Wednesday, September 17, 2008

Ok, tata: Bengal throwing good money after bad?

Anindita Chowdhury
KOLKATA, Sept. 15: The Tatas may have finally endorsed the West Bengal government's fresh rehabilitation and compensation package for land-losers to ensure that Tata Motors Limited stays put it Singur and the Nano can roll out in a "congenial atmosphere", but at what cost? Both literal and figurative, not to mention political. For, according to calculations made by The Statesman, the government will not only have to dig deep dig into an already depleted public exchequer once again to keep its enhanced compensation promise, but government investment in Singur will be at least one third of the Tata Motors' Rs 1,500 crore investment. And if the VAT holiday and subsidised electricity given to the Tatas, and the vague promises of jobs to land-losers are factored in, the total public investment in a private firm's project to build a car, even if it's the world's cheapest, could well be close to the amount being spent by the business house itself!The irony is even more pronounced when one keeps in mind that the Singur project is no private-public-partnership enterprise ~ it's rightly, and unashamedly, a commercial venture by one of India's biggest business houses. And whatever Mr Buddhadeb Bhattacharjee may believe in connection with industrialisation in one state, apparently through one project in the vanguard, to mix a couple of socialist metaphors, the question arises: is it worth it?The state government has already paid close Rs 133.10 crore, according to the Comptroller and Auditor General's report, as compensation to land-losers and the fresh package which promises to pay 50 per cent over and above the present compensation paid would mean an additional outflow of Rs 65 crore from the exchequer. Then there is a new commitment to pay accumulated wages of 300 days to landless labourers. According to the government, the number of such registered landless labourers and unrecorded bargadars is 955. The minimum daily wage is Rs 75 a day according to the National Rural Employment Guarantee Act (NGERA), which amounts to Rs 22,500 for 300 days. Multiplied by 955, that's 2.14 crore rupees. And this, only for landless labourers registered with WBIDC; the government has, indeed, gone a step further by stating that those with EPIC and NREGA job cards will also be eligible for this compensation even if they are not registered.The government has also promised to provide "sustainable economic existence" to land-losing families, jobs, in other words, although not spelt out so bluntly, and that's yet another claim on public money. This applies to around 5,000 to 6,000 families (as many land-losing have gone their separate ways over the past two years), a senior official at Writers' Buildings told The Statesman. Whilst some jobs will be provided in the private sector, an overwhelming majority will have to be accommodated in government jobs with all benefits, said the official. The wage bill is likely to be substantial.All of this only adds to government decisions already taken, no doubt in what it perceives as the public interest and geared towards putative job creation, of giving the Tatas land at a throwaway price, a VAT exemption to match that offered by the Uttarakhand state government, and extending a loan of Rs 200 crore to TML (effectively Rs 143.10 crore).Take the effective government, i.e. public, investment in terms of land cost first: At current market value, the price for the 645.67 acres at Singur (that's the deal with the Tatas; the vendors have been given land at a different rate the figures for which, incidentally, have not been provided to the CAG by the state government) is Rs 93.73 crore. Though the Tatas are paying Rs 855.75 crore over a 90-year period, at present value (according to a February 2006 government directive laying down the basis for making such calculations with reference to a 99-year lease) this would be equivalent to paying Rs 18.62 crore. Given the uncertainty over the Tatas commencing work at Singur, forget a 90-year stay, it would be imminently fair and sensible to regard the state's invest­ment as the difference between current market price and what the Tatas are paying in current terms. That amount is Rs 76.11 crore. As for the government, i.e public, investment in terms of VAT concessions, they are substantial, even if it's a fair discount, as the government claims, to attract private investment to Bengal in a competitive environment.
The CAG report has stated that the West Bengal Industrial Development Corporation (WBIDC) incurred a loss of Rs 81.52 crore on account of the Tata Motors plant at Singur. "The company incurred excess expenditure of Rs 2.99 crore towards payment of avoidable interest of Rs 1.44 crore and delayed consent awards of Rs 1.55 crore to landowners beyond statutory provisions. Further, it subsidised TML by 76.11 crore on leasing of 645.67 acres of land for 90 years," the report reads. Government also paid Rs 3.19 crore for direct purchase of land and payment to bargadars, and another Rs 2.96 crore as development expenses and training programme expenses for the land-losers for economic reha­bilitation came to Rs 78.52 lakh.
The state commerce and industries minister has justified the state governments' munificence towards the Tatas say­ing that an auto-cluster would lead to an economic boom for both Singur and the state. It may be recalled that the same state government has now asked the investors to finalise their rehabilitation package for land-losers along with their detailed project report.
Source: The Statesman, 16 Sept, 2008

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