Indian firm has a vision of a metropolis among the fields

In this sleepy village two hours’ drive from New Delhi, water buffalo laze in the town pond and sari-clad women carrying trays of cow dung patties on their heads negotiate the rutted dirt roads.

But Faizabad -- like several dozen similar towns nearby -- is about to get a makeover.

Reliance Industries Ltd., one of India’s largest private companies, is in the process of buying nearly 25,000 acres of wheat fields and small brick kilns around Faizabad, in Haryana state, with the intention of building a metropolis.

The planned city, 25 miles long and expected to draw a million residents within 10 years, will include a massive duty-free manufacturing zone, more than 2,000 acres of private housing, malls, schools, parks, hospitals, post offices, police stations, a PGA-caliber golf course, a monorail link to New Delhi, a huge Disney-style theme park, a power plant, an airport and much more -- all privately planned and built with private funding, company officials say

Reliance’s main interest is to developing an industrial park, in line with a national effort to create Chinese-style duty-free “special economic zones” capable of attracting foreign investment, boosting exports and creating jobs. The company, which built its fortune with refineries and fiber-optic cable, earned $2 billion in profit last year.

But in a nation where disastrous shortages of basic infrastructure -- roads, power, water, airport capacity -- are a major disincentive to investment, and where cities are struggling to accommodate tens of millions of rural migrants, building a new city just seemed to make sense, Reliance officials said.

“Rather than asking the government to develop infrastructure for us, we are offering to develop it for them,” said Ajay Nijhawan, coordinator of the $25-billion project, which Reliance hopes will rival duty-free zones in Shanghai, Dubai, Hong Kong and Singapore.

Such an effort might be expected to upset Faizabad’s residents, who stand to see their wheat fields bulldozed into parking lots and shopping malls. Family attachments to land run deep in largely rural India, and government attempts to expropriate land for a similar industrial project in West Bengal state in March led to protests by farmers, with police opening fire and killing 14.

Reaping profits

Faizabad’s farmers, however, smile when a Reliance vehicle pulls into town. Rather than confront protesters, the company has offered farmers $50,000 an acre for their land, about 10 times the land’s former value. That is $1 million for an average 20-acre rural plot.

“I’m very happy. I’m in favor of this,” said Ramesh Sharma, 43, whose family got $2.4 million after he and his two brothers turned over 48 acres to Reliance.

Using the cash, they made huge investments in fixed-rate government bonds, bought 70 acres of land in a neighboring district, bought property in New Delhi and invested in two plots and five stores in nearby Jhajjar.

A brand new white Tata Safari SUV is parked next to the family’s water buffalo pen, and a flashy green Suzuki Swift car sits by a pile of cut silage, its alarm sending neighborhood kids scattering in surprise. Even the poorest of Faizabad’s farmers believe they’re getting a good deal. Dayanand, 50, a subsistence farmer who goes by only one name, sold the three acres he farms with his two brothers for $150,000, enough to buy at least six acres elsewhere and a large truck to start a trucking business.

“If we waste this, things won’t be better. But I feel rich,” said the farmer, a gap-toothed smile crossing his deeply creased face.

In nearby Jhajjar, the closest sizable town to Faizabad, farmers who until recently owned only three sets of clothes went on a spending spree. But area officials say the region’s nouveau riche have for the most part shown signs of using their newfound wealth well.

In a nation where heavy farmer indebtedness has led to suicides, growers in the Jhajjar region have paid off their loans and are now attending investment seminars run by Reliance, the Haryana state government and local banks, which have gotten $34 million in new deposits in the last five months, Nijhawan said.

Most farmers have opted to spend their cash on land elsewhere, start businesses or put the money in government securities which, at 10% interest a year, could give them an annual income 20 times higher than that they made farming.

“This is bringing farmers into the mainstream,” said Satyender Duhan, an earnest state official who is in effect the mayor of the Jhajjar region. “I’ll never claim that everybody’s happy, but the majority of people certainly are.”

The area has seen some protests over the project, led largely by political opposition figures looking to rally personal support -- some after selling their own land to the project, Duhan said. But an opposition movement has been hard to build in a region where farmers outside Reliance’s footprint are clamoring to be let in.

“It’s beyond their dreams what they are getting,” Duhan said of the farmers.

Concerns voiced

Critics of the Reliance project, and about 100 other, smaller planned special economic zones around the country, argue that such projects should be located in the most remote, underdeveloped and unproductive regions of India, in an effort to spread the country’s growing wealth and protect its farmland.

Other critics, including Kashiram Rana, a member of Parliament who is surveying farmers about the planned zones, say taking agricultural land for industry represents a food security threat in a nation with 16% of the world’s population but only 2% of its land.

India’s Finance Ministry also is worried that the federal tax breaks offered to such zones will cost the country $5 billion a year in potential tax revenue. The breaks include a 100% exemption on corporate income taxes over the first five years and a 50% break the next five years.

Haryana’s state government has offered the Reliance project tax-free status in perpetuity and 1,500 acres of land in exchange for a 10% stake in the massive development. The state also will use its powers of eminent domain to forcibly buy land from holdouts if Reliance acquires at least 75% of what it needs from willing sellers.

But Prime Minister Manmohan Singh insists special economic zones are a key part of India’s drive to rapid industrialization, and the Commerce Ministry says they could draw tens of billions of dollars in new investment and help create half a million jobs.

Reliance officials acknowledge that their planned city, which will stretch most of the way from Jhajjar to Gurgaon, a New Delhi suburb, is not exactly in a remote region and is still awaiting final federal approval.

But almost all the successful duty-free zones around the world have been located within an hour’s drive of a major city, they argue, to take advantage of at least some existing infrastructure and to help attract skilled manpower.

Basic infrastructure will cost $5.6 billion, Reliance officials say.

The company has so far acquired about 40% of the land it needs and hopes to start building within five years. It also has started providing supplemental teachers to public schools in Faizabad and other villages and is making plans for vocational training centers with the aim of preparing children in farming villages for other kinds of work in the city that will soon engulf their homes.

“I don’t want my people being the coolies and [security] guards” in Reliance’s city, said Duhan, the state official, who grew up in the region and has pressed hard for training centers.

Farmers in Faizabad, though, say they believe industrialization is India’s future, and projects such as Reliance’s will help many in the region as land values increase and job opportunities broaden.

“We’re happy. Before, we didn’t have money, and I had four sons who did nothing,” said Mani Devi, 56, a Faizabad mother of five. “Now, Reliance will give them jobs.”