INSIGHT: Singur dispute could hurt India projects

01 September 2008 17:46  [Source: ICIS news]

Tata Motors drives into trouble in West BengalBy Malini Hariharan


MUMBAI (ICIS news)--In a small town near Kolkata on the east coast of India, a huge drama is being played out that is likely to have long-term implications for large investments in the country.


Over 30,000 activists and farmers have besieged Singur, in West Bengal state, to rally against Tata Motors’ plant for the Nano, the world’s cheapest car also known as the “People’s Car” .


Protesters at Singur, led by firebrand politician Mamta Bannerjee, who is also the leader of West Bengal’s main opposition party the Trinamool Congress, are vehemently demanding the return of 400 acres of land from 997 acres that was acquired by the state government on behalf of Tata Motors.


They claim that the land was forcibly taken from farmers and that compensation has been inadequate.


The highway leading to Singur has been blockaded and Tata Motors has been forced to evacuate employees from the plant site. The company has now threatened to walk out of West Bengal if the agitation is not quickly withdrawn.


It is ironic that the protests are taking place in West Bengal which is led by a communist government that sees the Nano car project as being for the greater good of the community, one that will stimulate employment and attract investments to a state that suffers from a long history of militant trade unionism.


One could blame the Singur crisis on India’s murky politics where an opposition party is required, almost by compulsion, to take a stand against any major industrial project proposed by a ruling party, leaving companies caught in the political crossfire.


It would also be tempting to believe that the protests at Singur are an exception - an isolated incident that is unlikely to come in the way of the central government’s grand vision for India’s economic transformation through mega industrial projects and the creation of special economic zones (SEZ)


But in reality, while the scale of the protests at Singur is unprecedented many such scenes are being played out in different corners of the country.  


Not too far away from Singur, South Korean steel giant Posco has struggled for more than three years to overcome public opposition to a $12bn steel plant at Orissa as the project would be housed on forest land.


And although the company recently received permission from the Supreme Court to proceed with the project, local people have not given up their campaign.


Over on the west coast, Reliance Industries (RIL), India’s largest refining and petrochemicals company, has encountered resistance from farmers for its proposed SEZ near Mumbai.


And last year, West Bengal had to scrap plans for a petrochemical hub at Nandigram after a violent protest by farmers, again on the issue of land acquisition, resulted in 14 deaths.


Although other Indian state governments have quickly issued invitations to Tata Motors to relocate the Nano project, there is no guarantee that the company will not face similar protests at a new location.


The seriousness with which Singur is being viewed by India’s business leaders is evident in the way that they have rallied to support Tata Motors.


RIL chairman Mukesh Ambani said in a statement last week that the Nano project was one of "national importance" and that a "fear psychosis" was being created to slow down such investments.


Just a year ago, Ambani’s Reliance Retail had faced stiff resistance in West Bengal against plans for supermarkets that would also sell agricultural produce.


The Confederation of Indian Industry has said that the process of development and growth being held to ransom for short-sighted political mileage was unwarranted. 


The Singur crisis does not bode well for India’s plans to develop mega integrated refining and petrochemical sites, also referred to as petroleum, chemicals and petrochemical investment regions (PCPIRs).


The plan is to house each PCPIR in a 250 square kilometre (61,776 acres) zone with a refinery and adjacent petrochemical plants. The central government has already shortlisted six sites across the country for development of these zones.


It is easy to be sceptical about the PCPIR plan given the uproar in Singur for the acquisition of only 1,000 acres.


The Communist Party of India had said last year that it would oppose the creation of PCPIRs until it had a clear view on the rehabilitation of displaced people.


Some state governments are already reconsidering their plans for PCPIRs.


The western Karnataka government is revaluating one at Mangalore while the Andhra Pradesh government is reported to have slowed down land acquisition for a PCPIR along the Visakhapatnam-Kakinada-Rajahmundry corridor.


An added problem for chemical investments is the environmental issue.


One of the reasons behind Karnataka’s decision to revaluate a PCPIR at Mangalore is because of public concern about the impact that chemical plants would have on the local environment.


Companies mounting huge investments in India will have to tread carefully, balancing the demands of politicians and the local community with their business goals.


The hurdles are not insurmountable and there are not many who doubt that the Nano project will eventually go ahead, either in West Bengal or in some other state. But investors will need patience, money and skill to navigate the very bumpy road to projects in India


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By: Malini Hariharan
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