The Hindu Business Line : Learning from Singur fiasco

For quite some time it has been apparent that Tata Motor’s first ultra low-cost car, Nano would not roll out of the Singur plant that was being built even in the face of some determined opposition over land acquisition for the project. The car was supposed to be out in the market late this year or early 2009, but given the pace of construction and the time needed to install the requisite plant and machinery the choice before the company was to either skip the launch deadline or manufacture the it elsewhere. The company had made it clear more than once that it would stick to the deadline. That meant taking the manufacture elsewhere. Viewed thus, Mr Ratan Tata’s recent announcement in Kolkata that the group is pulling out of Singur does not alter the situation on the ground in the near term. While the company has sunk quite a bit of money into the venture at Singur, the latest development may well turn out to be a blessing in disguise.

There are manifest concerns about the Indian economy slowing down in sympathy with the adverse global developments. In this background, the demand for a car, even one priced as low as Rs 1 lakh, may well be muted. Circumstances have thus forced the Tatas to go in for a more modest volume of production. Should the market reception for the car turn out to be exceptional, the company has the flexibility to ramp up production at any of its numerous facilities around the country. It may even be possible, in time, to return to Singur with greater moral authority if those opposed to the project are sufficiently chastened by the thought that they may have over-played their hand.

The episode, nevertheless, has brought into sharp focus the conflict between the State and land-owners over compulsory acquisition of land for public purposes. In the mind of a section of the public, at least, there is a perception that resorting to compulsory acquisition in the name of fulfilling a larger public purpose, when the land in question is to be used for setting up a private facility, is somehow flawed. The fact that land-owners in such situations are never quite able to impound a fair share of profits from the project as compensation for their lands makes the situation doubly complex. Equally, private enterprise’s keenness to secure land that is free of title disputes — something that acquisition by a State ensures — is entirely reasonable. What is, however, not defensible is its belief that it is fulfilling a social responsibility by the mere act of investing capital in a venture. The State’s capacity to mediate effectively between private capital and land-owners is considerably eroded by the aggrandising behaviour of its political class. Unless this is addressed, problems of the Singur variety are bound to recur with greater frequency, throwing industrial investments in the economy completely off balance.

Related Stories:
Locals feel let down by Nano pullout
Tatas pull out of Singur; to look at Nano relocation
Nano project: Ratan Tata to meet Buddhadeb on Friday
Fears of Tata Motors pulling out of Singur loom large

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