TATA Nano Dreamz

Saturday, September 6, 2008

With the Tatas’ Nano factory in Singur under siege for the past several days, things are looking bad for the West Bengal government. A non-democratic society might well have precipitated a new version of Tiananmen Square. But ours cannot afford that option, though the violent incidents at Nandigram last year didn’t fulfil some of the basic requirements of a democracy. The Singur crisis has reached a tipping point with the Tatas threatening to leave and the West Bengal governor being forced to intervene. Is there a credible way to defuse the crisis? Clearly, the return of the 400 acres in Singur — that is at the heart of the current dispute — will not help the farmers since the land is no longer cultivable. There is no reason to believe, therefore, that the opposition is engaged in preserving the bucolic charm of rural West Bengal. What it clearly wants is more money to be shared between the party bosses and cadre. Besides, they are well aware that under the present legal arrangement, the land acquired by the government under the 1894 Act cannot be returned in any case, though a higher price can surely be offered. Land prices in and around Singur have been continuously rising ever since the Nano plant began coming up. There is no way the government can afford to pay the prevailing price. However, if the Tatas leave, the price will fall to negligible levels.

A rise in the ex-factory price by Rs 10,000 will not affect consumer demand. The market can undoubtedly afford to pay more. The advantage of this proposal is that the Tatas do not need to cough up the money themselves since the consumers are paying it. The disadvantage is that the Tatas cannot offer the money directly to the farmers since the government owns the land. Hence, the funds need to be handed over to the West Bengal government as a loan. This would be a one-time loan and could be offered at a low rate, like the government’s soft loan of Rs 200 crore to Tata at 1 per cent interest for 20 years. Another subsidy the Tatas were offered was the low rent of Rs 1 crore for the next five years. This too could be modified. Will the Nano price be brought down to Rs 1 lakh after a year or so i.e. after the farmers have been paid off ? The price need not be brought down. In return for the higher price, the Tatas would be less dependent on subsidies which, in any case, would have been borne out of taxes collected from the middle class. Also, with the current annual rate of inflation hovering around 12 per cent, it is almost certain that the Nano’s price will rise soon enough. By leaving Singur, the Tatas would have to bear the extra cost and trouble of relocation. By following the suggested policy, they can avoid this as well as ensure steady profits. Indeed, a price revision for the Nano could well have its merits.


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