Why India needs New cities - exhaustive


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Why India needs New cities - exhaustive

  1. 1. Contents : 1. India’s Growth & Potential – Overview Population Economy Infrastructure 2. Designer Cities 3. Designer Cities Augmented with Ports 4. The Agricultural Plug-In AEON Consultants 1
  2. 2. India’s Growth & Potential – Overview ( Population ) AEON Consultants 2
  3. 3. Growing Indian Urban Population INDIA'S URBAN T RANSIT ION Urban Population (million) Rural Population (million) Total Population (million) 1600 1408.93 1400 1291.30 1230.48 1200 1164.02 PO PU LAT IO N IN MILLIO N 1027.02 1000 846.30 833.88 843.77 833.25 811.77 800 741.67 684.30 628.70 548.20 575.68 600 524.80 439.10 447.53 396.60 400 352.25 285.35 217.60 200 159.50 109.10 0 1971 1981 1991 2001 2010 2015 2020 2030 YEAR AEON Consultants 3
  4. 4. Indian Urban Growth- Features Urban population has grown at about 4% p.a. vis-à-vis 1.5% growth in rural areas Level of urbanisation increased from 23% in 1981 to 29% in 2001 Expected to reach about 36% by 2011 Pace of urbanisation has rapidly increased in the last 2 decades Increase in Urban incomes also having an impact on the demand for urban infrastructure Share of service sector in the Indian GDP has increased significantly Has resulted in increase in income levels in the Urban areas Of the 21 mega cities (population. 10 million+) in the world , 17 are estimated to be in developing countries, 3 in India India has the second largest urban system in the world. Comprises of over 3700 urban local entities About 30% of the total population resides in Urban areas Two-thirds of the above live in Class I (100k plus) cities Metropolitan (million plus) cities have increase from 5 in 1951 to 27 cities in 2001 About 1/3rd of the urban population lives in these cities Engine of productivity and growth in the country Contributes about 60% of the national income AEON Consultants 4
  5. 5. India’s Growth & Potential – Overview ( Economy ) AEON Consultants 5
  7. 7. Indian Scenario- Features A liberalizing economy and rated as 4th largest country based on Purchasing Power Parity [PPP] World’s largest democracy & among the strongest emerging markets 1..2 billion people with 300 million in the middle class bracket Well matured financial and securities market Time-tested judicial systems WTO member committed to providing opportunity to the global market Constantly undertaking reforms in every sector with Infrastructure Sector receiving Government’s fullest attention AEON Consultants 7
  8. 8. Indian Economy Growth- Features India has potential to attract US $ 100 billion over next five years Export Oriented Sectors alone to attract US$ 11 billion investments Increase in FDI will lead to increase in GDP by another 2-3 % Potential for creation of 1 Million direct and indirect jobs each year Source: AMCHAM with McKinsey&Co. Large pool of educated manpower available at affordable cost Significant Impact on lifestyle and standard of living Cities with world class integrated infrastructure recognized as necessary drivers of economic growth Between 2002 to 2007 India has improved its FDI confidence ranking from Rank No. 15 to Rank No. 2 AEON Consultants 8
  9. 9. Indian Economy Growth- Features C hina India United S tates United K ingdom B raz il Hong K ong S ingapore United A rab G ermany R us s ia A us tralia F ranc e V ietnam C anada Malays ia J apan Other G ulf s tates S outh A fric a Turkey Mexic o P oland Indones ia S outh K orea C entral A s ia C z ec h R epublic 0 0.5 1 1.5 2 2.5 FDI confidence maintained FDI confidence gone up FDI confidence lowered On a scale of 0 to 3 . Source : A.T. Kearney AEON Consultants 9
  10. 10. India’s Growth & Potential – Overview ( Infrastructure ) AEON Consultants 10
  11. 11. Indian Urban Infrastructure – Shortcomings Only 60% of the Urban households have piped water supply Only 46% of households have water toilets and only 28% are connected to public sewerage system Only 60% of them have their garbage collected by the municipal authorities Over 21% of the urban population lives in squatter settlements/slums The Tenth Plan Document has assessed a shortage of 22.4 million houses during the period 2002- 07, which requires an investment of Rs. 4 lac crores The city roads inadequate/poor for traffic requirements, leading to congestion None of the Indian cities have proper MRTS Inadequate medical and health facilities (Appx. 26 beds per 10000 population in Public Hospitals) Demand for Urban Infrastructure investment - Grown beyond the resources of Govt. AEON Consultants 11
  12. 12. Inadequate Indian Urban Infrastructure – Impact ? India Urban Sector is competing with the best cities in the developing countries to attract investments. Thus creating urban infrastructure is mandatory to increase India’s competitiveness Sustaining Industrial growth requires development of cityscapes Industrial growth faces a major impediment as Inadequate infrastructure is identified as one of the biggest constraints of doing business in India Infrastructure plays a major role when it comes to deciding between China, India and other Asian countries for FDI and FII decisions AEON Consultants 12
  13. 13. Inadequate Indian Urban Infrastructure – Impact ? Hampers Economic Growth Affects the profitability of production, levels of income, output and employment Poor Urban Infrastructure Affects Country’s Lower Corporate Investments Global Competitiveness Hinders expansion in areas with poor Slows down the pace with which a infrastructure and lesser country can integrate its’ economy developed areas into the global system Poor urban service coverage is the main hindrance to a city’s ability to attract investments which promote economic development AEON Consultants 13
  14. 14. Inadequate Indian Urban Infrastructure – Impact ? Total weighted responses Tax regulations 7 Tax rates 5 Restrictive labor regulations 15 Poor w ork ethic in national labor 3.2 Policy instability 4.5 Inflation 1.3 Bottlenecks inefficient government 18 Total Inadequately educated w orkforce 3 Inadequate supply of infrastructure 27 Government instability/coups 1 Foreign currency regulations 3.1 Crime and theft 1.2 Corruption 11 Access to finance 4 0 5 10 15 20 25 30 Source: Economic Forum’s Global Competitive Report of FY07; *From a list of 14 factors, respondents were asked to select the five most problematic for doing business in India and to rank them from 1 to 5. Figure 27 shows responses weighted according to their rankings, where higher the figure the more problematic the factor AEON Consultants 14
  15. 15. Indian vs. China – a comparison Indian Urban Infrastructure – Requirements India’s investment in infrastructure at around 4.6% of GDP is far lower than that of China’s at 11% China is investing 8-10x in highways every year since the mid-1990s compared with India’s investment In ports, China has on average added 350 million tonnes in capacity every year. This compares to overall traffic of 650 million tonnes in India China added 100 gigawatts in electricity generation capacity in 2007 alone. This compares to total electricity generation capacity of 140 gigawatts in India The gap in infrastructure between India and China is so large that for India to catch up with China’s present level of stocks per capita by 2015, India’s infrastructure investment to GDP should rise to 12.5% as against the current 3.6% 2.8% of GDP(Govt.) 0.8% of GDP(Private) AEON Consultants 15
  16. 16. Indian Urban Infrastructure –– Requirements Indian Infrastructure Requirements The Gross Capital Formation (GCF) in infrastructure as a proportion of the GDP emerges as the most important key in sustaining high economic growth. However GCF as a proportion of GDP continues to be lower at around 5% only As per the Indian Prime Minister’s speech at NYSE 2004 US$150/year bn would be required in next 10 years for infrastructure alone According to the United Nations Population Division (UNDP) by 2030 while the rural population will increase only marginally, urban population will double by 2030 to around 600 million people . AEON Consultants 16
  17. 17. Indian Urban Infrastructure – Requirements It is estimated that INR34,385 billion (~USD860 billion) worth of construction opportunity in India for the next five years, representing a CAGR of 20% versus a CAGR of 14% for the past five years The Central Public Health Engineering (CPHEEO) has estimated fund requirement of Rs. 172,905 crores (~USD38.42 billion) for 100% coverage of the urban population under safe water supply and sanitation services by 2021 The Rail India Technical & Economic Services (RITES) has estimated fund requirement for Urban Transport Infrastructure at Rs. 207,000 crores (~USD46 billion) over the next 20 years Comparing the demand with the estimated annual institutional finance flow of about Rs. 5,000 crores (~USD1.1 billion) leaves a huge gap in Infrastructure funding requirements AEON Consultants 17
  18. 18. Indian Urban Infrastructure – Government Initiatives Recent initiatives have seen India create a liberalised and free policy regime in all infrastructure sectors i.e Roads – Highways & Road development projects worth US$ 12 billion being implemented through National Highway Authority of India (NHAI), have attracted extensive participation of world majors Telecom – India is rated as amongst the fastest growing markets Seaports – Leading port operators across the world participating in government port privatization and to develop greenfield ports. Power – Huge investment plans in power generation, transmission and distribution through both government and private sectors are being planned Railways – Moves to augment rail infrastructure through private sector being brought in place AEON Consultants 18
  19. 19. OUR SOLUTION…. DESIGNER CITIES AEON Consultants 19
  20. 20. Why build a whole new city ?? Although, each city or town has a master plan and zoning plans and is technically supposed to expand in conformity with that in a planned manner, the coming up of slums shows a definite weakness in the system if not a failure of the development authorities The growing urbanization has posed a new challenge to the authorities as there is a continuous pressure on available basic civic services like shelter, drinking water, electricity, sanitation, transport, health and education The advantage a new Designer City will have is that they wont carry any historical baggage of improper urban planning and development The expenditure on improving the infrastructure in cities is massive and even when incurred, the cities will soon reach saturation. Cost of building new cities is much lower than providing different services to the people scattered in different slum areas of a city or providing all the rural areas with infrastructure. Increased production of goods and services at a lower cost there by creating efficient contribution towards Indian Economy One city will not solve India’s problems, but a chain of such cities will go a long distance in urbanising India. AEON Consultants 20
  21. 21. Proposed concept – A Multi-Product SEZ City It is planned to build the city as one Multi-Product SEZ The area for a multi-product SEZ varies from 2500acres(min.) to 12500acres It is mandatory for a minimum of 35% of the area known as processing area to have industries involved in exporting goods and services An SEZ is the most sought after status by the industry players keeping in mind the tax incentives Special Economic Zones (SEZs) in India defined as : “Specifically delineated duty-free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs” Apart from tax benefits, the world class infrastructure will further lure the industries in to the city The SEZ act requires the developer to further develop the social infrastructure in the remaining 65% or less area of SEZ known as non-processing area AEON Consultants 21
  22. 22. SEZ – Added Incentives High Point - Preferential Policy framework with a package of incentives Benefits of local advantages within an international business environment Business Infrastructure combined with social facilities Development, Administration and Operation to be undertaken by private sector to enable a hassle free operating environment Envisaged as areas of excellence to enable global companies to derive domestic advantages for doing business An SEZ is ensured of infrastructure support for development in terms of resources like water, power, roads connecting to SEZ by the government Further, government goes a long distance in acquiring the land for an SEZ, which to a great extent simplifies the process of land acquisition Sectored restrictions on manufacturing sector inapplicable within SEZ Single window clearance All SEZ activities on self certification basis AEON Consultants 22
  23. 23. SEZ – Added Incentives Inter unit transfer of goods permitted The SEZ developer enjoys various benefits, a few of which are listed below: Exemption from customs/excise duties for development of SEZs for authorized operations approved by the BOA. Income Tax exemption on export income for a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act. Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act. Exemption from dividend distribution tax under Section 115O of the Income Tax Act. Exemption from Central Sales Tax (CST). Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act). Integrated Greenfield cities are the most sought after projects by all state governments under a PPP(Public Private Partnership) model AEON Consultants 23
  24. 24. SEZ – Added Incentives No routine customs examination of export and import cargo Forward looking Labour Laws under consideration 100% FDI for manufacturing units operating inside SEZs through automatic approval route in almost all sectors 100% exemption of income tax for the first 5 years and a 50% exemption for the subsequent 2 years from the date of commencement of operations. 100% profit repatriation facility from export earnings Permission to sell within the Domestic Tariff Area (DTA) and an exemption from a Special Additional Duty (SAD) subject to the company having a positive Net Foreign Exchange Position (NFEP) Supplies from DTA to be treated as exports while those from SEZs to DTA to be treated as imports. Investments in SEZ treated as infrastructure development and eligible for exemption Local inputs at reduced cost without the excise, VAT other levies of India Duty free import of materials for construction, capital goods and goods required for O&M AEON Consultants 24
  25. 25. PPP – Public Private Partnership ? Goals Use Government resources to attract private investments Improve efficiency in service delivery  PPP approach Private Sector contribution for: Financial investments Improved Technologies Efficiency in service delivery Public Sector contribution for: Financial gap funding to make projects commercially viable Providing institutional support guidance & regulation AEON Consultants 25
  26. 26. PPP – Public Private Partnership ? Types of Asset O&M Capital Commercial Duration Contracts Ownership Investment Risk (Yrs) Service Public Private & Public Public 1-2 Contract Public Management Public Private Public Public 3-5 Contract Lease Public Private Public Private 8-15 Concession Public Private Private Private 25-30 BOT/BOOT Private & Private Private Private 25-30 Public AEON Consultants 26
  27. 27. PPP – Public Private Partnership ? Public Private Participation is gaining increased prominence in developing countries Investments flows to infrastructure projects with private participation in developing countries grew by 12% to US$ 64 billion China has executed around 406 infrastructure projects during the period 1990-2004 with a cumulative investment of US$ 67 billion Greenfield projects (i.e., BOO, BLO, BOT, BOOT) most common format of Public Private Partnerships Indian Urban Infrastructure sector needs to learn from and build upon the international experience to harness the potential of PPP AEON Consultants 27
  28. 28. Indian Ports India has got 14,500 km of navigable waterways, which comprise of rivers, canals, backwaters, creeks, etc Presently, about 37,00 km of major rivers is navigable by mechanized crafts but actually only 2000 km is being used 160 tonnes of cargo is transported through Inland Water Transport There are 12 major ports in the country apart from 139 minor working ports along the coastline of about 5,600 km. The 12 major ports of the country have, on the other hand, handled a total of 519 million tonnes of cargo during the year 2007-08, registering a growth of 12% in cargo throughput. Last year, the ports handled 463 million tonnes Major ports are the direct responsibility of the Central Government while the minor/intermediate are under the management of the state governments Kandla, Mumbai, Mormugao, New Manglore, Cochin and Jawaharlal Nehru Port are the major ports of the west coast while Indian ports handle large quantities of commodities such as crude, iron ore, steel products, fertilizers, food grains and cement. Apart from these electronics, textile, stationery, auto AEONancillaries, leather and jute products are also transported via ports Consultants 28
  29. 29. Indian Ports Significantly, India's port sector has emerged the unsung hero in India's efforts to increase its global presence. The country's booming economy along with its foreign trade has given a tremendous boost to the sector, which has been instrumental in increasing India's share in world trade from 1.1 per cent in 2004 to 1.5 per cent in 2006 India's share in world trade is likely to increase to 2 per cent by 2009 With a growth rate of 19 per cent, India's container cargo traffic is estimated to reach 21 million TEUs(Twenty Foot Equivalent Units) by 2016 The share of non-major ports in cargo traffic has increased from less than 10 per cent in 1990 to the current level of 26 per cent AEON Consultants 29
  30. 30. Indian Ports – all major(pink) and a few minor ports AEON Consultants 30
  31. 31. Traffic & Capacity for major ports for last 6 years TRAFFIC CAPACITY YEAR (Million GROWTH (Million GROWTH Tonnes) Tonnes) 2001-02 287.59 343.95 2002-03 313.55 9.03 362.75 5.47 2003-04 344.8 9.97 389.5 7.37 2004-05 383.75 11.30 397.5 2.05 2005-06 463 20.57 457.125 15 2006-07 519 12.09 660 15 AVERAGE AVERAGE GROWTH (%) 12.52 GROWTH (%) 8.97 AEON Consultants 31
  32. 32. Projected traffic & capacity for major ports for next 6 years PROJECTED TRAFFIC (Million Tonnes) PROJECTED CAPACITY @ 15% growth per annum (Million Tonnes) 2007-08 583.64 2007-08 758.73 2008-09 671.18 2008-09 872.54 2009-10 771.86 2009-10 1003.42 2010-11 887.64 2010-11 1153.93 2011-12 1020.78 2011-12 1327.00 2012-13 1173.90 2012-13 1526.00 AEON Consultants 32
  33. 33. Indian Ports – Presently Inadequate ? In its representation to National Manufacturing Competitiveness Council (NMCC), FICCI has urged the Government of India to target over Rs 1 lakh crore(~USD22.2 billion) of investment in ports by 2012-13 so as to support the 12% manufacturing growth. FICCI noted that Indian exports are growing at more than 20% since 2002-03 and last year (i.e. 2005-06) imports grew by 28% mainly on account of demand from manufacturing sector for raw materials, intermediate goods and capital goods In addition to the current growth rate in cargo traffic if we consider the likely impact of various FTAs and multilateral trade agreements that India is going to have in the near future on our trade, FICCI feels that the projected traffic could reach 1174 million tonnes by 2012-13 at major ports To support this traffic, around 1500 million tonnes of capacity is required at major ports by 2012-13, noted FICCI (Here, the underlying assumption is to add 30% surplus capacity over the projected traffic for the year). The present capacity is only around 750 million tonnes Already, 276 projects entailing an investment of US$ 13.70 billion have been identified. These include development of new berths, expansion and upgradation of existing berths, deepening of channels, equipment modernisation and upgradation of rail and road connectivity AEON Consultants 33
  34. 34. Indian Ports – Presently Inadequate ? Currently, Indian ports have a capacity of 750 million TPA. In comparison, China has an installed capacity of 5.6 billion TPA Indian ports are working at much higher capacity utilization, 90%, as against world standards, wherein capacity is generally pegged at 120 per cent of estimated port traffic to ensure smooth functioning of the port Currently, most of the ships carrying cargo from East to West break their bulk at Colombo, Hong Kong, or Singapore (this is trans-shipment port - shipment of goods to an intermediate destination before reaching its final port) At present, 80 per cent of the Indian containers are trans-shipped at Colombo, Singapore, and Dubai. Most of the major ports in India are not automated and require up gradation. They are grappling with low productivity compared with world-class ports such as Singapore For instance, the time taken for clearing import cargo and shipping export cargo is 21 days and 19 days respectively in India as against 3 days and 5 days in Singapore. In terms of railway costs Indian shippers incur 7.9 cents per km. as against Canadian railway cost of 2 cents. Further, the logistics costs in India accounted for 13% of GDP compared to 11% in Japan; 10% in Europe and 9% in the US on account of poor logistics infrastructure at ports in the country AEON Consultants 34
  35. 35. Indian Ports – Bottlenecks ?? Inefficiencies at the ports affecting the traffic has been a major reason behind not growing at a reasonable rate and lagging behind in the global race Although container traffic has grown rapidly at the major ports in India, inefficiencies due to infrastructure bottlenecks still persist Infrastructure bottlenecks have led to higher dwell time, thus hampering container traffic growth Weak regulatory structures of major ports AEON Consultants 35
  36. 36. Indian Ports – Various State Scenarios Gujarat state, with the pioneering work being carried out by its port authority, Gujarat Maritime Board (GMB), has already established its leadership position among maritime states of India GMB ports have registered a cargo throughput of 147 million tonnes during the fiscal year 2007- 08 as against 132 million tonnes they handled the year before. Maritime states of Maharashtra, Andhra Pradesh (AP) and Tamil Nadu (TN) are neck to neck in comparison when it comes to claiming the No 2 position after Gujarat in port development In east coast it is Andhra Pradesh as in west coast it is Gujarat ! There is more of an integrated development happening in Andhra Pradesh than elsewhere in south, either SEZ or industrial activity and connectivity. The state is supporting in land acquisition etc TamilNadu (east coast) will come closer to Andhra Pradesh but the issues their are related to land acquisition and when you go down south hinterland gets narrower In terms of traffic volume it is Maharashtra(West coast). There is plenty of cargo availability and ports like Rewas, Dharmadhar, Ratnagiri, Dighi would add more pace to throughput in due course AEON Consultants 36
  37. 37. Indian Ports – Government plans.. Under the National Maritime Development Program (NMDP), the major thrust is on private sector participation. 66 percent of the total investment outlay is expected to the contributed from the private sector Of this, NMDP has expected a total capital expenditure requirement of RS 55,800 crore(~USD12.4 billion) to expand the existing port capacities Private players are expected to pump in Rs 34,500 crore(~USD7.66 billion), either as operators of container terminals or by forming joint ventures with port authorities Further, 360 projects have been outlined for all ports put together, including expansion of ports, improvement in hinterland - inland region lying behind a port - connectivity, and deepening of ports (aimed at improving ports statistics) Opening up of this sector for private participation and inducing favorable policies to promote investments will turn out to be the key so successful implementation of the huge capacity expansion project AEON Consultants 37
  38. 38. What do we have planned for ports in India and AAJ ? PORT AUGMENTED DESIGNER CITIES AEON Consultants 38
  39. 39. Proposed concept – A Multi-Product SEZ City augmented with a PORT A designer city with a multi-product SEZ status would be an “IDEAL” location for any manufacturing industry when very near to a world-class port. Not only would the tax benefits be applicable to the trading done via the ports but also to the developer of the port The tremendous savings on transportation of goods from the factory to the port will further provide an incentive to the industries The strategy is in line with FICCI (Federation of Indian Chambers of Commerce and Industry) – E&Y(Ernst and Young) paper on “transforming Indian ports into world class facilities” The FICCI-E&Y paper calls for focusing on three imperatives if the Indian port and shipping sector is to become competitive and world class. These include: Focussed infrastructure development Facilitating trade through an innovative mix of IT and other value added services Promoting competition through privatisation AEON Consultants 39
  40. 40. PROBABLE AREAS IDENTIFIED… Chennai-Bangalore-Mumbai industrial corridor The Karnataka Government in the State has planned to develop an industrial corridor along the national highway connecting Bangalore and Mumbai and also between Hubli and Bellary Main idea behind creating an industrial corridor was to see that all districts along the highway were industrially developed The State had been divided into six industrial zones and the Government had already identified the nature of industries that could come up, based on locally available raw materials Bellary, where iron ore was available in abundance, was suited for steel industries, while Gulbarga and its surrounding places, which were rich in limestone deposits, were ideal for cement factories Hubli-Dharwad and Belgaum would be given an opportunity to start automobile industries and IT/BT units Food processing units would be started in Bijapur, Bagalkot and Shimoga which are well known for their horticultural produce AEON Consultants 40
  41. 41. PROBABLE AREAS IDENTIFIED… AP North Coastal Corridor The Government of Andhra Pradesh intends to develop Coastal Corridor covering the Districts of Srikakulam, Vizianagaram, Visakhapatnam and East Godavari Districts for providing connectivity through various modes of transport to potentially identified ports both major and minor and power plants of different categories namely conventional, barge based, non-conventional power plants The development is proposed for the integrated purpose to create infrastructure on design, finance and build under PPP mode Government of A.P. proposes to conduct pre-feasibility and detailed feasibility studies on the existing pattern of road network, rail network and air links available and required for future facilities in order to create self sustaining infrastructure, which in turn generate revenue and improved facilities under the core sectors mentioned above The principle objective behind this project is finally to develop the important connectivity of along the costal regions duly exploring the potentials under various natural resources in the coastal districts AEON Consultants 41
  42. 42. AP NORTH COASTAL CORRIDOR – Development Plans SECTOR SKLM VZM VSP EAST GODV. TRANSPORTATION TOTAL PROJECT 1. a) Coastal Roads 130 km 52 km 100 km 156 km 438 KM Pre-feasibility study on 1.existing road pattern b) Link roads 0 68 80 80 228 KM a. nature, serviceability, land availability, New alignment with 130 120 180 236 666 KM connectivity to other salient units under, the proposed corridor 2. Rail Network Study on existing rail links between ports and feasibility for 2 track Port link 60 km 20 km 60 km 60 km 200 KM further requirement in the light of goods & cargo handling in the Railwayline ports. 3. Coastal Sea route Establishment of sea Preliminary report prepared for total investment of Rs. 4628.80 route along the North crores(~USD1.028 billion) coastal districts. 4. Air Links a) Air Ports 0 0 2 1 3 Pre-feasibility study to be done for each air port. b) Helistations 2 2 2 4 10 PORTS Port wise feasibility study to be conducted for its initial feasibility. 1.Major Ports 0 0 1 1 2 2. Minor Ports 4 1 4 5 14 POWER Pre-feasibility study to be done for each power plant for its potential features. Power Plants a) Conventional 2 2 2 2 8 b) Barge based 1 1 1 1 4 c) Non-conventional 6 6 6 6 24 Source : INCAP (Infrastructure Corporation of Andhra Pradesh) AEON Consultants 42
  43. 43. PROBABLE AREAS IDENTIFIED - PROBLEMS/RISKS ?? The lands to be acquired are vast and hence sometimes a few small chunks are unavailable due to the presence of a settlement The government has been proactive in acquiring lands for the projects and SEZ’s but it faces opposition from a few opposition parties The sole reason behind the opposition is the conversion of agricultural lands and inadequate compensation given to the farmers/owners of these lands The development is also expected to change the natural settings of these areas, further strengthening the opposition Most of the planned projects though ushering in development in the region, do not take care of the needs of the rural folk in these areas AEON Consultants 43
  44. 44. How do we plan to overcome these impediments ? THE AGRICULTURAL CITY PLUG-IN AEON Consultants 44
  45. 45. AGRICULTURAL CITY .. ! ? Conceived as a huge tract of land which will be utilised for large-scale mechanised agricultural activity The agricultural activity shall be carried out in a corporate manner and will follow either a model of contract farming or co-operative, depending upon which is the more suitable one The land owners shall have contracts with the corporate where-in they would retain the ownership of their land and receive an income which would be decided on the basis of his land area and produce per unit area. The tract of land shall be provided with infrastructure facilities like reservoirs, irrigation grids, wind energy based power(windmills) if feasible etc., to provide the output an insulation from natural mishaps like floods, famine etc The people stand to gain from the proposal as they get a fixed income, better equipment, improved farming practices, better infrastructure support and hence higher produce The corporates mostly visualised as a food processing firm or a a firm like a textile firm shall have control over which crop to be grown based on their needs. This ensures availability of raw goods at cheaper rates and huge cost savings in transport, be it from the farm to the factory or factory to the port for export. AEON Consultants 45
  46. 46. AGRICULTURAL CITY .. ! ? The processing units shall be under the SEZ and hence the before mentioned tax incentives would apply We on the other hand would not face the opposition other projects have faced as the people in this scenario will only stand to gain, though proper awareness regarding the project shall have to be done and any possible loop holes in the plan after discussion with experts plugged In brief, we plan to promote even those industries in our SEZ which would find it in their best interest to enhance agriculture in the vicinity. The location of the land and it’s suitability for various crops shall determine the nature of both the industry and the crop Further the agricultural plug-in would go a long way in bringing an urban lifestyle to the rural poor as time progresses soon AEON Consultants 46
  47. 47. INDIAN AGRICULTURE – AN OVERVIEW About 70% of the population, and about 75% of the poor, live in rural areas and most depend on agriculture Agriculture provides livelihood to 60 percent of the rural people and remains vital for food security In the past decade (1995/96-2004/05) India's agricultural growth rate slowed down to less than 2 percent per year, compared to about 3.5 percent per annum in the preceding decade In the poorest states, such as Madhya Pradesh, Orissa, and Rajasthan, growth in the last decade was below 1 percent per year The stagnation of agriculture, the high proportion of poor dependent on it, and the widening rural- urban income gaps are the major concerns of the Government of India (GOI) Yields of major crops (foodgrains, oilseeds, other cash crops) in India are lower than in many other countries - for example, rice yields in India are one-third of China’s and about half of those in Vietnam and Indonesia The virtual collapse of the agricultural extension system in most states limits farmers' access to better technologies and practices AEON Consultants 47
  48. 48. INDIAN AGRICULTURE – AN OVERVIEW The effectiveness of the public agricultural research system is undermined by weaknesses in the agricultural research system such as: bias towards irrigated agriculture weak prioritization proliferation of programs top-down programs weak cost effectiveness The sustainability of land and water resources is at risk with increasing soil degradation and the over-exploitation of groundwater in many areas In addition to erosion, salinity and alkalinity, soils are also losing carbon and micronutrients due to unbalanced fertilizer use Nearly 30 percent of the blocks in the country are presently classified as semi-critical, critical or overexploited as groundwater use exceeds the rate of groundwater recharge AEON Consultants 48
  49. 49. INDIAN AGRICULTURE – AN OVERVIEW Succinctly put, following are the issues with indian agriculture Farmers own small tracts of land making the use of machinery on their farms financially infeasible for them Further due to the area being small and no uniformity followed in what is being grown by various farmers, the productivity decreases and sometimes also leads to degradation of soil fertility Farmers are not provided with the adequate infrastructure support in terms of power, irrigation, flood protection etc. Awareness of the modern farming practices is not there leading to farmers not getting optimum outputs Farmers are taken advantage of by the intermediaries between them and the markets Agriculture in India needs to be modernized, organised and carried out in a professional manner India is a major exporter of cash crops like cotton which are the raw materials of various industries like textile Properly planned co-ordination between agriculture and agri-industries can highly propel the incomes of both the farmers and the industries. AEON Consultants 49
  50. 50. Thank you AEON Consultants 50