A recently deserted car factory in Singur in the communist-run state of West Bengal offers mute testimony of heavy industry’s ongoing struggle to acquire land in India.

The factory was to have been the home of Tata Motors‘ Nano, billed as the world’s cheapest car, and was to have transformed the semi-rural suburb around it into a bustling township. Tata announced its plans to much fanfare in 2008.

But more than two years of protests by farmers and villagers over land acquisition forced India’s third-largest automaker to move its operations to a new plant in the western state of Gujarat and abandon its $350 million factory in Singur.

Now Tata Steel, the world’s eighth-largest steelmaker, is fighting a similar, if embarrassing, battle to construct a plant at Kalinganagar in the eastern state of Orissa.

As India tries to woo foreign investors and burnish its standing as Asia’s third-largest economy, its industrial endeavors face resistance, mostly from villagers reluctant to part with land their families have tilled for decades.

Current delays in land acquisition for industrial projects threaten to sink investments worth $100 billion to India in the near term, according to a recent study by the Associated Chambers of Commerce and Industry of India, one of the country’s largest business groups.

The study noted an assessment released by the Indian Steel Ministry stating that 22 major steel projects worth $82 billion are being held up by public protests over land acquisition and red tape in securing environmental-impact clearances, among other reasons.

The Associated Chambers of Commerce and Industry says problems in acquiring land for industrial projects has tarnished the image of several Indian states as business-friendly locations.

India’s Land Acquisition Act of 1894 allows the government to claim land for public use, such as for roads, railways and parks. Enacted during British rule of India, the act is murky on issues of claiming land for private industry.

Governments in some Indian states have tried to cite the act to set aside land for industry, with varying results.

Claiming that Tata Motors‘ use of the site in Singur was in the public interest, the communist government of West Bengal tried to acquire fertile farmlands by force for the Tata project in Singur in 2006.

The land-grab attempt was met with violence from villagers, who also revolted against government plans to construct a chemical factory in nearby Nandigram. Villagers dug up roads and threw trees on the communists, bellowing a war cry against land acquisition. Scores of villagers were killed and raped during the uprising, but Nandigram became a symbol of resistance against the state forces.

“There is an overwhelming need for industry so that this poor state [West Bengal] can flourish again. But the way that land was acquired was a mistake. If one needs industry, there has to be land, but acquisition of land should have been the last resort,” said Nobel Prize-winning economist Amartya Sen, who is a strong votary of industry.

West Bengal’s mineral-rich neighbor, the state of Orissa, faces similar unrest and business uncertainty because industrial ventures there have been stalled for years over protests by prospective land losers.

Thousands of villagers in and around the town of Jagatsinghpur have opposed Orissa’s plans to allow the South Korean steel giant Pohang Iron and Steel Co. (POSCO) to construct a 12 million-ton plant, staging day and night vigils to prevent a “forceful” acquisition.

“This protest is against any kind of forceful attempt by state police forces to enter into their village in the name of conducting socioeconomic and land survey for POSCO,” said villager Prasant Paikray, a member of the Committee to Protest POSCO. “We will fight tooth and nail.”

If constructed, the Posco steel plant would be India’s single biggest foreign investment to date.

Another company facing the protest of local tribespeople in Orissa is the Indian unit of London-listed Vedanta Resources PLC. Vedanta proposes to mine bauxite for its 1.4 million-ton aluminum refinery in the foothills of Niyamagiri, but protests already have started around the area.

Some economists say land acquisition is a challenge, but not only because of people’s distrust of government.

“Land acquisition is a problem because land records were never kept properly,” said D.H. Pai Panandikar, director of the RPG Foundation, a think tank engaged in research on macroeconomic issues.

“Many argue that the industry should buy land directly from the farmers or land owners. But it is a tremendous hurdle for industry to buy the land in the contiguous areas of the project. Direct purchase by the corporates is difficult, given the complexities,” he said.

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