The arbitral award allowing Tata Motors to recover Rs 766 crore plus interest from West Bengal Industrial Development Corporation Limited (WBIDC) for capital loss towards the scrapped Nano automobile factory in Singur will go a long way in ensuring the safety and security of investment and business deals in India.
A mixture of administrative failures on the part of the former Buddhadeb Bhattacharjee government, ultra-leftist anarchy and, narrow politics by Mamata Banerjee’s Trinamool Congress without any regard for the interests of the state and the nation forced Tatas to relocate from Singur, just ahead of scheduled production in October 2008.
In a rare case, a newly-built automobile factory with hundreds of ancillaries left for Gujarat. The state lost its only industrial rejuvenation attempt in the last 50 years. The national image as an investment destination suffered. Tata lost crucial time and marketing momentum. Ancillaries were the worst sufferers.
The arbitral award is too little for the monumental loss. However, it should serve as a strong lesson for states to not give in to anarchic or populist interests and honour investment decisions. The fate of economic decisions must not be decided on the streets.
The award ordered a recovery of 11 per cent interest from September 2016. There is not much clarity on the methodology of interest calculation. At simple interest, WBIDC already owes Tatas Rs 1,355 crore.
Most likely the state will approach the High Court and Supreme Court for judicial review. There is less possibility of a complete reversal of order. However, the court may tweak the compensation amount and the interest rates. On the other hand, the litigation will add to the period for interest recovery.
In all probability, therefore, the West Bengal government has to pay through its nose for dishonouring the investment decision. The same Mamata Banerjee, who was the face behind the eviction of Tatas in 2008, is now the Chief Minister of the state.
The states should also be more careful in ensuring legal formality while inviting an investor. After a protracted legal battle since 2008, the Supreme Court, in 2016, held that the acquisition of Singur land by the Left Front government didn’t comply with the requirements of the Land Acquisition Act of 1894.
A Dangerous Precedence
The story behind the relocation of Tatas was a sad one. Originally, the plant was scheduled to come up near Kharagpur, 140 km from Kolkata, on government land. However, going by the Tamil Nadu model where auto factories are in close vicinity of Chennai, the government zeroed in on Singur, 40 km from the city.
The Singur assembly seat has been held by Trinamool Congress since 2001. The party was washed out in the 2006 election. As the state went for land acquisition in 2006, Banerjee took to protests for her political resurrection.
That was just a year since the Kalinganagar (Odisha) incident, where police firing on anti-land acquisition protestors at the Tata Steel factory site killed a few. However, the protests at Singur fizzled out in no time, as the region saw massive economic prosperity for the next two years.
Tatas started taking interest in West Bengal in the late 1990s. After Buddhadeb Bhattacharjee (2000-2011) came to power, they started investing heavily in the state. Nano was one of them and the best of the lot. The state government grabbed it with both hands.
From involving women self-help groups in supplying food and sourcing materials from local contractors to training local youth in automobile engineering — Tata Motors made a robust plan for inclusive growth. The house rent and land prices shot up in a 20-30 km radius.
Availability of land and compensating landowners were no major hurdles. The trouble cropped up in compensating sharecroppers and landless labourers.
The Jyoti Basu government of CPI(M) made West Bengal an industrial graveyard and built a rural support base through land reforms, giving tilting rights to sharecroppers and unionising the landless labourers. The landowner became a prisoner to the last two.
Naturally, the majority of owners saw an opportunity in the land acquisition drive. By the act, they were supposed to get the lion’s share of compensation. The huge army of sharecroppers and landless labourers were alarmed.
The opportunity was used by the Maoists, who had announced their strong presence in West Midnapore through a bomb blast near the proposed Jindal Steel project site in 2006. The project suffered.
By 2007, Maoists and Islamists created a free zone at Nandigram in East Midnapore at the proposed site of a special economic zone. That was also the year, Islamists went on a rampage in Kolkata.
The police firing at Nandigram killing nearly a dozen, brought them public sympathy. All anti-establishment forces joined hands to spread the fire across the state, including Singur, to bring down the government. The state was gripped by anarchy. Banerjee yielded fruits.
By Maoist admission, they recreated ground for Trinamool to lead protests at Singur in 2008. In the end, both the state government and Tatas tried level best to reason Banerjee. Compensation was hiked. Offers were made to return a portion of the 997-acre acquired land.
But, as Ratan Tata famously said, Banerjee pulled the trigger. She understood it right, power shifts through anarchy in West Bengal. The left rule became history in 2011.
After assuming power, the Trinamool government forcibly acquired the plant site from Tata. The company won the case against the state government in the division bench of Calcutta High Court in 2012.
The apex court, in 2013, requested Tata to return the land as the project was relocated. In 2016, they ruled in favour of the state. Banerjee deployed machines to create visuals of reducing a modern plan to rubble.
She promised to make it farmland again. Today it is a wasteland.
Investors Deserve Better
Banerjee became a hero by chasing out investment from an industry-deprived state. Over the last 20 years, Odisha and Sikkim became industrialised. Bengal is on a downhill journey. That is what this state deserves.
But the nation deserves better examples. Between 2007 and 2009 Nandigram and Singur became inspiration to anarchic forces in the country to stall projects and damage national interests. Huge investments were recalled from the mineral-rich states.
Multi-billion-dollar projects were called off in Odisha. Thankfully, the Naveen Patnaik government in Bhubaneswar was able to tide over the crisis. Tata Steel completed the Kalinganagar project. The plant is now under expansion.
New India needs more such examples to gain the confidence of global investors. The arbitral award may lay the foundation for that.
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