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No winners if Nano project is moved

September 04, 2008

Singur's fate (but not that of the Nano project) hangs by a thread. If the West Bengal government and/ or its interlocutors are not able to get a breakthrough very quickly, or if Mamata Banerjee does not find a quick way to beat a face-saving retreat, the iconic project will be lost to West Bengal -- and, along with it, the potential for 4,500 jobs at the Tata Motors [Get Quote] plant and its ancillaries as well as suppliers one step removed.

That compares with 13,000 farmers whose land has been acquired, of which some 4,000 have not yet taken payment and are among the protestors assembled near the factory gate. The project's capital cost is Rs 1,500 crore; the money paid for 1,000 acres of land (at Rs 10 lakh an acre) is Rs 100 crore. Even if the payment to farmers for their land were doubled, the cost-benefit analysis would be a no-brainer. Indeed, the cost to Mamata Banerjee of feeding and maintaining the crowd that she has got together at Singur must be half a crore a day.

Tata Motors opted for Singur in the first place because the state aggressively wooed the company, because Ratan Tata had regard for Chief Minister Buddhadeb Bhattacharjee, and because there must have been some sympathy for a state that has seen its industrial heritage disappear over the decades. If Tata pulls out now, it will be a huge blow to the state, and will be expensive for Tata too, as the company has irretrievable sunk cost in Singur of between Rs 350 crore (Rs 3.5 billion) and Rs 500 crore (Rs 5 billion). But it is clear that this substantial cost will not prevent the company from pulling the plug on Singur and going to the company's existing facility at Pantnagar in Uttaranchal, which was supposed to be a backstop from the beginning.

In short, moving the Nano project yields only losers -- among whom will be Mamata Banerjee, who will find it hard to live down the ignominy of having deprived her state of a project that has made news the world over. Indeed, the available evidence suggests that the issue will boomerang on the Trinamool Congress leader in the coming elections. It would be ironic in the extreme if a Left Front that has been on the back foot politically finds its fortunes revived because it has lost out in its efforts to industrialise the state.

While the cost of moving out of Singur will be substantial all around, it is important to not overstate the case. Tata as a group can absorb a hit of Rs 350 crore (Rs 3.5 billion). Though it will hurt, it will not kill the Nano project or significantly affect the car's pricing. Other industrial projects are still coming up in the state, including at least three from the Tata group -- among them, a met coke project and related power station at Haldia, and a Tata Metaliks [Get Quote] project in Durgapur. The Jindal steel project in the state is making headway too.

There is also irony in the fact that, barely 10 km from Singur, Tata is setting up a cancer hospital to mark the death centenary of Jamshedji Tata. Indeed, it is possible to speculate on downstream developments at Singur itself. Will Tata cancel the lease on the land, or will it hold on to it in the hope of coming back someday, once it is clear that there will be no fresh rabble-rousing?

Also see
Tata shuts Nano plant at Singur
Why farmers are fighting Tata's Nano

Tatas to exit Bengal if protests continue



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