IN WEST BENGAL, LAND ACQUISITION FOR INDUSTRY (SLOWLY)

UNCLAS SECTION 01 OF 02 KOLKATA 000117

SIPDIS

SIPDIS

DEPT PLS PASS USTR-AADLER

E.O. 12958: N/A
TAGS: EAGR ECON EINV PGOV EFIN IN
SUBJECT: IN WEST BENGAL, LAND ACQUISITION FOR INDUSTRY (SLOWLY)
MARCHES ON

REF: 07 KOLKATA 41, 07 KOLKATA 380


1. (U) Summary: As the Government of West Bengal (GOWB)
continues its efforts to attract investment and industry into
the state, the debate over how and where to acquire land
continues in the run-up to May's panchayat (local) elections.
The Communist Party of India-Marxist (CPM)-led Left Front
coalition has faced internal friction over the CPM's interest in
further industrialization and the its efforts to speed land
acquisition in the past have met with protests and violence in
the cases of Singur and Nandigram (reftels). Despite these
controversies, the GOWB continues to facilitate land
acquisition, albeit in a more tempered manner. From March 7 to
March 18 Econoff met with an official who oversees these
projects and spoke to researchers who are following the land
acquisition issue in the state and confirmed that acquisition of
agricultural land and further industrial development remain top
GOWB priorities. End Summary.


2. (U) In West Bengal 72 percent of the population depend on
the agricultural sector and farming for their livelihoods.
Almost all of West Bengal's land is cultivable and landowners
hold less than 1.6 acres of land on average, according to
research performed by international consulting firm KPMG.
Partly due to this emphasis on agriculture, other sectors of
West Bengal's economy have faltered or remained fallow in the
past. The state ranks tenth nationally in per capita income,
with only 5.8 percent of the total number of factories in India.
Its manufacturing sector currently makes up just 11 percent to
the state's NDP, according to the KPMG report. Compelled by
these statistics, the West Bengal government is working to
attract industry projects that can infuse its economy with
capital and diversify career opportunities for its residents.

Efforts to Address Problems with Land Acquisition
--------------


3. (U) According to Economics Professor Abhirup Sarker, who has
researched land acquisition issues in West Bengal extensively,
the GOWB's haste to attract business triggered a backlash from
farmers who were disadvantaged by the prices they received for
land acquired by the state. For example, in Singur land was
purchased at prices that did not account for the "shadow value"
a farmer's labor contributes to the worth of land, or to the
future accrual of the property's value once a factory was
constructed on it. In Singur, according to Sarkar, prices in the
immediate area have risen from Rs 1.2 million (USD 30,000) per
acre paid two years ago at acquisition to Rs 5 million (USD
125,000) per acre today.


4. (U) Farmer's feelings of having gotten a raw deal have
spurred some re-thinking in the GOWB. The GOWB recently
introduced new measures that Executive Director of West Bengal
Industrial Development Corporation (WBIDC),Nandina Chakravorty,
says is aimed at ensuring corporate responsibility and providing
adequate rehabilitation and compensation to family's displaced
by land acquisition. She described this approach as an effort
to address the "multiple socio-economic dimensions associated
with land expropriation." The WBIDC is the GOWB's nodal agency
for rehabilitation and recently began using socio-economic
surveys to identify and track the needs of family's in areas
identified for industrial development and land acquisition.
These surveys provide census data and assessments of the
infrastructure and social needs of communities in areas
scheduled for land acquisition.


5. (U) According to Chakravorty, this data is used to fashion
rehabilitation packages, which might include stipulations for
employment, training, or education of displaced families.
Chakravorty said that implementation of these packages is
required before the WBIDC, which acts as an intermediary when
land is acquired for industry, releases the property to the
companies involved in the industrialization project. She said
that current rehabilitation packages include stipulations for
establishing English language schools, in addition to payment
packages for land acquired.

Attitudes Towards Land Acquisition in an Affected Area
--------------


6. (U) The GOWB recently tapped Professor Santanu Roy to
perform one of these surveys among the landholders in Singur.

KOLKATA 00000117 002 OF 002


Roy spoke with Econoff and said that according to his findings,
less than half of the landholders in Singur resent the GOWB
efforts to acquire their land. Those who do, said Roy, resent
the expropriation efforts because their psychological and
cultural ties to farming outweigh the fiscal rewards of selling
their land. In Dr. Roy's opinion, this section of the populous
provides fodder for the opposition parties' political rhetoric
as they try to leverage the concerns of traditional farmers in
order to gain broader public attention and undermine the GOWB's
policies.


7. (U) Conversely, according to Roy, about 75 percent of the
landowners were open to the financial gains made through selling
their land. This group, according to Roy, was able to take the
money they received for their land and deposit it in interest
yielding bank accounts, which are transacted through national
banks established in the area. He also said the families have
used their profits to pursue entrepreneurial ventures in sectors
outside of agriculture. Roy's research has shown that a
majority of landholders are interested in moving into new
economic sectors and GOWB Commerce and Industry Minister Nirupam
Sen has cited the West Bengal electorate's demand for
industrialization as a talking point to support land
acquisition, according to Sarkar.


You Can't Stop Progress
--------------

8. (U) According to WBIDC Executive Director Chakravarty,
controversies over projects like Singur overall have not been
detrimental to potential projects in the state. Within the last
two years, according to Chakravarty, interest in industrial
projects and the associated requisition of land have experienced
exponential growth and she does not anticipate any slow down in
the future. According to her office's data, the WBIDC will be
working to realize and complete their current portfolio of
industrialization projects and land acquisition is expected to
continue through this term as well.


9. (U) Private and public investors committed USD 2.5 billion
to West Bengal in 2006-07. The state needs 90,000 acres to
accommodate these proposals, which is 0.6 percent of the total
agricultural land (14 million acres) available. The KPMG report
on West Bengal's sustainable development says that the loss of
less than one percent of agricultural land will make no
difference to the state's food security provided issues like
investment in irrigation, adopting high yielding crop varieties,
and market distortions are resolved.


10. (U) While the Tata Motor plant on 1,000 acres in Singur is
nearing completion, the 10 million ton USD 8.7 billion steel
plant by JSW Bengal Steel in Salboni is also likely to bear
fruit. The plant will be built on 5,000 acres of land, of which
4,500 acres have already been acquired. In addition, Caparo
Engineering India, a subsidiary of the U.K.-based Caparo Group,
is setting up a sheet metal and stamping facility at Singur.
The state government is also planning two new IT-specific
special economic zones (SEZs) to accommodate IT giants Infosys,
Wipro, and TCS. These SEZs will be located in Rajarhat (323
acres) and Kalyani (200 acres).


11. (U) Comment: The ongoing issue for the CPM is how to
please both its traditionalist allies as well as those pushing
for changes in the structure of West Bengal's economy. Left
Front partners like All India Forward Bloc (AIFB) and the
Revolutionary Socialist Party (RSP) remain a thorn in the side
of the coalition's efforts at economic development, and further
criticism and threats to industrialization efforts can be
expected as local elections approach. The AIFB and RSP control
West Bengal's Ministries of Agriculture and Public Works,
respectively, which have provided both parties ample
opportunities from which to expound anti-industrialization
platforms in order to protect the farmers and special interest
groups associated with the two portfolios. This helps account
for the "slow" pace of industrialization that GOWB CM
Bhattacharjee often mentions. However, Consulate
interlocutors, including Chakravorty, the researchers, and
businessmen with whom we spoke, emphasized that the CPM is
committed to the process of industrial development and that it
is unlikely to be derailed by political opponents either from
within or without in the long term.
SURAMPUDI