State governments offer incredulous incentives to lure Tata
in the last few days Maharashtra and West Bengal witnessed two diametrically opposite developments. In Maharashtra, for the first time in the history of this country, affected farmers voted in a referendum on the upcoming Reliance special economic zone (sez). Initial results suggest that the majority voted against the sez. In Singur, Tata's plans kept slipping into a deeper imbroglio by the day. Several state governments lined up to lure the company as Tata seriously considered moving out--each one trying to outdo each other in terms of offering incentives and freebies. Soon as West Bengal made some parts of the 'secret' deal between the state and the company public, Tata Motors moved the High Court obtaining a restraining order.
Tata's lawyers argued that basically the agreement between them and the state government was a trade secret. This means that the Nano project is private commercial venture. Ironically the state government had acquired land for the project invoking the "public purpose" law. The state government and company will have to come clean about what exactly is the Nano project. If it is a commercial venture the company must directly need deal with the farmers. And if it is indeed a project meant to serve the public purpose, details of the agreement must be immediately made public.
What is clear from the deal between the West Bengal government and Tata motors is that state government are trying to outdo each other to attract investments. This is a race right to the bottom. The moment Tata Motors threatened to walk away from Singur, several state governments came forward. The lure of big-ticket project is such that governments are willing to forgo taxes, forcibly acquire land, give subsidized water and electricity, give capital subsidies and put thousands of security personnel to man the project. In all this, industries are having free ride on public money. This is cheap industrialization. Where not only states are giving fiscal subsidies, they are subsidizing the natural resources--land, water, and energy. In a single economic entity that India is, competition between states, by the way of subsidizing industrialization, is neither good for economy nor is it good for environment. And it surely is not for 'public purpose'.