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Singur a lesson, not a deterrent for investment

PHOTO: PTI

TROUBLED SITE: Trinamool Congress leader Becharam Manna (right), Managing Director of WBIDC, Subrata Gupta (second from right) along with members of the committee formed to help farmers visit the site in Singur last week.

The last word on the Tata Motors project — the prestigious Nano venture — in Singur, West Bengal, may not have been said yet. At a time when all that remained was the official announcement from Tata group Chairman Ratan Tata that the company was pulling out of Singur, West Bengal Governor Gopalkrishna Gandhi stepped into work out a compromise. And when it appeared that the project has been saved at the nick of time, Tata Motors issued a veiled warning — “We would like to be clearly told about any future arrangements, understandings or commitments that will go contrary to the agreement, and which will result in not honouring the commitments,” as the company’s Managing Director Ravi Kant put it.

From the beginning, the Singur plant has run into a huge controversy because of the land acquisition issue. Tata Motors wanted land not just for its plant, but also for an auto cluster that includes the ancillaries. As it was designed to produce the much touted Rs. 1 lakh car, the costing and economics had been worked out to the last detail. Any change of plan or difference in input costs could impact on the pricing, which Mr. Tata vowed to keep at the promised level.

But the Trinamool Congress, led by the fiery Mamata Banerjee, would not let the issue pass. Singur has witnessed tension and repeated violence over several months now. The Nano is still scheduled for release in late October — perhaps in time for the festival of lights, Diwali. The first car may roll out from the Tata’s Uttarakhand plant instead of Singur. However, the question remains: Will the Tata Motors plant stay in West Bengal, or will it move to another location? If so, what would be its impact on not just the State, but India as an investment destination?

Who better placed than the global investor L. N. Mittal? He and his Arcelor Mittal group have lined up a clutch of projects in Jharkhand and Orissa, which are facing much similar problems as the Tata’s in Singur — land. But Mr. Mittal is emphatic when he says one project, or one Singur cannot change India’s attraction as an investment destination. Industry sources, who are willing to discuss this sensitive issue on condition of anonymity, identify

two main problems arising out of this controversy - the basic question of land and its acquisition, as also the problem of cost over-runs on account of delay in the commissioning of the units.

Even according to conservative estimates, the escalation in project costs could be anywhere from 30 to 50 per cent, depending on the actual delay and the increase in in-put costs. If for instance, Tata Motors had planned the Singur plant at a cost of Rs. 1,500 crore, and it has now climbed to Rs. 1,800 crore, its impact on the pricing can be well imagined. Similarly, if the ancillaries have to relocate to another place, they too will incur additional cost. If the Tatas do decide to pull out, the project costs will go up further and the delay could lead to other problems as well.

Industry captains argue that Singur will be a lesson, not a deterrent for investments. They are convinced that the protracted agitation was more political in nature. The government, especially the Chief Minister, and later the Governor, tried their best to salvage the situation and ensure the continuation of the project. “Land remains a sensitive issue and that is why industry prefers to deal with or through the government. Buying land directly from farmers, or the owners, may not be difficult. But there is no guarantee, and getting possession in time can also create more roadblocks,” industry captains say.

“If Singur created so many problems even with the government backing it, you can imagine what it would have been if the investors dealt directly with the land owners,” reasons the chief executive of an automotive unit in Chennai. He is convinced that the southern States, Maharashtra, and Rajasthan are much better organised and systematic in their industrialisation policy and investor-friendly approach. Without land banks, no State can hope to attract more industries and investors.

A parallel debate relates to the on-going tussle between the manufacturing sector and the services sector. There is a feeling that though the services sector has generated lakhs of jobs in many States, the sector provides employment only to the creamy layer of the student community. On the other hand, the manufacturing units generate employment not just for skilled staff, but also the locals, who can be trained for the semi-skilled jobs. This becomes important in the compensation package, which is by itself another major issue involved in land acquisition and displacement of people. Both the Centre and the States are still toying over this formula for the special economic zones, which are taking quite some time to fructify.

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