As India transforms itself from agriculture dominated country to industry power house the biggest problem that is coming up is land acquisition for industrial projects. There are many examples starting from Tata Motor’s Nano plant in West Bengal to recent protests against Posco Steel.
It is totally expected but industry is not looking at this as a challenge instead it is looking at it as a “Hurdle”. Instead of finding solution by themselves they are involving government into it and according to me this is the biggest mistake. As soon as you involve government into your business it is bound to face problems, hurdles and delays. Industry thinks they can simply offload the “dirty” work to government.
We see police force being used to oust people from villages, their livelihoods and their land, which they are using for past many generations. The clash is imminent but we have to find way to reduce the conflict, it can never be avoided.
The problem as I see currently is the pace at which industry wants to execute its projects. CEO’s and Chief ministers sign pacts and MOMs, so called one window clearance gives all clearances like environmental clearance, financing arrangements, legal clearances etc. Govt. issues ordinance and takes control of the land. The rate given is always less than present market rate so the land owners do not get any advantage of their land being at a prime location for some multi billion dollar project. Do you need any other reason for a conflict? And then there is the Politics. People are used to gain political advantages and often the losers of the game is the common man as we have seen in case of Tata Nano plant in West Bengal.
I see only one solution for the problem. Giving ownership to people. This may sound crazy but this is the way to go forward. Forming special purpose vehicle for the project and giving people the preferred stock worth value of the land with some premium to existing prices. If you calculate land costs are generally less than 10 to 20% of total project costs so if you are giving preferred stock to the people you are not losing any control and they are earning fixed income for lifetime. Giving common stock is even better but I guess it is not possible for many companies. (Difference between Preferred and common stock : http://www.investopedia.com/ask/answers/182.asp)
By this way people get to participate in your growth, get security of payment for lifetime. The biggest worry currently people face is losing their livelihood. It is far easier to convince people once you remove that worry. Once convinced they may help in reducing local issues and problems. I see two advantages of this approach. First if local communities are on your side there is lesser chance of disruptions in operations. Uninterrupted operation is very important for efficiency of the plants. Second brand value and respect for company will increase many folds. People will experience that company cares for them and not here only to stock their banks with cash. This will lead to faster execution of future projects and far less resistance from people.
So it is important that industry looks at this issue as a challenge not as a hurdle. It should consider this in the feasibility process and should tackle it on its own. Relying on government and thinking of outsourcing the dirty work will only lead to more clashes and failed projects
Signing off
Nikhil Parchure
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One Up^^ for Para no. 2!!
ReplyDeleteand I don't know but I think One Window clearance in India only works in favor of corruption. In communism or less corrupted democracies its fine.
In terms of getting locals on your side and not just people but also gelling in with flora and fauna, Konkan Railway serves as a great example.
and Nano project was a total political farce. Maharashtra should've been the first choice as Tata Motor's OEM suppliers are all here and also the group's internal support firms such as Tata Technologies, Pune.
With Congress and Tata not seeing eye to eye, Tata went to 2nd best site, i.e. closer to their steel plant in Jamshedpur and got their hands burned.
Modi made gold out of this all and pulled the plant in Gujarat but by that time it was already a big loss to Tatas, and not just financially! They couldn't keep their promise of 1L price of the car. And that is something Tata always value.
There was bigger issue back in a decade regarding Sivri-Nava Link but it got less attention from media.
Tata was ready to raise the project for free and hand over in 20 years. Congress Govt. did not entertain as Tata wasn't ready to play in Black.
How lucky we are to have such businesshouses with us....and how unfortunate, to have it all messed up by politics. When will they foresee for country they serve(...or at least they are supposed to be)