Font size: 
Even as the West Bengal government and its main opposition, the Trinamul Congress, continue to bicker over the controversial 400 acres of farmland that the opposition claims was forcibly purchased from unwilling sellers for the Nano plant, it is not the only land-related controversy dogging the Indian manufacturing industry.
From industrially backward West Bengal to the upcoming industrial state of Haryana, near New Delhi, and from the most industrialized state of Maharashtra to the struggling state of Orissa, huge industrial projects are suffering, trying to sort out local resentment, bureaucratic bungling and political issues.
Over the past five years, wherever private industry has sought to acquire land for setting up projects, it has faced a tidal wave of grassroots-level opposition, as land acquisition is proving to be a burning issue in the industrial development of India. Currently at stake are projects worth US$64 billion related not only to local groups like Tata and Reliance Industries, but also to foreign investors like Korea’s Pohang Steel Company, the United Kingdom’s ArcelorMittal and global conglomerates like Dupont and Dow Chemicals.
For that matter, the Nano land controversy, even thought the “hottest” in recent times, is puny in terms of its project cost of US$400 million compared to POSCO’s and ArcelorMittal’s steel projects in the state of Orissa that have an outlay of US$10 billion each. Not that each project requires huge tracts of land, but the collective requirement of about 90,000 acres of land scattered across the country multiply the problems surrounding them.
So, why is land acquisition proving to be such a big issue in India? The biggest reason is the method that is generally adopted to acquire and allot land for any industrial project. Local laws make it almost mandatory for any industry venture to seek permission from the government, and in most cases the government of the state in which a project is going to be set up takes up the onus of providing the land. And, in the pursuit to achieve industrialization in the fastest possible way, most state governments often cut corners by forcing unwilling sellers to part with their land. This is what the communist government of West Bengal stands accused of by the opposition in the Nano project. In the case of POSCO too, it has been alleged that the Orissa government has forcibly allotted about 430 acres of land acquired from local villagers unwilling to sell their land, from the total 4,000 acres required for the project.
A more complex issue to emerge from this is that even when land is acquired from willing farmers, it is rarely purchased at a fair price. In the Nano project, for example, the price paid to acquire land just 18 months ago was only one-fifth the market value at the time. While the state government says that land prices have inflated since, as a consequence of the Nano car project, the opposition says that, in its desperation to prove the success of its new industrial policy, the state government has forced many unwilling farmers to sell their holdings at “throwaway” prices.
Similarly, India’s largest private industrial group, Reliance Industry, has a power plant in the state of Uttar Pradesh that is facing trouble because landowners say that the price of about US$10 per square foot that Reliance is offering is only half of what other private builders are offering for land just a few miles away.
“Clearly, not only does the industry have to come with the right compensation package, but there is also an urgent need for clearer land acquisition policies,” said a spokesperson from the Confederation of Indian Industry.
The root of all these problems lies in the country’s flawed Land Acquisition Act, formulated in 1894 during the colonial era. Unlike in most democracies, this Act does not consider the right to property of an Indian citizen as a fundamental right, which means the government can take away private property, at a unilaterally fixed price, overruling the protests of landowners.
Social activists condemn this rule. According to Sunita Narain of the New Delhi-based Centre for Science and Environment, this flaw has caused displacement of close to 40 million people in India in the last six decades and would displace millions more in the future, if it is not overhauled immediately.
In the Nano controversy, however, critics say that there is another even deadlier force at play: namely, senseless politics. “Senseless politics seems to have wasted the years of effort that it took to build the iconic Nano. There are lessons to be learned from this episode,” says Biswadip Gupta, CEO of JSW Bengal Steel, an industrial venture in West Bengal.
Like Gupta, many in the industry are worried. The general feeling is that even if the industry is paying the price for the state governments’ poor land acquisition and management policies, it is the future of India’s industrialization that is getting hit. “These disturbances could well set India's industrialization efforts back and could even send the wrong signal to foreign investments,” fears the CII.
Hints of this are already appearing. The first official international criticism of the Nano impasse came from Vince Cable, a Member of Parliament and deputy leader of the Liberal Democrats, which is the United Kingdom’s third largest political party. “At one level, it will give a favorable message to investors about the strong democratic values in India unlike that in China,” he said, addressing a press conference organized by a local industry lobby. “But the problems faced by Tata in Singur make foreign investors skeptical about their investments in India.”
Perhaps that is why Sajjan Jindal, an industrialist who is setting up a US$2 billion aluminum smelter in Viskhapatnam and a US$8 billion steel plant in West Bengal, feels that a good way to avoid land-related problems is to make the former landowners stakeholders in the country’s industrial projects. Jindal has offered land-for-shares to former landowners in both the projects, “which has worked well for us,” he said.
Meanwhile, after a marathon of now-on-now-off meetings to come to a truce and save the Nano project from moving away from West Bengal, the state government and the opposition TMC party announced that an agreement was reached between them last night. “The government has made the decision to respond to the demands of those farmers who have not received compensation, by means of land provided to the maximum within the project area, and the rest in adjacent areas, as early as possible,” a statement from the government read.
While the opposition TMC has suspended its agitation, it has also threatened to resume its protests if the government does not work out a satisfactory deal. This provides little or no relief to Tata to commence production. On the contrary, “the company is distressed at the limited clarity on the outcome of the discussions between the state government and the representatives of the agitators in Singur," a recent statement from Tata said. “We will review our stated position only if we are satisfied that the viability of the project is not being impinged, the integral nature of the mother plant and our ancillary units are being maintained, and all stakeholders are committed to develop a long-term congenial environment for smooth operations of the plant in Singur."
What is certain, though, is that even if the Nano controversy meets a happy end for India Inc., this would not be the last land-related controversy in India’s march towards industrial reawakening.
