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A project and some protests

Published : Nov 18, 2005 00:00 IST

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West Bengal Chief Minister Buddhadeb Bhattacharjee with the Salim Group's executive director Beni Santoso at a meeting in Kolkata on October 20 to finalise the proposal to set up a motorcycle plant in Howrah district.-SUSHANTA PATRONOBISH

West Bengal Chief Minister Buddhadeb Bhattacharjee with the Salim Group's executive director Beni Santoso at a meeting in Kolkata on October 20 to finalise the proposal to set up a motorcycle plant in Howrah district.-SUSHANTA PATRONOBISH

Despite some opposition, the West Bengal government goes ahead with its plan to invite investment in the State by the Salim Group of Indonesia as it is convinced of the benefits from the projects.

NOWHERE has the process of industrialisation been painless. The current controversy surrounding the investment that the Salim Group, an Indonesian multinational corporation (MNC), has proposed for West Bengal is reminiscent of the sabotage of the rural utopias dreamt of by Luddites in England and Narodnikies in Russia. The Salim Group's profile specifies four investment projects: a `health city', a `knowledge city', a special economic zone and an express highway. The expected timescale for completion of the projects is about 15 years. The cost is as yet unknown but will be underwritten entirely by the Salim Group. The State government has called for a more detailed project report.

The `health city' will have the most modern facilities and equipment and is expected to attract `health tourists' from abroad. The `knowledge city' will focus on the research in the fields of biotechnology, nanotechnology, biophysics and so on, serving as a magnet for future investors. All this will need a modern township close by, currently envisaged to be built on 1,500 acres (600 hectares). The projected 85-km four-lane express way will run from Barasat to Raichak which will be connected with a bridge on the Hooghly river to Haldia port.

The investment is expected to have a very positive impact on the economy of the South 24 Paraganas - one of the more backward districts in West Bengal. Recently, the Salim Group's executive director Beni Santoso visited Kolkata to finalise proposals for a motorcyle manufacturing unit in Howrah, the first major FDI venture in West Bengal. Mahabharat Motorcycle Manufacturing Company Pvt Ltd, a wholly owned subsidiary of the Salim Group, is expected to provide employment to at least 3,000 people and scheduled to be operational by June 2007. It will invest Rs.250 crores in an initial annual production of 5,000 motorcycles. Production will later be increased to two lakh. Santoso handed over a cheque to Chief Minister Buddhadeb Bhattacharjee for Rs.3.82 crores, which represents half the cost of the 65 acres (25 hectares) of land needed for the factory.

The crux of the controversy relates to the acquisition of nearly 5,000 acres (2,000 hectares) of land in one compact block. This raised an outcry from some sections of the media and the Opposition parties which accuse the State government of reneging on its pledge to improve the lot of small and marginal farmers and sharecroppers. This allegation has been effectively refuted point by point by the soft-spoken State Industries Minister, Nirupam Sen.

"It is not true that we are going back on land reforms. But there is no denying the fact that industrialisation is a must for providing growth and employment opportunities. No country has ever developed on agriculture alone," he told Frontline. Advanced economies which thrive on agricultural production and exports, such as New Zealand, Denmark, the Netherlands and Canada, have less than 10 per cent of the population engaged in the agricultural sector against 65 per cent in India. The key to successful agricultural production is to increase productivity per acre and per farmer. West Bengal, which has the greatest population density in the country, has 63.5 per cent of its land under cultivation; between 1991 and 2001 the total amount of cultivated land increased from 54,27,431.9 hectares to 54,54,679.18 hectares. "If the success of land reforms in the State has to be maintained, the pressure on land has to be reduced," said Sen.

It is not the case that those who may lose their land will not be rehabilitated; in the memorandum of understanding signed between the State government and the Salim Group there is a clear indication of providing alternative livelihoods for small and marginal farmers. The compensation, as per the Land Acquisition Act, broadly includes the following: in addition to the market value of the land assessed by the Collector, a farmer will be given a solatium of 30 per cent of the cost of the land, and 12 per cent of interest on the total value of the land for the time between the notification and the final transfer. Assessment, however, will be a long-drawn process. Moreover, the cost of homes and standing crops, if any, will be included in the total cost, and, according to Sen, attempts are being made to identify fallow land or mono-cropped areas.

These assessments, however, often founder through failure to consider lack of infrastructure such as communication facilities, availability of power, nearness of ports and so on, while the attempt to take over land locked in closed industries bristles with legal formalities and conflicts.

Interestingly, Sen has calculated that in an area under double-cropping in West Bengal, the net annual income from an acre of land is around Rs.10,000 to Rs.13,000. If an acre of this land is acquired and the farmer paid the market value as per the Land Acquisition Act, the amount of compensation due in a district like Howrah maybe as high as Rs.13 lakhs, which if kept under a fixed deposit could generate an interest income of more than Rs.1 lakh per annum. Even if one included the value of family labour, the interest surplus to the land-loser still remains significant. Moreover, those who lose land can also look forward to gainful employment in the industrial and ancilliary activities that will follow from the projects.

While West Bengal has made remarkable strides in land reform, its gains cannot be capitalised upon without rapid industrialisation to absorb the surplus population of workers released from agriculture. This is evident, according to Sen, from the fact that the returns from land have not been rising commensurate with the increase in the cost of inputs into agriculture. In consultation with the renowned agriculture scientist, M.S. Swaminathan, the State government has chalked out a policy of diversification for its rural economy, exemplified by recent investments of around Rs.1,200 crores in 187 food-processing industrial units.

There is no way of taking an overpopulated economy to prosperity without resorting to the transfer of the surplus rural manpower to manufacturing and service sectors because of the inexorable law of diminishing returns. This was first cogently argued by the economist Colin Clark in 1930. He developed a model of economic development based on the three sectors: primary (agricultural), secondary (manufacturing, mining and so on), and tertiary (service, trade, commerce and so on). According to him an economy prospers as surplus labour moves from the primary to the secondary and finally the tertiary sector. In India, the agriculture sector today accounts for barely 25 per cent of its gross domestic product, though it employs about 65 per cent of the population; India's secondary sector, unlike China, has not made enough progress to absorb the unskilled rural labour. The service sector in India, however, accounts for about 50 per cent of national GDP. The result is a mismatch between national income growth and employment generation, leading to the justifiable criticism by Communist Party of India (Marxist) Politburo member Brinda Karat of `jobless growth'.

Sidestepping the point, Nirupam Sen said that despite a buoyant agriculture, industrialisation in West Bengal urgently needs a boost; traditional industries such as jute and tea are in decline, the engineering sector in Howrah and Asansol has not yet emerged from the doldrums, and there are 25 Central public sector units in West Bengal which have been referred to the Board for Industrial and Financial Reconstruction (BIFR).

The rationale for inviting FDI is clear; apart from bringing in additional funds to supplement domestic savings, it will also bring new technology, skills and managerial practices. India's national savings rate, at about 24 per cent falls way behind that of fast-developing Asian economies such as China, Malaysia and South Korea, where it is of the order of 40 per cent. Moreover, Sen pointed out that the Salim Group investments would open up access to new markets and promote investment, both domestic and foreign. It may also lead to the development of new institutes for knowledge and skill formation.

Unfortunately, all these arguments have not been appreciated by the principal Opposition leader, Mamata Banerjee of the Trinamool Congress. She threatened to prevent Beni Santoso and his entourage from entering the city, claiming that the Left Front was taking away land from farmers to "sell it to the foreigners". She even attempted to organise sporadic road-blocks and demonstrations in front of the hotel where Santoso stayed and, of course, in front of Writers Buildings, the seat of government. But the lack of response from her own supporters turned the whole thing into what Buddhadeb Bhattacharjee called a `tamasha'. Mamata, undaunted, blamed the weather for the poor turnout.

(This story was published in the print edition of Frontline magazine dated Nov 18, 2005.)

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