Singur saga spells trouble for India investments

I have yet to meet anyone who has not expressed disappointment at the drama unfolding outside Tata Motor’s Nano plant site in Singur at West Bengal. They also concur that the episode will have serious implications for large investments in India.

Violent protests have forced Tata Motors to halt construction and withdraw its employees. It is now putting together a detailed plan for relocation of the plant and evaluating options of building the Nano, the world’s cheapest car, at its other plants.

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 and 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.

The protests at Singur are hardly 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) .

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

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 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)

Each PCPIR needs about 250 sq km (61,776 acres) of land. Given the uproar in Singur for purchase of a little less than 1000 acres one can easily imagine the turmoil that a larger scale acquisition would create.

Some state government are already reconsidering their plans for PCPIRs. The 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 but investors will need patience, money and skill to navigate the very bumpy road to projects in India.

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2 Responses to Singur saga spells trouble for India investments

  1. Pradeep 5 September, 2008 at 7:03 pm #

    “The hurdles are not insurmountable but investors will need patience, money and skill to navigate the very bumpy road to projects in India.”
    Well put.

    Land availability is quickly becoming a major impediment to development in India. The parties involved (politicians,investors, public) have to consider this.

  2. hemant 11 September, 2008 at 9:33 am #

    “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 and one that will stimulate employment and attract investments……”

    EMPLOYMENT: ….i don’t think the farmers fighting against the land aquisition are actually concerned with it or are un-employed. They (the farmers)are no different from other small scale entrepreneurs who have their own set-up and provide one of the most vital need for us …the food we eat.

    Investment: ….investment – till the time is supported by entreprenueral nature creates value, and fulfills the quest for adventure, innovation, motivation, reason…….whatever one would like to call it. But, passive investors or speculators………..they are a serious problem……..i guess they are the concerend parties……who survive on sentiments…….

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