Tata woes fuel debate on India drive

October 5, 2008

, NEW DELHI, October 5 – A decision by the giant Tata Group to shift a factory building the world\’s cheapest car after angry farmer protests has refueled debate about India\’s troubled industrialisation push.

The company said late last week it was pulling the Nano car project out of West Bengal state, even though the plant near the state capital Kolkota was 90 percent completed.

The decision followed a month of violent demonstrations by evicted farmers and activists, and industry groups warned the move could blemish India\’s attractiveness as an investment destination.

Tata has said it will now construct the Nano — set to be priced at about 2,130 dollars — elsewhere in India.

The whole debacle underscores the need for companies "to be much much more careful about doing their homework" when they set up a plant, said Ajai Sahni, head of the New Delhi-based Institute for Conflict Management.

"They have to make sure the local population is amenable to the project and that compensation has been adequately provided," he said.

The protesters led by Mamata Banerjee, fiery chief of the regional Trinamool Congress party, had accused the Marxist state government of forcing farmers to give up their land for a pittance to make room for the high-profile factory.

The jelly-bean shaped vehicle was conceived by Tata Group chairman Ratan Tata as a way to make cars affordable to ordinary working-class Indians.

The West Bengal government offered up to 1.2 million rupees (25,000 dollars) an acre, depending on the fertility of the land, but that needed to be divided among four or more "stakeholders" in the plots.

Many critics said the money was not enough to allow the at least 12,000 people forced off their land to build new lives.

Industrialisation has been long championed by economists as a way to pull tens of millions of Indians out of poverty. But across the country, acquiring land for factories has frequently created battlegrounds.

There has been violence in Orissa state over South Korean steel giant POSCO’s plans for a 12-billion-dollar steel plant — India\’s largest foreign investment — and clashes over proposals for the creation of Special Economic Zones, a major thrust of the country\’s industrialisation drive.

A big part of the problem is the way land has been acquired, critics say.

Companies don\’t seek "to inflict harm on the local population, it\’s usually the incompetence of state governments using strong-arm measures," said Sahni.

Hundreds of thousands of people have been displaced for projects in India and the promised compensation is often inadequate or just never materialises, critics say.

"If you take away my livelihood and land and give me nothing in the way of alternative income, what do I have?" said Sahni.

When setting up plants, companies usually lease land from state governments that acquire the plots because of the complicated nature of land purchases in which securing title is notoriously difficult.

And sometimes, as in the case of Tata\’s Nano plant, the process can go badly awry.

"The government behaved with enormous insensitivity, using (Marxist) cadres to engage in violence and intimidation" of farmers to accept the deal, Sahni said.

Some farmers complained their signatures handing over their land were forged by communist party workers.

The government\’s actions provided a rallying point for social activists and the Trinamool Congress, which hoped to use the issue to break the Marxists\’ 31-year rule over the state.

Abhirup Sarkar, an economist at the Indian Statistical Institute in Kolkata, also said many farmers were just not ready to give up their land for money.

"A lot of people aren\’t prepared for full-scale industrialisation, they don\’t know what to do with the money. They feel much safer with farming which they have been doing for generations," he said.

"They don\’t want to leave the safety net of agriculture."

At the end of the day, most observers believed that the plant was the victim of state politics, with Banerjee seeking to build her political base.

"It was an irresponsible political action," said T.K Bhaumik, an economist with Assocham, a leading business chamber.

"The farmers got nothing out of this. They have been left high and dry."


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