*Q. We had seen Trinamool Congress movement yesterday, and they had some information about some Standing Committee meeting. They went through some of the terms of the Agreement with Tata. Let me go back to some of these points. There point was that the concession is costing the government around Rs. 30 crore. They have split up the figures.
* A. I will explain to you the Tata deal. The government of India has a schemefor development of the North Eastern part of the country, i.e. Assam and surrounding other states. In order to promote investments going into those regions, which are relatively underdeveloped , the Government of India said that the excise duties for the industries coming up in the North Eastern states would be fully exempted for ten years, the corporate income tax would be fully exempted for five years and one- third exempted for the next five years. The Government of India has a tax called excise duty, it is a production tax for every item that you produce, there is different rate for different commodities, you have to pay a tax as soon as the product leavesthe factory, it is called the excise or the central excise, and obviouslythe Government of India has a corporate income tax for companies. Now this package was originally meant for the North Eastern states, but subsequently the Government of India first extended it to Sikkim and then to Himachal Pradesh and Uttarakhand. And you will find that the plains of Himachal Pradesh and the plains of Uttarakhand, which are very close to Delhi, have immediately started attracting lot of investments because of obvious financial benefits from a company perspective. Now Tatas first thought of setting the plant in West Bengal. They decided togo for West Bengal based on their assessment of the state and they really wanted to do it here. But later on they looked at the benefits in Uttarakhand where they already have a plant which manufactures the Ace, theyhave a small truck called Ace. They found it very difficult to give up thatkind of tax benefits. So in early 2006, Mr Tata personally told the Chief Minister, "I am very keen to do the project in Bengal but it is impossible to ignore the kind of financial package offered by Uttaranchal." Then the Chief Minister said, "If you want to come to our state, allow us to see whatwe can do to match the benefits." So they agree to do that because they still wanted to do the plant in Bengal. So he said, 'If you can match it,then we will come." So we had negotiations with them. The negotiation basically came down to arithmetical terms. We calculated Uttaranchal package– how much the excise duty is in terms of money for Tatas, then bring itdown to net per cent value in ten years, how much the income tax is, bringit down to net per cent value in ten years – we made some internalcalculation and some logistics. In fact the logistics were in our favour,the logistics were easier in West Bengal than in Uttarakhand. So wesubtracted that, and came to a package. We had to match it. We have no powerto reduce excise duty and income tax; those are in the turf of the Federal government. So we developed a package that consisted of no upfront paymentfor land for the mother plant, not for the vendor park – so they have notpaid upfront for the around 640 acres of land for the mother plant, they areonly paying the annual rental. We are supposed to give them a loan of Rs.200 crores, not Rs. 2000 crores, but Rs 200 crores and the rest would be byway of return of the VAT. The VAT is a tax we earn. We did this because wehave an announced Incentive Scheme which under Clause 19 of the Schemeenables us to decide on a case to case basis, packages for special categoryof industries which we think will bring lot of benefits to the state. TheVAT is something we offer to all projects. Every project enjoys VAT return.In the case of the Tatas, we have given it as a form of a loan which theywill repay at some point of time. In other cases it is usually given as aform of grant. They produce the car here, they sell the car, the state government earns VATand every year the VAT paid by them will be returned to them as a form of loan. And as I said, this VAT return is common to every project in West Bengal. In the days before the VAT came in we have the sales tax. At thattime we used to give sales tax remission, sales tax exemption, pr sales taxdeferment. When VAT came in, and it was decided by all states that no moreexemption or remission, his scheme was devised. You produce goods here, yousell it, the state government earns the VAT, next year we five it back toyou and we benchmark how many years. So that is a common thing to allinvestors in Bengal. Everybody gets that. Tatas have also got it.
Q. Normally it is a grant.
A. But this is a loan and they will return in time. All other companieshave taken it as grant. Tata is the only company so far who has said thatthey want it as loan and will repay at some point of time.
Q. Why did you agree?
A. If somebody wants to return the money, why deny? It is in our favour.It would come back to us. It would come back later and would not be the sameas the real value. But it would still come to us.
Q. And it is not interest free loan?
A. The loan is paid at a very nominal interest rate. It has interest, butvery nominal, 0.1 per cent. So basically they return the principal, theinterest in very insignificant. And we have told them that the power will besupplied by the state power distribution company at Rs. 3 per kilowatt hour,which is roughly the ongoing rate. And in case power rates go up in future,up to a rate they will pay, but if it goes up enormously, we will subsidizeto an extent, but I don't think that is going to happen.
Q. You will subsidize if it goes up?
A. We are allowing 25 paisa increase in every five year. If it goes upbeyond 25 paisa then we will help them make up the short by the VAT methodonly, no other way.
Q. And this power rate f Rs. 3 – is this normal rate or subsidized?
A. It is the normal rate and it is coming down. So even though we theprovision of going up, it will actually come down. It is the normal rate.
Q. It is very cheap.
A. Yes, it is cheap. West Bengal has cheap power. It is cheap as we havecoal reserves. Our power is cheaper than the rest of India. Anyway, so themain components are these three. The main issue in West Bengal is the landissue. In Singur, the whole debate is about the land. Why do we give theland free to the Tatas? That has been the main question. We had to give itfree – though they have not made upfront payment, it is equivalent to sayingthat we are giving it free – only they are paying the annual lease rent – itis not free land, they are on lease only and they will pay lease rental butthey don't pay what you call the lease premium which is comparable toupfront payment. We had to this consciously as we had to match theUttarakhand package. The second question about the Rs. 200 crore loan, we agreed to it.But they did not ask for it and we have not given it. So the loan has notbeen given. So all that will remain is the VAT, the annual VAT return willcontinue for a while, but there is nothing unique about it. I can give you20 other projects that we have sanctioned in the last five years which haveVAT refund incentive. So that's it.
Q. What is the rent?
A. The rent is nominal. Rs. 1 crore for the first five years, and then itgoes up. The land is cheap. For the first 30 years it goes up by the rate of 25% every five year. Then after 30th year, there is a quantum jump, theit goes up by the rate of 30% every 10 year for the next 30 years, and onthe 60th year, it goes up to Rs. 30 crore and stays there till the 90th year. After 90 years, the terms would be renegotiated. So the Tata's advantage in Bengal, and please remember this as it is very important, isvis-à-vis Uttarakhand in nothing extra. In Uttarakhand, they would not haveto pay the excise, but pay for the land. And in Bengal, they are paying theexcise, but don't have to pay for the land. They are equal. The truebeneficiary if you ask me is the Central government. If the project happenedin Uttarakhand, they had to forego the excise duty for every car producedfrom that plant for 10 years, here they earn for the very first that goesout of the factory. So the Government of India is the beneficiary. For theTatas, it is equal. It is 'barabar' for Tatas.
Q. So how much does the actual package cost?
A. The benefit given by Uttarakhand is R. 3000 per car. But there is onemore benefit here. You must highlight – Tatas do not benefit from Bengal,Rs. 3000 they would have got in Uttarakhand by virtue of excise and incometax concession, in West Bengal, they get the same Rs. 3000 per car benefitby virtue of land and the VAT concession. They are equal. They don't lose,they don't gain. What the states gains by bringing the project in WestBengal, first a Group like Tata investing, second, investing in automobilesector with immense potential. Why is there no auto-mobile hub in Eastern India? There in one in Northern India, there is one in the West and one inthe South. We wanted one in the East and West Bengal is the logical place inthe East. We wanted to develop an auto mobile cluster in West Bengal like a Gurgaon, like a Pune, like a Chennai. We did not want West Bengal to loseout the auto-mobile boom in India. That is a conscious policy. And we tookwhatever it takes to bring the project here. The benefit is obviously theemployment potential of the project, the other auto-mobile projects thatwill happen in due course, the downstream activities, the indirectemployment, image booster to the state as the Investment destination, andalso, once the VAT refund period is over, we tend to earn around Rs. 400-500crore per year from this one plant alone. Once the VAT period is over, the annual income for us even at thefixed price of the car at Rs. 1 lakh, and the present VAT rate, after fiveyears, our tax revenue will be enormous. After that period, our tax revenuewould increase significantly. The agreement also says that it is not frozenfor ever. If there is some change in the central excise duty, as it hasalready come down from 16% to 12%, immediately that Rs. 3000 per car wouldactually be less, and our package would cost less. Already Rs. 200 crore hasgone out of window. The number of years for VAT return has come down. We areworking on the calculations. If the corporate income tax comes down further,our VAT of 4% does not change. Our VAT income prospect, from one singleplant excluding the vendors, is so huge. We will earn a lot of revenue fromthis one single plant. We had to give them some concession to bring themhere in the first place. We earned nothing initially. But after five years,we earn a lot. So by giving a concession which is equivalent to what theywould have got from the Government of India in Uttarakhand, we have got themrelocated here. The biggest objective for us was not the tax benefits, butthe employment generation, improvement of state's investment climate,brining more industries, create manufacturing industry hub in Bengal. Bengalneeds manufacturing industry, and auto mobile industry is one of the keymanufacturing industries in the world. For those skeptics who think that wehave lost out, we have not lost out even from the monetary point of view. Welose the money to start with if you call concession losing money, but weearn a lot later. The land cost is Rs. 90 crore. But we will recover in thevery first year we start collection VAT. And they will pay for 90 years.
Q. About VAT rate, what is the rate?
A. There are two rates, 4% and 12%. We return the VAT collected by usfrom the plant as a form of loan.
Q. So there are two loans. One is the VAT refund and the other is the Rs.200 crore loan.
A. We have not given the Rs. 200 crore loan, and now that the centralexcise duty has come down from 16% to 12%, that loan does not need to begiven. It has been deleted out of the package. Now there are two components– the land and the VAT refund. Once the VAT period is over, the entirerevenue will accrue to the state.
Q. That is 10 years from now .
A. Might be less than that. It depends on how many cars sold here. Itdoes not depend on cars sold in Maharashtra, but here. If the car is sold insome other state, we would get inter state transfer, which is called CST.
Q. And you will also return this CST?
A. yes, we will return the composite. They don't pay VAT or tax. InUttarakhand, they don't pay excise duty for 10 years, income tax for 5years.
Q. And Uttarakhand has VAT and they have to pay that?
A. Yes. See the Tatas have asked to match the concession the Centralgovernment was giving. In all fairness, they have not asked for more. Theyhave not asked for what the Uttarakhand was additionally giving to them.They only said to match what the centre was giving. I don't know whatincentives the Uttarakhand govt. was giving. What I saying is that naddition to central concession, the Uttarakhand govt. might have someincentive schemes like us. Tatas haven't asked us to match that. They onlysaid to match the Federal.
Q. So what would be the tax benefits for five years?
A. I would give you the VAT rate, you calculate. The capacity is 2.5 laccars per year. Even half of that is sold in West Bengal, we get the VAT, forthe rest we get CST. CST is much lower then VAT.
Q. So just going into the issue of land.
A. Let me clear your doubt, why the state govt. did it. We had to givethis much of concession as we had to match Uttarakhand. Tatas were gettingthe concession of Rs. 3000 per car as central excise duty and income taxexemption. We matched that through land and VAT refund. They are gettingsame kind of package car to car. It is not different.
Q. And the land is cheap?
A. Oh yes. The land is very cheap. You can even say that the land is freeto them. It doesn't matter. They are not paying much in real term for theland. But it does not negate my argument. Assuming that we have given themRs 90 crore valued land free and forget the rent they are paying, and the VAT refund we are giving – together we match the concession the Governmentof India was giving in Uttarakhand. And as a result of this, Tatas do notget anything extra, but West Bengal stands to benefit from the plant, West Bengal's industrial process stands to benefit from having the plant here, nobody has said that the plant should not be here, everybody wants the planthere, you can see the direct and indirect employment generated by the plant.The economic boom that will happen, I don't know whether you have noticed the changes in Singur. So the economic boom that will bring to the locality and the state and attract other auto makers. Now along with Tatas, we have the auto component base as well. The mother plant is coming with an auto-component base. Component industries with serve others as well. So once we have the component base, it will attract other car makers, other carprojects. So our vision of having West Bengal as the auto mobile hub in Eastern India will gradually get implemented. And in limited sense on revenue terms, say for 10 years we are going to refund the VAT, we have given 84 crores of land free, but from the eleventh year to the ninetieth year, our VAT collection would out way this by many many times. So the state has benefitted even on monetary terms. We have incurred some loss initially. My net outgo is actually 84 crore. On VAT, they will pay the VAT, get it returned next year. Say the tax refund is for 10 years, so for 10years, I am not getting the revenue for 10 years, but since the volume is huge, from 11th year, we earn the revenue. If we compare the net present value of tax weare foregoing to net present value of tax we will earn, the later would outnumber by many times. We gain in monetary terms, we gain from the employment generation – people earn money and spend that – so we earn revenue from that and also we get tax revenue from the people who buy the car. So it is slightly short sighted to say that the state is incurring loss. The initial loss would be compensated many times once the refund period is over. So in long term, the state has not lost monetarily, rather it has gained significantly.
Q. Why this land was chosen?
A. We first though of locating the land in Kharagpur. Presently Tatas are on the National Highway toward Delhi. Kharagpur is on the National Highway towards Mumbai. It is in another direction. Kharagpur was chosen as we could see that land would be available there. And Tatas already have two small factories there, Tata Metaliks and Tata Bearings. And Tata Steel itself is not far away. Kharagpur is one the way to Jamshedpur. But when we discussed this with them, they said they would like this project close to Kolkata for logistic reasons, for proximity to airport and for being close to the city itself. So we showed them 4-5 locations.
Q. When was this?
A. In 2006. We have shown 3-4 locations in Howrah and 2-3 locations inHooghly. Obviously we did not anticipate the problem we would face over land near Kolkata at that time. Singur has taught us many lessons. But at that time, it was a new thing happening. Having seen its proximity to the airport, the new bridge that has been constructed, airport is only 30 min drive, and the fact that Hooghly is a developed district, by West Bengal standard, they are fairly developed state and they can see the development and the land and chose Singur. We showed then 5-6 locations, they chose what they liked. It was not their fault. We did not know there would be problem. For all you know, there might have problem in Kharagpur. We did not anticipate a problem in Singur in this dimension. I think the problems have grown, addressing at the right time would have brought down the issue. I think dialogues, discussion can find a solution. And sooner they start, the better. So that was the history of the land. It was available. We had shown them 5-6 lands. But on the highway, a stretch of land was available. There was nothing special about it. Those who talk about moving the project by a kilometer or on the other side of the land miss the point. The anxieties of the farmers who feel the pain of displacement do not easily see the future benefit. Or even if they can understand the benefit, they do not know how they would get benefit for themselves. That is the root problem. And that problem might have happened anywhere in West Bengal. The problem was unique,we did not encounter the same problem anywhere else.
It is a question of clear anxiety –
a. I am being displaced from my ancestral property, it was my asset, I have to part away with it. There is a sense of loss.
b. when they talk about the future growth, either the person can not conceptualize the future growth, and even if he is educated and visualize, he does not know how he himself would benefit from that. That is the main problem. Howwould I get the benefits? Do I get the TV, fridge or pucca house? Apermanent source of income? Other would earn. But how would I do that? We have to address that. We can not just console him, rather give answers to his queries. Now the first answer would be to give a very good compensation package, which we are now doing. Singur has been a lesson for us. Now we do the consensus building, stakeholders' meeting, conferences, now in West Bengal, we are not having problems over land acquisition any where. Because there is agreement for the project, there is agreement for the land of the project, there is some agreement on the future benefit package. This did not happen in Singur. We now tell them, but by the time, the agitation has taken shape. So first question would be good price, that question is open. In Singur, the land price was good – 8 lac per acre for single crop and 12 lac per acre for multi crop. Then you create a financial return flow so that they also have some income in their hand. But definitely one job per family should be a target. Between us, the vendors and Tata Motors we should look increase to a 2,500. What we need to do this to come at this number should be found in a socio-economic survey which we could not do as there was hostility. There still is hostility. Since the government could not get involved, we should get an agency on the ground to do a proper socio-economic survey. And if we focus on the actual people who have lost their land, not the absentee landlords and those who have land elsewhere. They should be our primary target. Primary target should be who are actually farming, owner or a share cropper and whose land has been acquired and who has no other land. They are the real needy, they are actually displaced and the survey must identify these people. And a package should be created that ensure one person per family is accommodated in some jobs, who should earn not less than what he earned from agriculture. And the money he has earned from land could be put in a bank. His regular monthly income is assured through his job and the money he has got from his land can be invested and take care of his family.
** *Q. Why the government acquires land on behalf of a company?
* A. If the project, whoever it is, once it is set up, achieves a publicpurpose, then it is done. The public purpose now in this case is employmentgeneration and growth. And that is a valid public purpose. And not only ourview, as of know it stands vindicated by the high court. High court hasupheld the public purpose in this case. Has upheld the validity of theacquisition. So that is the judgment of the Calcutta High Court.?? There'sonly one act, it has been used by the colonial power for 47+6= 53 years andhas been used by independent India for 60 years. The colonial government has used for 53 years and independent India has used it for 60 years. At that time the price was good. It was for single crop, it was 8 lakhs or something, 8 – 8and a half, and for the double crop it was 12 – A lakh an acre. At that point of time, the agitation has never been on the price, which would have been a much easier agitation to address and settle. Theagitation was not on price! That could have been settled on Day One acrossthe table by discussion. If the question is price, negotiate the price.
*Q. How do you calculate the price?*
A. The price is normally calculated in land acquisition by consulting thesale deals in that area of the previous 3 years. And all the lower valuesale deals were kept out and the higher value sale were averaged. That onlygave this figure. This is done by the Collector of the District. But I knowhow he did it.
*Q. This is the way all round India?
* A. This is the way round the India. Now, if the agitation has been onprice, it could have been settled much earlier. The agitation was – don'ttake the land. And it's still is there. Don't take the land creates problemfor the project. Land is needed for the project. Don't take the land ….youcannot have the project! So anxiety to be removed through dialogue and tocreate a set of package or whatever a set of benefits which will convincethe farmer, yes, he can actually , can palpably feel he is going to bebetter off – he and his family. And not only farmers, we take care of thesharecroppers and also farmers, they are not the owners but they are theactual tillers and the agricultural laborers who used to work on the fieldsas landless laborers.
*Q. How do you people derive the number of landless ?
* A. Hard to say. We can count the owners, we can count the recorded sharecroppers. Perhaps we can do a census and count the laborers. But somebody was selling vegetables and if he argues that the vegetable sold was produced in that field only, then he is also an affected person. But it is hard to find a link. The person who is selling cauliflowers or potatoes, whatever, which actually came from that field and as a trader or theseller, he cannot access somebody else's field, he is the trader. But ifyou extend the logic, then, even these people who somehow or other traded inagricultural products! And if not full, part of what he traded came fromthese fields. Vat rate is 12.5 %. So we earn 12 and a half thousand rupees for every onelakh of cars sold.
*Q. So altogether someone say it to be 10,000 people.
*A. Yes in West Bengal's case definitely yes. The opposite of that is you letthe company go and buy it directly, now I would not speak for the whole ofIndia but in West Bengal average land holding is less then a hectar, ok. Probably then an acre in most cases, that small 1 acre plot by hindusuccession laws is held by many, all brothers all siblings, sisters, theyall own it. In fact when we tried to pay out the cheques we found out that the person in whose name the land was recorded is not there. And his children grandchildren are all the owners, because if he was the owner thenall of them have a share in his property, then all of them are owners. So asI said so small plots and multiple ownership plot. Now when a large manufacturing project wants to buy large land by directly negotiating, itwill take years to establish contact with all the sellers. Buyer is one,sellers are numerous. To establish contact with all the sellers, toestablish a uniform price, it will take years. Right? 1 project yes we seethe Tata but smaller plants which have come in Bengal 50 acres, 100 acresthey all buy directly because up to that its still doable, 1000 acres 5000acres in steel plants its close to impossible it will take years and neverwill they be able to establish a uniformity of price, then what happens? Insuch cases you'll find that the buyer being a manufacturing company, nothaving expertise in sort of negotiating land deals will employ the serviceof brokers, and when brokers come in there is lack of transparency. We actually, the government have no way to find out that the price actually paid by the manufacturing company?? The brokers, how much of it is actually leased to the farmers? Then the manufacturing or the direct purchase willnot perhaps take care of the interest of the share croppers; certainly willnot take care of the interest of the agricultural labourer. They may be leftout in the process if direct purchased by the company. There would be otherproblems like there are u know in Bengal we have what is called a patta landwhich is government land, land which is vested in the government is givenout to a landless farmers. You know in West Bengal there is Land Reforms,one of the foundation of land reforms, we have a land ceiling laws, so inthe 50's and 60's land in excess of ceiling was identified and vested withthe state. And what the state did with this vested land was in most casesgiven small chunks 1 acre, half acre whatever to the landless. So a lot oflandless people are now land owners. Right, and one of the criticisms thegovernment is facing is you did so much for poor agriculture and now you aregoing against them? So this is called a patta, the instrument is called thepatta. The piece of paper by which the land is given is called the patta.Now patta land cannot be sold. So if a company is trying to do a directpurchase, could be unable to buy legally the patta land from the pattaholders, it will be illegal. Similarly there are a lot of laws about theland belonging to tribal people. Person belonging to the tribes. India hasseveral tribes, the land belonging to tribal people cannot be purchased. Cannot be alienated by direct purchase like that, it can be done, but thereare a lot of legalities and all that and a lot of provision has to be taken.Direct purchase will also not be able to address these features. But themost important feature is the first one, time. You want to set up a plant,you've made a decision, studied the market, you looked at the raw materials,you're a manufacturing company, and you're not a land dealer. You want tospend 3 years 4 years buying the land? Your project and economics have gonehaywire by that time. Isn't it? Now let us look at acquisition, what is thenegative of acquisition that it is forcible, that is the negative side ofacquisition, you can bargain the price, but you can't say you can't sell.You are not selling ?? So supposing now the negative aspect, the forciblepart of acquisition is addressed, which is what we are not doing, before theacquisition process starts , the legal process starts we have the meetingsat the local levels with the elected representatives of the local levels,with the political parties of the local level. and if possible addressvillage level meetings, where the villagers themselves can come, thegovernment explains, the investing company explains what the project is, wetry to create a consensus, not a hundred percent consensus, in a democracyyou never get a 100 percent consensus but a majority consensus, that yesthis project is welcome in the area, that this is the kind of land requiredfor the project, we agree, these are the identified plots that are to beacquired for the project, this is the kind of price that we are going to payfor the land after acquisition and this is the kind of future we havepackaged and the community development work that will be taken up in ourcase in our villages, if these agreements are there in place, and then youstart the legal acquisition process, it is no longer forcible. People'ssupport is there. Then what acquisition achieves, the policy of acquisitionachieves is – a) uniformity of price, everybody gets the same price, youdon't have one person holding out saying you buy my neighbour's land andcome to me with a higher price. Otherwise, I would not sell. So it ensuresuniformity of price on the same type of land. b) You take care of the sharecroppers. A package for share croppers. We are doing it in Singur. Butagricultural labourers are not covered by Land Acquisition Act. The lawtalks about the owners and share croppers. The law does not talk about thelabourer. That is one weakness of the Act – it talks about compensation tothe owner, compensation to the share cropper (that was also inserted later),but there was no mention of agricultural labourer. So that was given outsidethe law itself, but separately. It ensures that the whole process is over insix months and land is in possession. It can be done in six months. It canbe done even earlier than that. Counting the minimum time and some overlaps,it takes about six months.
*Q. What is the solution now to Singur?*
A. I can not give you the specifics of the settlement. That will have tobe developed through dialogue. But I can see a settlement. That has notstarted, but I can see a settlement coming. Nobody wants the project to goaway. The agitation has achieved what it has aimed to achieve, what ever wastheir goal broadly. I think returning 400 acres is a doable proposition.Demand has been made, but it was understood also. It has to be in terms ofcompensation and other community works. Singur people, particularly thosearound 5-6 villages, must clearly see the benefits in their hands. Some kindof an acceptable package which would make them happy. In terms of happinessif calculates in terms of monetary gain, there is no end. But somethingrealistically will happen. We will reach a doable package. It could beincreasing the amount, or other thing also. I will not get into that. Letthe dialogue happen. It is difficult to forecast how this will happen. Butthe problem in Bengal is the absence of dialogue between the govt and theopposition part. And that has to happen.