The Cheapest Car Ever Made

As we had often come back to discussing economic benefits/impact of sports I thought it was about time for an economic discussion forum.
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Re: The Cheapest Car Ever Made

Postby prasen9 » Mon Aug 25, 2008 3:03 am

Jay, given the bad rep the labor force in WB has cropped over the years, perhaps rightfully, and given that there were several suitors for the project, the government perhaps had no other option than to give that deal.  I think Naidu started it with large corporate subsidies like this to get industry to Hyderabad.  I believe the calculation is based on the number of jobs and future benefits in the form of supply industries, etc.  This is also has some PR value in that the state has changed.  A successful Tata project may pave the way for industries in the future, who, hopefully will not be so subsidized.  The hypocrisy comes from the business types who rant at agricultural and social subsidies and forget the business subsidies.  I would rather that there be no such subsidies, but, this may be the cost of getting capital in. 

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Re: The Cheapest Car Ever Made

Postby PKBasu » Mon Aug 25, 2008 4:36 am

This is simply modern capitalism at work. US cities fight all the time to get businesses, sports teams, and either iconic institutions to locate within their municipal limits rather than elsewhere -- and of course US states do the same (Bill Clinton made his career on being such a smart executive). Such inter-state competition has now come to India, and it is no bad thing.

(In Singapore, the government has reclaimed land from the sea, joined seven islands together and created a single large island where it has built the appropriate infrastructure for it to be entirely devoted to the petrochemical industry; in the past three quarters, massive investments by MNCs have finally started pouring in. China, Malaysia, everybody in Asia does things like this, although Singapore goes to extremes: with a massive fiscal surplus, it can afford to make the petrochemical-specific land available to that industry -- coupled with specifically-trained skilled labour for that industry -- without charging for the cost of the infrastructure created over a decade, and often with an equity stake taken by a government corporation to further sweeten the deal.)

Indian states can't afford so many freebies -- as they are in very poor shape fiscally -- but the only ones they can afford relate to land allocation (although I wonder how WB, with its parlous fiscal shape, will finance this bit of generosity to Tata). Anyway, I don't mind such freebies going to Indian corporates. But when they go to foreign corporates (and especially to ones like the "Salim" group, the Indonesian-Chinese family that was discredited for being the leading cronies of the late president Suharto over four decades) my hackles go up. The problem with Mamata is that she conflates issues, pounces on whatever she can, and knows very little else apart from agitation. She should have persisted with Nandigram (where I think she is on more solid ground) and worked out a decent compromise deal with Ratan Tata on Singur, to get her workers jobs etc. for the long term. But such basic logic appears not to work with her, as she seems to be motivated mainly by the adrenalin rush she gets from agitating a large crowd (the same problem that afflicts Indian politicians everywhere, including of course in Kashmir).   

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Re: The Cheapest Car Ever Made

Postby prasen9 » Mon Aug 25, 2008 5:13 am

I do not know as much as PKB about these things, but that has not stopped me from arguing sometimes to see where the argument leads to and perhaps learn.  As an argument, I do not buy that because everyone does it, it is okay.  Almost everybody subsidizes agriculture; I do not think it is right and encourages waste or poor methods.  If the government has done due diligence and it knows that at the end it will come out ahead, counting the benefits to the local and state residents, then I would pinch my nose and say the sweetheart deal is okay. 

Even then, there are questions about whether this is the best way to generate employment and the best use of the money.  This is the same government that cannot fund its hospitals, etc.  My brother is an ophthalmologist and he said that the techniques that they use and learn in medical colleges in the state are about forty years old and nobody in the world use it anymore.  Some medical historians from Netherlands visited their hospital 5-7 years ago when he was in college to find out how some operations were done 40 years ago :-(  Such is the state of the hospitals in the state.

The only way they are managing this sleight of hand is by decreeing that the land has to be given to the state at half price if kujo is correct (at any rate, I am almost certain it was taken over at a cheap rate).  So, in essence the government is robbing from the farmers and giving to industry.  Just because everyone else does it, ... 

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Re: The Cheapest Car Ever Made

Postby prasen9 » Mon Aug 25, 2008 5:23 am

This is rather murky.  There seems to be some other land nearby that could have been used.  So, BBS' original question about whether there was other non-farm land that could be used comes into play.  Rediff Article

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Re: The Cheapest Car Ever Made

Postby PKBasu2 » Tue Aug 26, 2008 4:52 am

Of course, my argument isn't that everyone does it and so it's fine. Far from it. First, if the state indeed robbed the farmers I would strongly object to it. They were paid handsomely at the time, although perhaps not full market price. It is the responsibility of the state to provide adequate compensation if it can be independently determined that the farmers were not paid full market price. (there definitely was some skulduggery involved, in that Singur is a Trinamul stronghold, the land is fertile -- which provide two strong reasons why the CPI-M was being disingenuous in locating the project there).
Second, on the matter of giving the land to industry, WB has attracted an iconic project that the whole world is focused on. Once the West Bengal government laid out the red carpet to attract this iconic project, it behooves them to fully defend the Tatas, and ensure that law and order does not collapse. As usual, the WB government has failed in its task of governance.

The worst aspect of this is that the agitation is occurring now, when the project is close to completion. What does lasting damage to a state/nation is when property rights are over-turned retrospectively -- after major investments have been made on the basis of an existing contract. The sanctity of contract is essential to the functioning of capitalism. (Dabhol, for instance, was a classic example: the terms on which that project was given to Enron were awful; but the time to object was when the deal was done, not when the Dabhol project had started supplying electricity based on that contract). When a state enters into a contract, and then is obliged to renege on that contract just as it is being implemented (after major investments have been made on the basis of that contract), it does permanent damage to that state's reputation as a contracting party and place to do business in. Bengal's reputation was decimated during the '60s (because of Naxalism), 70s, 80s and 90s (because of the CPI-M's anti-business approach/attitude). Rebuilding that reputation is a herculean task; killing the Nano project will doom Bengal's latest attempt at industrialisation for perhaps another decade.

In turn, the lack of industry (and weakness in services) will mean that Bengal's main export will remain its people -- who will go everywhere but their own state in search of a living. Agriculture in India is over-burdened with too much surplus labour -- which results in very low absolute levels of productivity (both of labour and land). Taking fertile land for industry is fatuous, but Mamata should have protested like this before the project started, not now that it is about to start producing the final product. In the long-term, the Nano project will make Singur and its residents much more prosperous than agriculture ever could or would, but the project will disrupt their lives in the interim. Of course, the CPI(M)'s shenanigans (and especially the strong-arm tactics and corruption that are at the heart of the problem here) are ultimately responsible, although Buddhadeb is largely paying retrospectively for the sins of his predecessor, and the unseemly tactics of his party cadre. The trick now is for Buddhadeb to come up with a compensation scheme for the dispossessed, Ratan Tata to try and find out if there are rational ways in which to appease Mamata (rather than threatening to move the project), and for all parties to try and look to the long term (rather than their immediate short-term gain).

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Re: The Cheapest Car Ever Made

Postby prasen9 » Wed Aug 27, 2008 3:55 am

Jindal says Double the land. JSW is setting up a huge plant in Medinipur. He bought 480 acres in Salboni. Why did the farmers not revolt there? Why could Mamata not stir up sentiments there? Because he gave them an exemplary package. People are not stupid. If you give them a fair price and slightly more, they will not kill themselves. In this case, it is an attempt by the government to rob the farmers, plain and simple.

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Re: The Cheapest Car Ever Made

Postby prasen9 » Wed Aug 27, 2008 4:14 am

PKB, in general I agree to the post. However, there are some statements that I have to respond to:
PKBasu2 wrote:Of course, my argument isn't that everyone does it and so it's fine. Far from it.
Great! Thanks for the clarification.
First, if the state indeed robbed the farmers I would strongly object to it. They were paid handsomely at the time, although perhaps not full market price. It is the responsibility of the state to provide adequate compensation if it can be independently determined that the farmers were not paid full market price.
The middle sentence seems to be expressing a different sentiment than the first and third one. I do not understand how you can reconcile them. So, paying less than the market price should be considered handsome payment? Perhaps it was a loose comment. If I take your house away and give you half the price, I am sure you will not say that you were compensated handsomely. The rest of your post seems to say that you want them to get fair compensation. [So just to irk you,] is this sentence a Freudian slip? We all have our biases, anyway.
...but Mamata should have protested like this before the project started, not now that it is about to start producing the final product...
You know what they are doing, don't you? Essentially, this is all part of their strategy. I think they do not want the project to go away. They just want cheap mileage and the people want to renegotiate a better deal. When will you be most effective in getting your way? When the company has made significant investment and is looking at big losses by moving. Only then, does the protesting party have more leverage. So, this is a drama that has been well thought out by the other side too. I would rather it did not happen now as you have said, but, I expected this. I also expect this to be sorted out by paying more money. I expect the Tatas to threaten pullout to get leverage. Now sometimes uncertain things happen when passions stir up, so in the worst case, someone may get killed and that will flare up passions to a point of no return. The situation is precarious, but, if things go according to the script, this will be settled by more compensation. If they wanted the Tatas to go away, there would have been more vigorous opposition two years ago.
In the long-term, the Nano project will make Singur and its residents much more prosperous than agriculture ever could or would, but the project will disrupt their lives in the interim.
Yes, but, it will be a different set of residents. Not these farmers. I have struggled with the answer to this question. It is the same principle in the Narmada movement. Is it conscionable to sacrifice some individuals for the good down the line of another set of individuals if the second set is larger in number? In this case, with some care, a good compromise was and is still possible so that not to hurt the farmers drastically.

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Re: The Cheapest Car Ever Made

Postby Sandeep » Wed Aug 27, 2008 7:50 am

The middle sentence seems to be expressing a different sentiment than the first and third one. I do not understand how you can reconcile them. So, paying less than the market price should be considered handsome payment? Perhaps it was a loose comment. If I take your house away and give you half the price, I am sure you will not say that you were compensated handsomely. The rest of your post seems to say that you want them to get fair compensation. [So just to irk you,] is this sentence a Freudian slip? We all have our biases, anyway.


Prasen as you must be knowing, there are always two values to a land in India. One set by the governemt and the other which is the selling price. With black money being so rampant in India, majority of the people to evade registration fees and taxes just show the government value as the price for which they bought on official documents. For example let us assume that 'A' is buying a land from 'B' for Rs.1 lakh out of which only Rs.50,000 is paid officially and the rest in the form of balck money. Now, if the government decides to acquire the land, what should be the compensation? Obviously, it will be Rs.50,000 only.

From the land owner's point of view it is not justified but government can only pay the maount which he bought for (may be a little more but not double!). How do you solve a problem like this? Whose fault is it?

I think what PKB meant by market price is what I termed as selling price. There is no way government can acquire land without paying the market value it has fixed. People have every right to go to the court and they will win if it is such a case. I think what is happening in Singur is what happened to A in the above example. I don't see a solution for these problems as long as black money exists and acquiring land will be a perennial problem.

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Re: The Cheapest Car Ever Made

Postby prasen9 » Wed Aug 27, 2008 12:59 pm

Sandeep, I understand what you are saying. First, the government should not be in the business of setting land prices. Second, the government, I believe, has the power to update the land prices and set a fair market amount. It does not have to stick to old comparables (data points). Third, knowing that this is the case, even if it did not have the money to more money, other compensation could be given. For example, an offer to train the laborers there for free. Jindal gave shares in the company. Etc. Nobody tried to stop the government from doing any of those to make up in kind. Fourth, there was already land available being held by the promoters (500 acres) nearby. Why was that non-agricultural land not taken? So, these are crutches. The government does not have the funds to perhaps give a fair package. And maybe wanted to keep costs down. So, it passed on the burden/loss to the farmers. It should have asked Tata to do more.

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Re: The Cheapest Car Ever Made

Postby Sandeep » Wed Aug 27, 2008 1:51 pm

First, the government should not be in the business of setting land prices.


If government doesn't set land prices, then they will hardly get any revenue from registration and capital gains (by selling land)!! It might work out in countries where the black money is not as rampant as in India, but here there defintely has to be a price from government's end. If not, I will even go ahead and register land for Rs.1!!

Second, the government, I believe, has the power to update the land prices and set a fair market amount. It does not have to stick to old comparables (data points).


Governments keep updating the market price from time to time. Is it fair or not is a different thing. As a buyer I can always go ahead and buy the land at fair market price irrespective of what the government price is. If I deliberately undervalue my property that is not government's problem. Obviously they will pay me the amount I bought for while acquiring.

The government does not have the funds to perhaps give a fair package. And maybe wanted to keep costs down. So, it passed on the burden/loss to the farmers. It should have asked Tata to do more.


Prasen, it is always a delicate issue. May be TATA would have never set up a plant in West Bengal if they were asked to do more.

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Re: The Cheapest Car Ever Made

Postby prasen9 » Wed Aug 27, 2008 3:38 pm

I agree with the rest of your post, so not quibbling on that.
Sandeep wrote:If I deliberately undervalue my property that is not government's problem.
Then the people will not want to sell at that low price and the government also has to face these hassles. By the way, to the best of my knowledge, most of these farms have been farmed for generations and are ancestral lands, so although some may have been bought and sold, most of them did not change hands for a long time. That someone else tried to avoid taxes by putting a low price tag on it should not be harming the others. I understand the problems you mention and it was a difficult thing to do. But, either the government had to pay something fairer or handle the dissatisfaction.

Regarding the Tatas not coming to WB, maybe. The question is whether the government got the best possible deal. I think the deal was too sweetheart and possibly they could have got more. But, maybe it was not given that other governments may have wanted to give similar sops. So, the point is taken.

Given what it is, if you pay lower than market and Tatas want the cheapest possible deal, then they are facing the results of their karma, you will have to deal with dissatisfied people. That is all what I am saying.

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Re: The Cheapest Car Ever Made

Postby Sandeep » Wed Aug 27, 2008 7:49 pm

Given what it is, if you pay lower than market and Tatas want the cheapest possible deal, then they are facing the results of their karma, you will have to deal with dissatisfied people. That is all what I am saying.


I agree that it is in the best interest of TaATAs and WB goverment to solve this issue amicably, but the big question here is if Mamata really wants an amicable solution? None of her acts so far suggest that. There is a way of showing dissatisfaction, agitating and threatening TATAs for no fault of theirs, burning down public property, closing down businesses etc would send a wrong signal accross the country. If something like this can happen to TATA, how about small time investors? After this incident I am sure everyone would think twice to invest in WB. Mamata should come up with statistics on how much government paid and what would be the fair price etc if she her intention is to do any justice to the farmers. Without that she is going nowhere. Why isn't she coming up with figures and forwarding it to the media?

If I have to guess the real reason for these agitations is not to bring justice to farmers. I am afraid to post it here Prasen, Please check your PM

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Re: The Cheapest Car Ever Made

Postby prasen9 » Wed Aug 27, 2008 10:05 pm

I do not think that the farmers are that stupid that you can easily get them to believe that they have been cheated and be ready to agitate for this long and this vehemently. Mamata is just thinking about herself and trying to get some mileage of the issue. Never have I believed that she is doing it for the good of the farmers. I do not support her politics. Also, I do not condone violence by burning down Tatas property, etc. or think that it is the right thing to do. have made my objections and positions clear in this thread and do not want to keep belaboring the point I have raised again and again (although I have done so somewhat already, I do not want to repeat it again).

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Re: The Cheapest Car Ever Made

Postby jayakris » Wed Aug 27, 2008 10:54 pm

prasen - your stand has been pretty clear, don't worry. we know that you are not just speaking for those like mamata who are taking advantage of the situation. I think the discussion is continuing only because some of the folks seem unconvinced if the farmers were truly that badly affected as you say.

I don't know of everybody here, but I grew up in a real rural village and do have a fair understanding of it when the farmers say their land and work are not things that can have a direct money value like how those who believe in business think. Yes, there is indeed some money amount that may be large enough not to make them feel cheated - but it is often much higher than anything that the government or tatas would/could give. Depending on the type of farms and farmers, I could well see that the agitation was unavoidable (mamata or not!) .. We need to hope that a solution will be found somehow, still.

Jay

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Re: The Cheapest Car Ever Made

Postby PKBasu » Mon Sep 01, 2008 3:50 am

I fully understand the view that Jay is articulating -- that farmers may assign more than money value to their land, which they have cultivated for generations (and their families for perhaps centuries). Thomas Hardy's life's work, for instance, was a lament to just this process of land-alienation and its supposedly negative consequences in England's heaths and moors.

prasen9 objected to my saying in the same sentence that the land-owners were "paid handsomely but perhaps not full market price". Handsome is, after all, a relative term. The price of the land has gone up exponentially because of the Tata project, as this report in today's newspaper points out:

http://www.telegraphindia.com/1080901/j ... 771631.jsp

I also said that the residents of Singur would benefit enormously from the project in the medium term, but prasen9 objected that only those employed by the project or those that received full compensation for their land would. In fact, in my view, ALL residents of Singur (who are willing to earn a living in any manner, and not simply sit and mope at home) will benefit hugely in the medium- and long-term. The first benefit is immediately obvious from the massive increase in the value of their land. The CPI-M's land reforms ensure that share-croppers also have deemed ownership rights, and they too are being compensated for the loss of land -- as are land-owners themselves.

Even if non-residents of Singur are the main employees in the factory itself, the employees will be earning substantially more (10-20 times what the average farmer is likely to be earning in Singur), reflecting the huge productivity gap between automobile manufacturing and labour-intensive (as opposed to US-style capital-intensive) agriculture. In turn, the employees of the factory will need to consume goods and services, which the residents of Singur will need to provide. Additionally, the Nano plant will spawn a slew of ancillary industries, where employment opportunities will exist, productivity and earnings will be substantially higher than on the farm, and multiplier effects will flow through to the community.

To oppose the project dogmatically, and make land-compensation an intractable issue, demonstrates Mamata's Luddite tendencies. The Left Front's goondas have worsened the situation, and Buddhadeb is suffering partly from the consequences of the Left's own legacy of Luddite protest in the past (which Mamata is aping quite brilliantly now). But none of this should take away from the central fact: Mamata and Buddhadeb are engaged in a mutually destructive game that will ultimately destroy the one chance that Bengal had of bestirring an industrial revival after forty years of headlong decline.


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