basically a function of demand and supply. Land owners realize that if someone is developing a huge project, they would be willing to acquire the land they need at any cost. They are pushing up prices because they think that if a large company wants to acquire land, they might be willing to pay a high price for it."