Wednesday, September 03, 2008

Tough Questions from Singur: Tata Motors and Government Vs Farmers

Tata Motors as stopped work in Singur in West Bengal, but its spokesperson said that there is still a small window open for Tata to return if normalcy returns. The $350 Mn that Tata Motors has put into the project is now a sunk cost. There are two scenarios for Tata to return.

  1. Farmers give in (of their own volition/ forced or coaxed by government/ community pressure from lure of future jobs etc)
  2. Or Tata strikes a deal with the farmers and gives additional payout to these farmers

The second scenario is appealing if the total payout would be lower than the amount Tata would have to invest in a new factory elsewhere + time costs. However this would not generally be good for other companies (and even for Tata) as this could potentially become a trend.

Even if the government acquired the land from the farmers at the prevailing market price, it is always a fraction of the land value after is handed over to the industry. The question is, at what price should the government acquire land. Is forced acquisition justified. What happens if one farmer does not want to give up his land and his land is smack in the middle of the land in question. What is your answer if the farmer in question is you and you little hut, that you call home, is smack in the center of it. What if farming is the only thing you have done your entire life. These are tough questions to answer if you are not the farmer.

And without fail, there are also rumors/reports of people close to the government owning a substantial stretch of land close to the land under question. What of these?

However, if you were a true believer in free markets, you would ask Tata to acquire land on their own at market rates and go fetch elsewhere even if one farmer refuses. The pseudo capitalists would let the government do their dirty in this case and use the free market argument to get government to slacken regulations elsewhere. What would you call such people? Ethical?

Certainly not....

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