R. Balaji

One of the largest multi-product SEZs, the 5,000-acre Sri City (P) Ltd is taking shape at Tada, in Andhra Pradesh, an hour’s drive to the north of Chennai on NH5. This is just one of the many major investments taking place to the north of Chennai, which investors say, spell good prospects for Andhra Pradesh and Tamil Nadu.

Investments in Tada, apart from generating jobs locally, will depend on Chennai and its environs which have the established infrastructure — ports, airport and managerial talent.

Mr Ravindra Sannareddy, Chairman and Managing Director, the promoter of Sri City, talks to Business Line on the personal and business reasons for setting up Sri City in Tada and what the investments in the region represent to both the States.

Sri City has a 3,800-acre special economic zone (SEZ) and a domestic tariff area (DTA) of 1,200 acres to house auto ancillaries, light engineering, IT and ITES, logistics warehousing, gems and jewellery, food processing, biotechnology and other environment-friendly industries.

Excerpts from the chat:

Why did you choose to set up Sri City in Tada?

I am from that area, I was born in a village near Tada, studied in Sullurpet in Tamil Nadu, 15 km from where Sri City is coming up. Personal reasons apart, the area has the ingredients for industry but is underdeveloped. If I needed to invest, I decided to do it there rather than elsewhere.

Industries need infrastructure — roads, port, and connectivity — and people. The place has it all but still people migrate to other cities for a living.

Traditionally, North Chennai has been the centre for industrial investment. It is only after the development of IT in the last two decades that the southern and western parts of Chennai have come into focus.

Tada is well connected by road to the north to urban centres in Andhra Pradesh and the Krishnapatnam Port, and to the south to Chennai, with its Ennore Port, Chennai Port and the international airport.

The real-estate prices are at feasible levels and land is available in large parcels. Anywhere else near Chennai it would not be possible to get more than 100 acres, and land would cost more than Rs 6 crore an acre.

What is the cost advantage to investors coming to the SEZ?

Sri City was conceived as a special investment region earlier than when the concept of SEZs was finalised. The project would have gone ahead even as a non-SEZ. That is why it has a domestic tariff area apart from the SEZ.

For the manufacturing sector which needs large areas, land is a key ingredient. They cannot afford more than Rs 20-30 lakh an acre. IT and biotechnology companies can grow vertically so even a few acres are enough.

Industry now puts two-thirds of the investment into land and one-third into structure — in the west it is the other way around. Sri City will keep land cost low for industry. This is possible only in underdeveloped areas.

The plan is to lease land at about Rs 1 lakh an acre a year. The lease period will range from 5 to 99 years. For long- term lease the deposit would be higher. But the basic concept is that land cost would be kept low.

What is needed here to support the investments in the area?

Tada region and the border areas in Andhra Pradesh and Tamil Nadu are seeing many major projects coming up. An integrated programme is required and I am talking with the Andhra Pradesh Government to develop Tada to Krishnapatnam, a distance of 100 km, as a manufacturing investment region.

A comprehensive plan is needed to link the area through a regional project. Only then will there be proper development, otherwise it would be sporadic and unplanned.

Also, discussions are on with both Governments to develop the Chennai and Nellore region as an industrial corridor along the lines of the proposed Chennai-Bangalore corridor. Nellore-Tirupati-Chennai could be one major industrial hub. Both State Governments need to start planning for regional infrastructure. Tamil Nadu has the developed infrastructure while AP has the land at feasible rates for the industry.

If for any reason TN loses an industry, it would be better to lose it to Tada than to far north.

But how about the social infrastructure - schools, health facilities.Social infrastructure such as education and health facilities has to come from the private sector. Sri City is not dependent on the government for these, we are planning special purpose vehicles, if so required, for schools and health services. But our focus is not on real-estate development so we are starting with investments to attract businesses to generate jobs. Once that happens others will follow, even now investments are happening in the area and managers and executive-level people stay in Chennai and travel to Tada.Large projects, educational and health services projects, are coming up, for instance, I have read reports that Frontier Lifeline hospitals is planning a 500-acre health city close by in Tamil Nadu. Industrial development in Gummidipoondi is creating over 1,00,000 jobs. Educational institutions, including medical universities, are coming up nearby, either in Andhra Pradesh or Tamil Nadu side.How about power and water? We will tap the grid. As an SEZ we have the potential to set up our own power project but we are not going for it now. Fuel is an issue even if coal import is possible. Down the line we are looking at gas when the Reliance gas pipeline is likely to be available. For now, we need only construction power but for industrial use it will be available from the grid.There is good groundwater potential with over 90 cm rain during the season. Also, we are targeting process-oriented industries which are water guzzlers. Also, Sri City has 1 tmcft allocation from the Somasila project for which we are setting up our own pipeline.

Responses to blproperty@thehindu.co.in

(This article was published in the Business Line print edition dated August 3, 2008)
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