‘We have little choice but to move out of Bengal. We cannot run a factory with police around all the time,’ exclaimed Ratan Tata,11 then head of the Tata group and chairman of Tata Motors, when he announced in October 2008 that he was closing the almost complete Nano factory at Singur in West Bengal and moving elsewhere. With that memorable exit line, he marked Tata’s departure after two years of often violent and politics-based opposition over two big industrial projects in the state – his
factory, which was almost ready to start turning out 250,000 cars a year, and a 10,000-acre chemicals SEZ planned by the state government for Indonesia’s Salim group at Nandigram, near the port of Haldia. Both disputes blew up in 2006 over the prospect of agricultural land being compulsorily acquired for industry, and together demonstrated growing social unrest that lay beneath the country’s economic boom.
West Bengal had been run for over 30 years by a Left Front government led by the CPI-M, with Buddhadeb Bhattacharjee as the chief minister from 2000 (till he was defeated in 2011). A mild and somewhat scholarly looking white-haired man in his mid-sixties, Bhattacharjee had been feted internationally as a forward-looking economic reformer, who saw the need to modify leftist policies with private sector (including foreign) investment in order to revive his intellectually strong but industrially backward state. An interview with him was a must for visiting editors of foreign business magazines and newspapers who were bemused by his inherent contradictions. But he misjudged people’s growing exasperation with decades of harsh and increasingly corrupt and ruthless communist rule. Amazingly, he expected them to accept that the government, which had implemented admired land reforms earlier in its 30-year rule, was now giving agricultural land to rich private sector corporations such as Tata.12
The storm started at Nandigram, a poor rural area in East Midnapur district, 170 km from Calcutta.
Nandigram had a history of opposition to its rulers, initially the British, which had helped it to become a leftist stronghold with relatively low literacy and little industrial activity.13 Bhattacharjee negotiated with the Salim Group, Indonesia’s biggest conglomerate whose interests range from noodles to real estate, to build a chemical complex there in a newly designated SEZ. The deal could ultimately have grown from 10,000 acres to 40,000 acres, but opposition to the transfer of land had been building up months before the deal was signed in mid-2006. By then, resistance was also growing against Tata’s car factory at Singur, which had been announced in May. Bhattacharjee wrongly expected that his party’s political clout and street-level muscle, especially in Nandigram, would push both deals through.
Violent demonstrations and clashes between villagers and police-supported CPI(M) cadres built up at Nandigram in 2007, generating some of the worst riots seen in the state’s history. In January, after violencefirst erupted, thousands of local farmers blockaded the area against government officials. Then West Bengal opposition politicians moved in. Mamata Banerjee, a maverick and temperamental leader of the anti-communist All India Trinamool Congress (TMC) party, realised she could use the growing disputes to rebuild her faltering career as a regional politician. Having set up her Trinamool (grassroots) party in 1997 when she broke away from the national Congress party, Banerjee successfully used the land disputes to burnish her populist image. It led her to victory in the assembly elections in 2011 when she became the state’s chief minister, ending 34 years of leftist rule.
Other opponents of the CPI(M) united to fight the Nandigram plans, culminating in 14 people being killed in March 2007 when police clashed with villagers protesting against land acquisition.
A month after those killings, Salim abandoned the Nandigram project. (A local financial associate planned a replacement chemical complex on a largely uninhabited 13,000-acre island in the estuary of Koltata’s Hooghly River, but this did not materialise during the time of communist rule and was cancelled by the Banerjee government.) Violence continued in the Nandigram area throughout 2007, when armed cadres of the CPI(M) tried to reestablish their control by ousting rival political groups and Naxalite extremists who had moved in during the troubles. Houses and shops were burned and ransacked, and fear was spread by patrolling motorbike convoys carrying red flags. Instead of trying
to rein in his party’s activists, Bhattacharjee endorsed what they had done, saying they were
‘justified’. Referring to earlier violence by the opposing groups, he said that ‘the opposition has been paid back in the same coin’.14 Reports of the Left Front’s ruthlessness with opponents had often been heard during the previous three decades, but no one expected such an open and top-level endorsement of lawlessness. (Bhattacharjee later publicly regretted having made the ‘same coin’ remark.)15
The dispute over Tata’s Nano factory at Singur was not nearly as violent as the battleground at Nandigram, but it did far more economic and social damage because nothing has happened on the site since 2008 when Tata departed. Originally, the Nano was to have been made in Uttarakhand, a state northeast of Delhi, in the foothills of the Himalayas, where Tata Motors already had a plant. It was switched after Bhattacharjee invited Ratan Tata to Bengal and matched Uttarakhand’s special hill-state investment incentives that included low-cost land, low interest financial loans and substantial tax waivers. At Tata’s request, the 90-year agreement, comprising four pages of text and eleven pages of financial spreadsheets, was kept confidential, though the text briefly appeared on the government’s website in response to a court order till Tata appealed for its removal. It is now back on the website following the change of government.16
Bhattacharjee’s officials proposed six sites, including one at Kharagpur, a town famous for its Indian Institute of Technology (where Telcon, a Tata company manufacturing heavy earth-moving equipment, successfully became the anchor investor in 2010 in a 1,200-acre industrial park). Ratan Tata wanted the Nano plant to be more accessible for staff living in Kolkata than Kharagpur would be, 120 km from the capital. He chose Singur, just 45 km away, which also provided high visibility for the Nano brand name on the busy National Highway 2 from Kolkata to Delhi. He refused an offer from Bhattacharjee to move elsewhere when the opposition began and the site was hit by monsoon flooding.
The drawback, which Tata ignored or did not fully realize, was that the site, divided into 3,500 small plots, mostly less than an acre, was on well-irrigated agricultural land that produced two good rice crops a year plus potato and other vegetables. This was used by opponents as an argument against the project, though the site had already been designated as an industrial park. Three industrial buildings (a cold store and factories for glass bottles and condoms) were already being built and had to be closed and transferred when the state government commandeered the land for Tata.
The government based its land acquisition on the controversial 1894 land acquisition law’s compulsory transfer provisions for ‘public purposes’, which triggered arguments about whether the law could be used for a private sector project. Political opposition, and national and international media coverage, focused on the loss of the agricultural land but the real issue – as elsewhere in India – was the level of compensation received by agricultural owners and tenants. Under the 1894 law’s compulsory purchase rules, compensation was paid according to the market price at the time, which meant it did not reflect later price increases when the value of land escalated, as it did two or three times within six months to a year. There was also resentment that Ratan Tata had given the impression that he was primarily trying to help West Bengal by building the Nano there – ‘almost like a philanthropist’ as one official put it – when in fact he was insisting on the state providing heavy investment incentives.
Banerjee escalated the row in December 2006 when she went on a hunger strike for 25 days, but Tata went ahead with construction work in January 2007. This led to fresh demonstrations that continued through the year and at least two farmers committed suicide. Tata had been allocated 997 acres, but the Trinamool argued that it only needed 600 acres, which provided a fresh basis for
opposition. Tata said the other 397 acres were needed for 55 component suppliers’ factories.
Compromises were sought to exclude those acres and to allow some 2,000 objectors and others not receiving compensation to stay on their land, which Tata rejected.
Both the factory and the jobs could have been saved, had it not been for the two stubborn and emotional people involved. One was Banerjee, who was focused single-mindedly on political victory in the 2011 assembly elections, with little care for the economic and social damage she caused along the way. The other was Ratan Tata, encouraged by his controversial public relations adviser, Nira Radia, who was regularly in Kolkata liaising on the Singur negotiations. A peace deal was eventually brokered by West Bengal’s governor, Gopalkrishna Gandhi,17 on 8 September, and Banerjee called off her protests. This did not, however, sufficiently guarantee the future of the project for Ratan Tata, who had refused to attend the governor’s talks, saying they were political rather than industrial.
Both sides took irreconcilable positions. Banerjee probably felt secure with the thought that Tata would not leave because it had invested $350m in the factory’s workshops and assembly lines that were virtually complete, and the car launch was planned for a few weeks later. She also probably assumed it could not quickly find an alternative site. Both assumptions were wrong. Ratan Tata had earlier accused industry rivals of encouraging the opposition18 but now he was exasperated by a series of thefts from the plant site, and by intimidation and assaults on engineers including Japanese and German experts who were installing machinery. He announced the withdrawal on 3 October and made an emotional departure after personally attacking Banerjee.19 ‘We have to shift because of Mamata Banerjee,’ he declared.20 He quickly chose a new site in Gujarat, where he was welcomed by Narendra Modi, the chief minister.
Of the 13,500 people (mostly landowners but including a few hundred others such as share-cropper tenants) on the 997-acre site, 11,000 had by this time accepted and received compensation while the other 2,500 (with 297 acres) had either refused the money because they were unwilling to hand over their land, or had their payments held up in ownership disputes. Some people had already been employed on or around the project – about 180 were working for Tata and its component suppliers, while about 650 were in supporting services and over 900 were receiving technical or semi-technical training.21 Once the land transfer was fixed, none of the 13,500 had any rights to the land under the 1894 legislation so, when Tata departed, they lost both their old agricultural livelihoods and the one-job-per-family that Tata was offering. They also lost the prospect of other future employment – there would have been 1,500 jobs in the Tata factory, plus thousands more in consequential manufacturing and service activities. (The automotive industry estimates that total employment can amount to more than five times the basic figure).22
Banerjee promised during her election campaign that, when she became chief minister, she would provide nearly 400 acres of land to the 2,500 people who had not received compensation (though only 297 acres were available, of which 220 belonged to the unwilling category). One of herfirst moves when she was elected was therefore to pass the Singur Land Rehabilitation and Development Act cancelling Tata’s ownership rights. The government then took possession of the land at night without giving adequate notice to Tata, and without offering the company compensation. Tata spotted flaws in the Act and started a case against the government, which included a compensation claim for its lost investment – estimated at Rs 500 crore out of a total expenditure of Rs 1,500 crore. In mid-2013 the Supreme Court suggested Tata consider returning the land to the previous owners,23 but it was no longer suitable for agriculture.
When I visited the site a few weeks after Tata had left, those without jobs were destitute.
Biswanath, a 42-year-old, had given up his half-acre land and said he had been beaten up by Trinamool activists for doing so. Expecting a Tata job, he’d distributed the Rs 300,000 he had received in compensation among seven brothers and two sisters, and had spent his own share. ‘Now I am consuming alcohol,’ he said.
The main lesson to be drawn from both the Singur debacle and the Nandigram crisis is the need for a company to be closely involved in community affairs in order to build local trust and support among those being displaced. This has to happen even if the state government is purchasing the land because it is the company that can give assurances about the future, including the possibility of jobs. Tata stayed largely aloof and, though it had medical teams working in the area, did not try to secure community endorsement for the project by explaining how the 997 acres would be used and by spelling out the job and other benefits that the factory would bring.
This was odd because the group had faced more community opposition in different parts of India than many other companies. Tata Steel had learned the need for involvement at the Kalinganagar project in Odisha where 12 tribal people had been killed in 2006. Till then, Tata had left the Kalinganagar consultations with the state government, but it changed tack and took over the job of resettlement, realizing it needed to build trust with the local people. Hemant Nerurkar, a former managing director of Tata Steel, has said the company learned the hard way the necessity of consultation and communication with local people in proposed areas of development, particularly those at risk of displacement.24 Speaking at the Jaipur Literature Festival in January 2013, he said,
‘We went and communicated, communicated and communicated with the people most of us don’t understand the local feelings.’25
Kalinganagar marked a turning point in attitudes over how to handle the transition of agricultural land for industry. National and regional politicians, along with companies, realized that a more cooperative stance had to be adopted, and that fed into the debate on new land legislation. Ratan Tata, however, did not apply that lesson at Singur and he underestimated the importance of harnessing local support – a few weeks after he had departed, there were still big signs saying ‘Welcome Mr Tata’
along the highway and many smaller posters on walls and telegraph poles calling for him to come back. The area had begun to prosper with small new eateries and services such as taxi firms opening up. Life could have been good, if only Ratan Tata and his people had been more involved in local affairs, and Mamata Banerjee less so.
POSCO
POSCO is the latest of a string of multinational mining companies that have tried unsuccessfully to start projects in the eastern coastal state of Odisha. Its plans involve what would be India’s biggest ever inward foreign direct investment. Manmohan Singh personally gave his support, but the project was just too big, too foreign, and too high profile to have had an easy start almost anywhere in India.
In Odisha, where there is a history of blighted projects, it had no chance. It is now many years behind schedule – thefirst four million tonnes per annum phase was to have been commissioned in 2010 but continuing protests and fear of riots makes it unclear when construction will begin.
The POSCO story is important because it shows how easy it is for a potentially large contributor to India’s economic growth to be stalled, even when it is a well-meaning company. POSCO cannot itself be blamed for the delays because, aside from any possible dealings with individual politicians and
bureaucrats, it does not appear to have tried to bend regulations or mishandle people living on the site. It seems to have been badly advised because it did not realize that it takes several years for such a project to progress, and it chose the wrong site. It wanted to be on the coast so that it could export iron ore – an ambition that set the company on the road to controversy in the early days.
POSCO came to India looking for iron ore reserves and downstream customers to bolster its position as the world’s fourth largest steelmaker. It signed an MoU with the Odisha government in 2005 and expected to move ahead quickly with what would be the first-ever integrated steel project undertaken on a greenfield site by any steel company outside its home country. Other Korean companies – notably Hyundai Motor, LG and Samsung – had become market leaders in India for their autos and consumer electricals manufacturing and marketing businesses in the 2000s, so POSCO could never have envisaged more than a short delay when it arrived.
‘We’ll try to win the heart of the people, and believe we can achieve that,’ Cho Soung-Sik, chairman and managing director of POSCO India told me, three years into the delays. The agreement with the Odisha government included a private port, an SEZ, and iron ore mining rights. POSCO planned to commission the first 4mtpa phase in 2010 but, three years later, it had obtained neither the steelworks land nor the port site, nor had it secured separate iron ore mining rights. Jairam Ramesh gave heavily qualified environmental clearances in 2011, but this was challenged by a petitioner at India’s National Green Tribunal, which suspended the approval in March 2012.26 Meanwhile, the state government began acquiring land for thefirst 2,700-acre phase of the project, and after large-scale protests and clashes with police over blocked access to the site,27 this was completed by July 2013. The project, however, still faced continuing local resistance and bureaucratic hurdles.28
When I visited the site in September 2008,29 my car bumped along a track beside a broad sweep of bright green and well-cultivated paddy fields. We stopped at a rough bamboo gate at the entrance to Dhinkia village, guarded by a group of villagers in order to block access by POSCO, the government and police. This was the stronghold of Abhaya Sahu, a local official of the Communist Party of India (CPI), who rigidly controlled the resistance movement. Though the opposition was coming from a tiny fraction of the land area, it was crucial because it controlled access to the proposed new port. Sahu moved there in 2005, after the killings at Tata’s Kalinganagar plant raised the profile of project demonstrations. He set up the POSCO Pratirodh Sangram Samiti (POSCO protest and resistance committee), hoping this would establish the CPI as a political force in the area. Members of POSCO staff were briefly kidnapped by Sahu’s group in May and October 2007 when they visited the
When I visited the site in September 2008,29 my car bumped along a track beside a broad sweep of bright green and well-cultivated paddy fields. We stopped at a rough bamboo gate at the entrance to Dhinkia village, guarded by a group of villagers in order to block access by POSCO, the government and police. This was the stronghold of Abhaya Sahu, a local official of the Communist Party of India (CPI), who rigidly controlled the resistance movement. Though the opposition was coming from a tiny fraction of the land area, it was crucial because it controlled access to the proposed new port. Sahu moved there in 2005, after the killings at Tata’s Kalinganagar plant raised the profile of project demonstrations. He set up the POSCO Pratirodh Sangram Samiti (POSCO protest and resistance committee), hoping this would establish the CPI as a political force in the area. Members of POSCO staff were briefly kidnapped by Sahu’s group in May and October 2007 when they visited the