WHEN Ratan Tata, chairman, Tata group, made a dramatic announcement of setting up his small-car project in West Bengal, about two years ago, it finally raised hopes of a resurgence in the industrial scenario in the eastern state, once the country’s most advanced region.

West Bengal has over the past three decades – and ever since the Communist Party of India (Marxist) came to power in 1977 – emerged as an industrial wasteland, with countless units having had to shut down operations because of militant trade unionism. The culture of ‘bandhs’ – general shutdown of the state – go-slows, demonstrations and harassment of managements saw industrialists and businessmen pulling out of West Bengal, worsening the state’s economy.

When Buddhadeb Bhattachar-ya, a mild-mannered Marxist, succeeded Jyoti Basu as chief minister in 2000, he vowed to transform the industrial climate, encouraging businessmen to invest in the once progressive state. Bhattacharya went about introducing dramatic reforms, luring both international and domestic investors. Tata’s announcement of setting up a sprawling factory to produce his dream ‘small car,’ the Nano, from Singur in West Bengal was the most significant achievement for the chief minister.

However, last week saw a sudden U-turn in the fortunes of West Bengal, as Ratan Tata, finally announced the end of an ugly chapter in the Nano episode. And unfortunately for the Marxists, he decided to relocate the prestigious, multi-billion-dollar project to Gujarat, a state ruled by their nemesis, Narendra Modi, the Bharatiya Janata Party (BJP) chief minister.

The controversial Modi has been indicted for his role in the communal riots that rocked Gujarat in 2002, in which about 2,000 persons – mostly Muslims – were killed. As chief minister, Modi failed to prevent Hindu mobs from attacking and killing hundreds of Muslims in Ahmedabad, the political and commercial hub of Gujarat; later, his government tried to stonewall several independent probes and was warned several times by the courts.

Modi’s image has taken a severe beating, though many in his party project him as a future prime ministerial candidate of the BJP. Even the US government has denied visa to the Gujarat chief minister. Strung by the widespread criticism, Modi has been desperately wooing investors, projecting himself as a pragmatic, industry-friendly politician, and his state as a ‘vibrant’ industrial and investor hub.

Last week when Ratan Tata finally pulled out of Singur, he decided to relocate to Sanand, located on the outskirts of Ahmedabad and falling within the Gandhinagar parliamentary constitutency of BJP’s ageing prime ministerial aspirant, Lal Krishna Advani.

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THE Singur fiasco has resulted in many prominent public personalities cut a sorry figure. Mamata Bannerjee, leader of the Trinamool Congress, and also a BJP ally, has emerged as a neo-Luddite, who has done more harm to West Bengal than any contemporary figure. Her mindless obstinacy and immature handling of the protests will prove to be extremely costly, not just for her politically, but even for the state, which will continue to be relegated as the industrial backyard of India.

When Tata announced last month that he was reviewing plans of building the Nano in West Bengal following Banner-jee’s reluctance to call off the agitation, several states – including Karnataka, Maharashtra, Gujar-at, Madhya Pradesh, Rajasthan, Haryana, Uttarakhand and Orissa – came out with attractive offers, hoping to lure the premier industrial house to set up its plant.

The flurry of offers from states across the country have come as a warning to politicians-turned-professional agitators like Mamata Bannerjee, who have been virtually blackmailing investors in backward states like Jharkhand, Orissa, Goa and even in so-called progressive ones like Maharashtra, threatening them with violence and mass agitations if their ‘demands’ are not met.

More importantly, the remarkable speed with which the Gujarat government came out with a counter-offer – 1,100 acres of unencumbered land – and the quick acceptance by the Tatas, should also serve as a warning to state governments in India.

Land-related laws are the most opaque in a majority of states; consequently, acquisition of land is also one of the most complicated tasks while setting up an industry, a real estate development, an infrastructure project, or a special economic zone. Corruption is rampant and most deals are done secretively.

Even the allocation of about 1,000 acres of land to the Tatas at Singur in West Bengal was done amidst much secrecy, with the state government refusing to come out with the terms of the agreement. In such an environment, it is not difficult for opportunistic politicians like Bannerjee to make wild allegations against the two parties and raise – and sustain – the tempo of opposition to the deal.

Economists have been urging state governments not to get embroiled in land acquisition proceedings, as farmers and other land owners will always accuse them of forcibly taking over their lands and paying them measly amounts as compensation.

In Maharashtra, for instance, chief minister Vilasrao Deshmukh has been accused by none other than his own revenue minister of favouring an industrial group – Videocon – while allocating land on the outskirts of Mumbai for a high-tech electronic plant.

Many state governments now want to stay away from brokering land deals, and want investors to deal directly with farmers. However, the absence of titles, the presence of bogus documents and the plethora of disputes even between brothers over patches of land, coupled with the fact that most farmers have marginal land holdings resulting in fragmentation, discourage investors from approaching owners directly.

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THE political class in India has for decades been opposed to consolidation of land, especially by big and powerful industrial houses. The ghost of the ‘zamindari’ era – landlords in the Raj exploited the poor, forcing many governments in post-independent India to introduce radical land reforms and impose curbs on holdings – continue to haunt most politicians, who are opposed to see large tracts being vested in one entity.

But when governments want private investors to pour in billions of dollars in mega projects – including infrastructure, realty, industrial, educational, healthcare, leisure and services sectors – that would generate thousands of jobs, they have to ensure the availability of hundreds of hectares of contiguous land.

In the past, when the public sector was the dominant player in the Indian economy, the government could get away by forcibly acquiring land for so-called ‘public purposes,’ including building airports and ports, power plants, highways, industrial estates and townships. Even courts would refuse to intervene and hapless farmers had to accept whatever meagre compensation was on offer. But these days, most state governments are cash-strapped, reluctant to invest in new developments and woo investors to take up these projects.

Most state governments also set up separate agencies – for industrial development or for building satellite cities – that acquired land at low prices and then auctioned them to private developers. But with real estate prices soaring, it has caused much agony, as former landowners – from whom land was forcibly acquired at a low price – feel cheated as developers sell off built-up office and residential space at mind-boggling prices.

Some states in India have launched ambitious reforms in land-related matters, introducing computerised records, clear titles and other transparent documents. But deals involving land are among the biggest source of black money in India, and corrupt organisations at the local level – both urban and rural – have been putting up stiff resistance to these changes.

State governments and local bodies have to realise that failure to reform land laws and procedures for the consolidation, sale and lease of land, will discourage investors from taking up projects. While investors like the Tatas have the option of pulling out of a ‘land-unfriendly’ state like West Bengal and relocate to a friendlier one like Gujarat, there is always the possibility that tomorrow they may just shift to Dubai, Malaysia or Vietnam, hurting India’s economic prospects.