Sunday, January 21, 2007

Rs 160-crore bonanza for Tatas

This is just an example how government subsidizes big companies with our hard earn money. All Acts and Laws --government's every action is only to maximize big companies' profit. This is what they call 'Industrialisation', the 'Development'.

Rs 160-crore bonanza for Tatas

Manash Ghosh

KOLKATA, Jan. 19: Neither Bengal chief minister Mr Buddhadeb Bhattacharjee nor the chairman of the Tata group Mr Ratan Tata has agreed to divulge the terms and conditions under which Tata Motors Limited (TML) has decided to set up a factory at Singur for manufacturing small cars to be sold for Rs 1 lakh. The chief minister and his industries minister Mr Nirupam Sen have both said on record that “these are trade secrets”. Indeed and undoubtedly they are. The chief minister is scared that making the terms public would amount to opening a Pandora’s box.

Because both Mr Bhattacharjee and Mr Sen are “committed to provide” for the Singur small-car project “upfront infrastructural assistance” possibly worth over Rs 160 crore. The amount is equivalent to the 16 per cent excise exemption that TML would have got if it had set up its small-car plant in Uttaranchal ~ a state that enjoys zero excise duty benefit ~ instead of in West Bengal. This commitment for “significant support in the form of upfront infrastructural assistance” was made by Mr Bhattacharjee “to make the TML investment in West Bengal attractive”.

A virtual gift of 650 acres of prime land to Tata Housing Development Company (THDC) in Rajarhat New Town and in the adjoining Bhangar Rajarhat Area Development Authority for building an IT and residential township along with WBIDC as a partner is also part of Mr Bhattacharjee’s “commitment” to provide “upfront infrastructural assistance” for the TML-Singur project. The “gift” has been made with the idea that the profit that THDC and WBIDC would make here will be used for subsidising the manufacturing cost of the first series of the Rs one lakh cars to be made by TML at Singur. The Tatas had sought this “gift” so as to enable themselves to provide a cross-subsidy for keeping the cost of their first series of 100,000 cars within the Rs 1 lakh price target. This “gift”, incidentally, is over and above the Rs 140 crore that Mr Bhattacharjee has already committed from the state exchequer to pay compensation to about 12,000 farmers whose 1000 acres of highly fertile multi-crop land have been acquired for the car project.

The chief minister’s “commitment to provide upfront infrastructural assistance” is part of the deal he made with Mr Tata to bag the small-car project for West Bengal ~ the official document saying so is in possession of The Statesman. The letter dated 10 October last year written by Dr Sabyasachi Sen, principal secretary of West Bengal’s commerce and industries department, to the Housing and Infrastructure Development Corporation (Hidco), spills the beans. It reveals how the chief minister’s “commitment to provide support in the form of upfront infrastructural assistance” for TML’s Singur project will be honoured.

Right at the outset, Dr Sen states that the “overall financial situation” of the Left Front government would not allow it to draw huge funds from the exchequer for providing “infrastructural assistance” to the TML project. Seeking budgetary support for the purpose will be out of the question as this would attract legislative scrutiny and censure by the CAG because providing exclusive infrastructure assistance to any private company’s project is not part of the Left Front government’s stated industrial policy. Making a complete departure from this policy to benefit a particular private player would not only be construed as unethical but would also be cited as discriminatory by other companies that would demand similar “infrastuctural assistance” for their projects in the state. Dr Sen’s letter states: “In order to bring TML investment in(to) West Bengal we had to face competition from other states, in particular, Uttaranchal which enjoys zero excise duty benefit. For a car proposed to be priced at Rs1 lakh, the exemption of 16 per cent excise duty makes a major difference. Therefore, in order to make the investment in West Bengal attractive to TML, the state government has to offer significant support in the form of upfront infrastructural assistance.”

Dr Sen then goes on to state how money is to be found for providing this “support”. “We have received a proposal from Tata Housing Development Company, another Tata group company, for development of an IT township in West Bengal in partnership with WBIDC. The agreement proposed to be executed between THDC and WBIDC envisages that the revenue earned by WBIDC from this project will enable it to fulfil its commitment for the TML project. The IT township project, spread over 600 acres, is proposed to be located within Rajarhat PS outside the boundary of Rajarhat New Town. However, for this project to provide adequate revenue to THDC, they (Tatas) have requested for allotment of 50 acres of land within Rajarhat New Town.

“Thus the composite IT-cum-residential project to be implemented by THDC comprising 50 acres in Rajarhat New Town and 600 acres in the Bhangar Rajarhat Area Development Authority will enable this project to offer sufficient returns to WBIDC. This in turn will enable WBIDC to meet its commitment of infrastructural assistance to the TML project without having to resort to government budgetary support.”
In other words, both THDC and WBIDC are being given prime land in Rajarhat and BRADA areas with the specific purpose of helping them make enough money there, aka providing the promised “upfront infrastructural assistance” for the Singur small-car project. This would go a long way in subsidising TML’s manufacturing costs at Singur. All of this was discussed and approved by the standing committee of the Cabinet on industry of which the chief minister, the industries minister and finance minister Mr Asim Dasgupta are members.

The committee had directed Hidco, which is executing the Rajarhat New Town project, to allot THDC 20 acres of prime commercial land for building an IT hub and an adjacent 30 acres for residential purposes. The price of commercial land was fixed at Rs 3 crore per acre and the Cabinet fixed a special concessional price of Rs 2.50 crore per acre for the residential land. The standing committee overruled objections that a self-financing government company like Hidco, which runs without budgetary support and is still in its infancy, could hardly afford this loss. The committee pointed out that this “little sacrifice” on Hidco’s part was necessary to get the TML project going at Singur. It didn’t matter if THDC and WBIDC made gains at Hidco’s expense. No amount of argument could convince committee members that providing concessions to a giant real estate and building company like THDC (which has built huge estates and developed properties for L&T, Lupin Laboratories and Phillips in Mumbai) was an unsound proposition.

Also, the standing committee refused to divulge the price fixed for 600 acres to be allotted to THDC in BRADA area for building another IT-cum-residential complex. Objections regarding WBIDC utilising profit earned in Rajarhat and BRADA areas for providing “upfront infrastructural assistance” in Singur were also raised. This was because TML’s proposed Singur car project is not a joint venture and WBIDC is not a partner in it. TML is an independent private company responsible only to its shareholders and WBIDC is not among its shareholders. In fact, WBIDC’s involvement in the Singur project was restricted only to make available land to TML to avoid the costlier route of land acquisition for a private company as provided under chapter 7 of Land Acquisition Act of 1894. And there was no government policy allowing WBIDC to utilise its profits to help TML’s Singur project get off the ground.

“Of the over 1600 acres land to be given to the Tatas in Singur, Rajarhat and in BRADA areas, only 300 to 350 acres at Singur will be needed for the car factory,” said a senior state government official. “The rest will be utilised for real estate purposes and earning a high profit by the Tatas. This is not acceptable to many of us. This is not industrialisation. So many open-ended commitments have been made by the chief minister that the whole deal smacks of sleaze and skullduggery.”


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