The suspension of work at the Tata Motors plant in Singur and at 60 key auto ancillary units to be followed by possible relocation is a serious setback to West Bengal?s quest for faster industrialisation. The state has actually been very successful in attracting new investors in recent years?proposed investments in the state shot up from Rs 12,047 crore in 2005-06 to Rs 45,678 crore in 2007-08, and the state emerged the fifth-biggest recipient of investment by attracting proposals worth Rs 76,453 crore in the first five months of 2008. The opponents of the project can feasibly argue that the choice of location was not ideal from the farmers? viewpoint?99% of the land holders in Singur are marginal (with less than 1 hectare) and small farmers (with less than 2 hectare), who among them own 94% of the total land, and whose eviction without adequate compensation could impoverish them. The government, on the other hand, could and should have argued that the average land holding of just 0.5 hectare would not have lent itself to high productivity agriculture and that industrialisation?along with compensation?was the best outcome for the farmers in the long run.
The crux of the problem, as we have argued earlier in these columns, lies in the nature of the acquisition of farmers? land?acquisition by the state usually under-prices the value of land. Direct negotiations between the concerned industry and many thousand landowners would normally have very high transaction costs. So, what is actually needed is the creation of a market mechanism which would enable the landowners and potential acquirers to transact with minimal cost and maximum benefit to both sides?this is where the state government should have acted as an honest facilitator and referee. Even at this late stage, perhaps the only solution left, if any, is for the Tatas to pay a higher price for the land of that minority which is not willing to sell. It will be difficult for politics to then overturn the logic of the market. Such a move would also lay bare the populist positions taken by various groups in other states like Jharkand and Orissa where other large projects are facing similar hurdles. These states and West Bengal cannot afford to miss the industrialisation juggernaut this time around.
