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Sustainable economic development in West Bengal – A Perspective December2007 KPMG IN INDIA

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Page 1: West Bengal Kpmg Survey

Sustainable economic developmentin West Bengal – A PerspectiveDecember�2007

KPMG IN INDIA

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Message from Confederation ofIndian Industry (CII)I�am�pleased�to�present�a�study�on�“Sustainable�Development�in�West�Bengal”

Jointly�done�by�CII�–�KPMG�involving�a�cross�section�of�eminent�people�from

different�works�of�life.�Industrial�and�economic�development�in�the�state�has

experienced�a�journey�which�has�brought�to�force�social�and�economic�issues

which�have�become�subject�of�debate�and�discussion�across�the�country.�

The�issues�are�complex�and�do�not�have�easy�and�final�answer.�The�ideal�and

best�answer�may�differ�from�person�to�person�and�their�point�of�view.�

The�team�of�researchers�engaged�in�the�project�have�tried�their�best�to�chart�a

sustainable�road�map�for�a�balanced�growth�of�agriculture�and�industry.�

Some�action�points�have�been�suggested�both�for�the�Government�and�the

industry�for�the�smooth�journey�of�West�Bengal�towards�the�destination�of�a

more�developed�and�prosperous�state.�

We�hope�that�the�study�will�help�in�understanding�the�real�situation�and�in

facilitating�the�policy�formulation�of�the�Government�and�industry�in�such�a

manner�that�all�the�stakeholders�have�a�sense�of�security�and�feel�confident�in

the�process�of�industrialization�will�bring�prosperity�for�all.

Biswadip�Gupta

Chairman,�

Confederation�of�Indian�Industry�(Eastern�Region)

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The�state�of�West�Bengal�is�currently�experiencing�significant�economic�activity.

The�government�is�taking�pro-active�steps�to�make�the�state�an�attractive

investment�opportunity�and�make�it�a�key�part�of�the�India�growth�story.�The

state�is�unique�in�terms�of�the�social,�economic,�political�and�demographic

factors.�An�interesting�interplay�of�these�factors�affects�the�investment�scenario

and�hence�deserves�greater�attention.�

The�CII-KPMG�study�on�‘Sustainable�Economic�Development�in�West�Bengal�–�A

Perspective’�aims�at�highlighting�the�various�factors�which�affect�the�investment

scenario�in�West�Bengal.�During�this�study�we�have�sought�the�opinions�of�over

fifty�stakeholders�in�the�state�including�industrialists,�bureaucrats,�media�etc.

across�the�state�–�Kolkata,�Kharagpur,�Medinipore,�Siliguri�and�Jalpaiguri.�Over�30

of�these�were�CEOs/�CFOs�of�leading�companies�based�in�West�Bengal.

The�views�received�during�such�interactions�have�been�followed�by�internal

analysis�on�key�issues.�The�report�consolidates�the�various�opinions�and�presents

some�of�the�key�steps�that�need�to�be�taken�to�facilitate�sustainable�economic

development�of�the�state.

It�is�quite�likely�that�some�of�the�points�highlighted�in�this�report�are�either

intuitive�or�have�been�highlighted�elsewhere.�We�think,�however,�that�sometimes

repeating�the�obvious�is�also�of�help.�Too�often,�we�get�so�caught�up�in�our�quest

for�the�‘perfect�solution’�that�even�incremental�improvement�is�put�on�the

backburner.�

A�number�of�improvement�steps�have�already�been�taken�in�the�state.�We�think

that�even�greater�effort�will�be�needed�from�here�on.��The�responsibility�lies�not

just�on�the�government�but�also�on�the�shoulders�of�other�stakeholders�–�the

industry,�state�officials,�media,�politicians,�intelligentsia�and�other�opinion�leaders.

The�world�is�watching�and�we�all�have�to�deliver�collectively�to�make�West

Bengal�a�shining�example�to�others.

Arvind�Mahajan

National�Industry�Director

Infrastructure�and�Government

KPMG�in�India

Foreword

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Table�of�Contents

Executive�Summary 1

Overview 3

Economy 7

Agriculture

Industry 13

Action�Points 26

Annexure 29

List�of�respondents�

Bibliography 31

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In�recent�times�the�economy�of�West�Bengal�has�demonstrated�an�improvement

in�many�aspects.�The�GSDP�of�the�state�at�current�estimate�is�growing�at�a�rate

of�7.2�percent.�In�the�IT�sector�the�state�recorded�a�growth�rate�of�48�percent�as

against�national�growth�rate�of�30�percent.�The�value�of�projects�implemented

during�the�period�1991-2006�was�around�INR�33�billion,�whereas�the�fresh

investment�committed�during�the�year�2006-07�itself�stands�at�around�INR�96

billion.�The�FDI�inflow�in�the�state�increased�by�26�times�in�the�year�2006-07

when�compared�with�to�that�in�the�year�2003-04.�

In�terms�of�social�infrastructure,�the�number�of�hospital�beds�in�the�state�has

increased�by�31�percent�during�the�period�2001-02�to�2005-06.�Around�7�lakh

students�graduate�every�year�from�universities,�colleges�and�other�professional

institutes�providing�West�Bengal�with�a�robust�talent�pool.��

Despite�these�improvements,�the�state�has�slipped�to�10th�position�in�terms�of

per�capita�income.�In�1999-00�nearly�32�percent�of�the�rural�population�was

below�poverty�line�and�urban�unemployment�was�7.6�percent.�The�manufacturing

sector�contributes�only�11�percent�to�the�state’s�NSDP.�These�clearly�indicate�that

new�challenges�are�the�horizon�and�are�required�to�be�dealt�with.�

The�income�levels�of�persons�dependent�on�agriculture�in�the�state�is�low�and�is

likely�to�reduce�further�with�the�increase�in�population�dependent�on�the�same

quantum�of�land.�Their�income�level�can�increase�by�way�of�enhanced�farm

productivity,�better�crop�mix�and�by�a�gradual�reduction�in�the�population�directly

dependent�on�agriculture.�It�may�be�noted�that�rice�productivity�in�West�Bengal�is

lower�than�in�states�like�Punjab�and�Karnataka�and�much�lower�than�countries�like

Egypt�and�China.��There�is�ample�scope�for�improvement�on�this�count.

Our�survey�of�CEOs/�CFOs�of�leading�companies�in�West�Bengal�showed

interesting�results.��To�boost�the�state’s�rural�economy,�many�felt�that�contract

farming�should�be�encouraged�to�provide�farmers�an�access�to�better�farm

inputs,�latest�technology�and�an�assured�price�for�their�produce.�A�regulator�for

contract�farming�needs�to�be�established�to�lay�down�rules�and�to�monitor

compliance.�Roads�and�canals�in�rural�areas�need�urgent�attention.�Procurement

of�agricultural�produce�by�the�state�needs�to�be�enhanced.�

Land�is�essential�to�establish�new�industries.�To�bring�about�the�balanced

development�of�different�regions�of�the�state�while�ensuring�minimal

displacement�of�people,�first�attempt�should�be�made�to�develop�non-arable�or

less�fertile�land�for�industrial�purposes.�Given�the�fact�that�West�Bengal�has�a�low

quantum�of�non-arable�land,�many�respondents�felt�that�the�conversion�of�some

agricultural�land�for�industrial�use�would�also�have�to�be�considered.

Executive Summary

1

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Acquisition�of�land�requires�a�transparent�procedure�and�clarity�on�the�steps

involved.�This�will�require�a�suitable�land�policy.�The�land�policy�should�identify

land�for�industrial�use,�valuation�principles,�compensation�modes�and�put�in�place

roles�and�responsibilities�of�each�party�to�this�transaction.�The�current�market

value�of�land�is�not�always�the�best�indicator�for�estimating�compensation�as�land

market�is�imperfect�with�information�asymmetries�abound�and�does�not�capture

the�expected�appreciation.�Similarly,�a�one-time�monetary�compensation�may�not

be�the�ideal�mode�of�transfer�of�financial�benefit�to�the�land-loser.��The

compensation�package�should�ensure�that�the�land-loser�gets�an�annuity�payment

and�a�part�of�the�‘upside’�that�the�land-developer�enjoys.�

Our�survey�also�brought�out�the�fact�that�the�Government�and�the�entire

administrative�machinery�need�to�have�a�‘shared�vision’�for�facilitating�economic

growth�of�the�state.��The�‘pro-investor�attitude’�needs�to�be�a�collective�attitude

and�should�percolate�to�the�lower�bureaucracy�as�well.��It’s�the�lower�bureaucracy

that�the�farming�and�industrial�communities�interact�with�on�a�day-to-day�basis.

The�Government�needs�to�initiate�a�sustained�mass�communication�campaign�to

create�a�widespread�buy-in�for�successful�implementation�of�developmental

initiatives.�

Many�respondents�felt�that�the�private�sector�on�its�part�should�step�up�its

commitment�towards�corporate�social�responsibility.�The�private�sector�should

take�a�leading�role�especially�in�developing�ITIs�and�other�vocational�training

institutes,�which�would�enhance�the�employability�of�the�state’s�young�human

resources.�

West�Bengal�is�blessed�with�a�favorable�strategic�location,�availability�of�fertile

farm-land,�access�to�ports�and�mineral�wealth,�and�a�huge�talent�pool.��A�shared

vision�and�collective�effort�of�the�Government,�administration,�industry�and�the

farm�sector�is�what�the�state�needs�to�reach�the�commanding�heights�that�it

rightly�deserves.

2

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At�the�dawn�of�freedom,�West�Bengal�had�lost�2�million�acres�of�jute�land

producing�1.22�million�tones�of�the�crop,�that�fed�its�106�mills�before�partition;

133�estates�yielding�18�million�kgs�of�tea�(approximately�7�percent�of�the

country’s�production),�and�the�linkages�that�supported�its�two�major�industries

before�independence.�Additionally,�the�state�had�to�deal�with�the�influx�of�3

million�refugees,�including�an�estimated�6.5�lac�into�Calcutta�city�alone.�By�the

time�of�1951�census,�only�33�percent�of�the�city’s�population�had�been�born�in�it.�

Yet,�even�as�late�as�1960,�West�Bengal�had�the�highest�per�capita�real�GDP�of�any

state�in�India.�It�had�15.8�percent�of�the�country’s�factories�and�contributed�24

percent�each�of�national�value-add�and�employment.�These�numbers�did�not

mean,�of�course,�that�income�distribution�was�equitable.�Rural�Bengal�was�one�of

the�poorest�regions�in�the�country,�with�65�percent�of�its�population�living�below

the�poverty�line�in�1973,�compared�to�the�national�average�of�56�percent.

Nevertheless,�when�India�was�entering�the�stagnant�‘60s�and�‘70s,�West�Bengal

was�still�India’s�pre-eminent�industrial�state.�Between�then�and�the�next�forty

years,�a�gap�opened�up�that�the�state�is�still�trying�to�bridge.�

Today,�West�Bengal�is�still�India’s�third�largest�economy,�producing�10�percent�of

its�steel,�20�percent�of�its�tea,�22�percent�of�its�leather,�and�13��percent�of�its

total�polymer�production,�with�one�of�the�largest�petrochemical�hubs�in�the

country�at�Haldia.�However,�the�state�has�also�slipped�to�10th�position�on�per

capita�income,�has�5.8�percent�of�the�country’s�factories,�and�contributes�5

percent�of�national�value�add.�

As�an�investment�destination�for�foreign�capital,�West�Bengal�comes�after

Maharashtra,�Tamil�Nadu,�Karnataka,�Andhra�Pradesh,�Gujarat�and�Haryana.

Cumulative�FDI�flows�into�West�Bengal�from�2000�to�2007�amounted�to�

INR�1,587�cr,�as�against�INR�38,867�cr�for�Maharashtra,�the�leading�FDI�state.�To

appreciate�the�significance�of�FDI,�one�must�note�that�from�2000-2005,

developing�countries�or�transitioning�economies�like�Malaysia,�Taiwan,�China,

Mexico,�Brazil,�Thailand,�Vietnam�and�Russia,�FDI�inflows�were�between�8

percent�and�52�percent�of�their�net�national�savings.�West�Bengal�is�in�a�situation

where�it�probably�has�to�look�at�a�large�dose�of�equity�funding�for�its

developmental�expenditure�(see�box).�Here�is�where�FDI�can�play�a�crucial�role.

3

Overview

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While�its�steep�industrial�decline�has�been�the�subject�of�much�research,�West

Bengal’s�agricultural�resurgence�in�the�eighties�and�upto�the�mid-nineties�has�also

been�well�documented.�Progressive�land�reforms�is�believed�to�have�played�a

major�role�in�encouraging�private�investment�in�irrigation,�by�securing

sharecropper�rights�and�granting�them�a�share�of�production.1 Ownership

distribution�in�West�Bengal�is�today�amongst�the�most�equitable�in�the�country,

with�small�and�marginal�farmers�owning�84�percent�of�total�agricultural�land�in

West�Bengal,�as�against�43�percent�in�the�rest�of�India.�

4

West Bengal: private investment needed

West Bengal needs more money, and not from central grants alone. On a per capita basis,West Bengal’s total expenditure (capital and revenue) towards development in 2003-04 wasbudgeted at INR 1,573 – substantially lower than states like Andhra Pradesh (INR 3,071),Gujarat (INR 3,697), Haryana (INR 3,451), Maharashtra (INR 2,476), Punjab (INR 3,866), TamilNadu (INR 2,484), and the national average at INR 2,478.

Its debt burden crowds out developmental expenditure – comparing budget estimates of 2003-04 again, the national average for capital expenditure towards developmental purposes was50 percent, while the statistic for West Bengal was only 12 percent, with 60 percent goingtowards debt repayment.

In the budget for 2006-07 interest payments amounted to nearly 42 percent of the state’srevenue receipts. Per capita development expenditure was approximately INR 2,152 at 2003-04prices (consumer price inflation 4-5 percent during the period). To come on par with thenational average on per capita developmental expenditure in 2003-04, West Bengal would stillneed to spend another INR 26,000 mn. Even if central grants were doubled from 2003-04levels, it would be short of this figure.

West Bengal clearly needs a massive dose of private investment if it is to just keep up withthe rest of the country.

1. It�is�sometimes�stated�that�land�redistribution�was�the�driving�force�behind�agricultural�growth.However,�it�is�often�overlooked�that�253,556�hectares�had�already�been�redistributed�till�1977,�while�thenext�26�years�added�another�186,029�hectares�–�not�the�quantum�leap�that�could�explain�West�Bengal’sagricultural�resurgence�in�the�two�decades.�Statistically,�the�rise�in�number�of�recorded�sharecroppersfrom�3.49�lac�to�11�lac�in�the�same�two�periods�would�be�of�greater�significance.�It�is�difficult�to�quantifythe�contribution�made�by��peace�of�mind�to�West�Bengal’s�agricultural�growth,�but�it�is�neverthelessworthwhile�to�note�that�prior�to�Operation�Barga,�74�percent�of�tenancy�contracts�were�of�a�year’sduration�or�less.

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Other�reasons�advocated�have�been�the�cultivation�of�Boro�Rice,�and�effective

decentralization�of�power�through�a�three�tier�Panchayati�Raj�system.�Though�the

positive�externalities�of�institutional�changes�are�hard�to�measure,�exhibit�shows

that�the�increase�in�rice�production�in�the�‘80s�was�almost�entirely�on�account�of

a�whole�new�winter�rice�crop.�The�plateau�hit�in�boro�production�since�the�late

‘90s�therefore�prompts�the�question�of�whether�agriculture�in�West�Bengal�needs

to�look�at�other�avenues�for�growth.

Today,�West�Bengal�is�the�largest�producer�of�rice,�the�second�largest�of

potatoes,�and�a�major�producer�of�fruits,�vegetables�and�oilseeds.�However,�the

state�is�a�net�importer�of�pulses�and�oilseeds,�and�has�not�achieved�food�security

in�any�food-crop�except�rice�and�potatoes.2

West�Bengal�is�India’s�most�densely�populated�state,�at�904�people�per�square

kilometer.�Seventy�two�percent�of�its�population�depends�on�agriculture,�nearly

80�percent�of�whom�have�an�average�land�holding�size�of�0.64�hectares.��

While�land�reforms�have�addressed�the�problem�of�acute�poverty�to�an�extent,

problems�still�remain:�54�percent�of�its�population�earns�INR�1500�per�month�or

less.�Amongst�the�big�states,�only�Karnataka,�Madhya�Pradesh,�Uttar�Pradesh,

Bihar,�Chhattisgarh,�Orissa�and�Jharkhand�fare�comparably�or�worse.�Rural

poverty�continues�to�be�a�vexing�problem:�In�1999-2000,�18�million�people

comprising�32�percent�of�the�rural�population�was�below�the�poverty�line,�a

number�exceeded�only�by�Uttar�Pradesh,�Madhya�Pradesh�and�Bihar.

In�the�same�year,�urban�unemployment�was�at�7.6�percent,�much�above�the

national�average�of�4.5�percent.�With�the�population�in�the�working�age�group

estimated�to�increase�by�an�additional�7�million�through�2011,�17�million�by�2016,

and�20�million�by�2021,�a�high�incidence�of�unemployment�is�not�unrealistic

where�manufacturing�contributes�a�modest�11�percent�of�the�state’s�NSDP.

2 It�produces�11�percent�surplus�rice�and�40�percent�surplus�vegetables,�but�it�is�50�percent�deficient�inwheat�production,�75�percent�deficient�in�pulse�production�and�has�to�buy�60�percent�of�its�oil�seedsrequirement�from�other�states.

5

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West�Bengal�has�to�adopt�a�model�that�stimulates�growth�in�all�sectors�in�a

sustainable�manner.�Does�it�have�any�role�models�to�follow?�The�sheer�magnitude

of�its�population�density�makes�importing�successful�models�from�elsewhere

difficult.�Exhibit�shows�countries�with�a�population�between�20�and�150�million,

with�a�population�density�of�more�than�125�persons�per�sq�km.�The�only

comparable�geographies�for�West�Bengal�are�Bangladesh,�whose�political�and

economic�problems�are�far�greater�than�its�own,�and�Taiwan,�whose�population

barely�reaches�above�the�20�million�mark.�Countries�like�Vietnam�or�Thailand,�both

transitioning�from�an�agrarian�to�an�industrial�economy,�have�population�densities

less�than�one-fourth�and�one-ninth�of�West�Bengal.�

The�unique�situation�in�West�Bengal�is�the�fact�that�against�the�Indian�average�of

17%�;�less�than�1%�of�the�land�is�unfertile�and�that�too�non-contiguous.�Balance

needs�to�be�maintained�keeping�in�perspective�the�availability�of�land,

infrastructural�needs�and�proximity�to�urban�centers.�

West�Bengal�has�to�find�its�own�approaches�for�sustainable�development.�It�does

not�have�comparable�precedents.

6

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Agriculture

Dependence of population on agriculture as a source of sustenance should

be reduced

How�much�money�does�the�small�and�marginal�landowner�make�in�West�Bengal?

If�he�grows�two�crops�of�rice,�then�with�an�average�yield�of�2.5�t/ha.�an�average

land�holding�of�0.64�ha,�and�a�price�of�INR�700�per�quintal�–�significantly�on�the

higher�side�–�the�small�and�marginal�farmer�earns�a�little�more�than�INR�2,000.

Subtracting�the�cost�of�inputs,�he�is�left�with�very�little,�if�anything.�If�the�farmer

grows�potatoes,�then�at�a�yield�of�21�t./�ha�and�a�price�of�INR�400�per�quintal,�he

makes�INR�10,752�in�revenues�-�in�a�year.3 Undeniably,�the�farmer�gets�other

benefits�from�his�land�–�apart�from�the�crops�he�grows�on�his�land,�he�also

indulges�in�animal�husbandary�and�small�crafts,�and�thereby�keep�his�family

adequately�fed�and�sheltered�–�but�little�else.�There�is�of�course�a�limit�to�how

many�individuals�can�derive�even�their�subsistence�from�the�same�patch�of�land:

West�Bengal’s�working�population�is�estimated�to�increase�by�an�additional�7

million�through�2011,�17�million�by�2016,�and�20�million�by�2021.�For�incomes�to

grow,�a�significant�portion�of�the�workforce�has�to�be�gradually�shifted�has�to�be

shifted�out�of�agriculture,�and�the�average�size�of�land-holding�has�to�be

increased.

Rice productivity has to be increased

Boro�rice�cultivation�has�been�the�cornerstone�of�West�Bengal’s�agricultural

resurgence.��However,�the�water�intensity�of�this�crop�limits�its�cultivation�in�dry

areas.�As�exhibit�shows,�production�has�greatly�increased�in�all�districts�since

1980-81,�but�has�been�stagnant�or�declining�everywhere�from�1998-99�to�2002-

03.�The�production�of�Boro�rice�appears�to�have�plateaued.�Furthermore,�Boro

cultivation�has�not�been�a�success�in�Bankura�and�Purulia,�which�receive�lower

rainfall;�while�production�in�Darjeeling,�Cooch�Behar�and�Jalpaiguri�has�been�low.�

The�production�of�Aman�rice�increased�from�6.01�million�tonnes�in�1985-86�to

8.35�million�tonnes�in�1994-95,�but�subsequently�rose�and�fell�in�cycles,�finally

hitting�7.02�million�tonnes�in�2000-01�before�rising�again�sharply.�Over�the�period

1994-95�to�2002-03,�the�production�of�Aman�rice�increased�12�percent,�whereas

it�rose�39�percent�over�1985-86�to�1994-95.�To�that�extent,�the�rise�has�been

more�modest�from�the�second�half�of�the�nineties.

7

Economy

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8

The�net�cropped�area�in�West�Bengal�is�already�close�to�100�percent�of�cultivable

land�in�most�districts�and�hence�cannot�be�increased.�The�only�alternative�is�to

increase�yield.�This�is�an�eminent�possibility,�as�West�Bengal’s�yield�of�nearly

every�important�crop�except�pulses�is�significantly�less�than�that�of�the�respective

leading�state�in�the�country,�which�in�turn�is�well�below�international�standards.�To

illustrate:�West�Bengal’s�rice�yield�is�2.5�t/ha�while�both�Punjab�and�Karnataka

record�slightly�more�than�3.8�t/ha.�The�yield�in�Egypt�is�more�than�9.54�t/ha�while

China�manages�6.26�t/ha.

In�most�cases,�the�development�of�higher�yielding�hybrids�has�been�the�solution.

For�instance,�China�grows�hybrid�rice�in�50�percent�of�its�30�million�hectares

under�rice�cultivation�(see�box).

Farmers have to be supported on inputs and procurement

Following�the�reformed�APMC�act�in�1998-99,�grain�can�flow�freely�between

states.�This�subjects�the�average�farmer�in�West�Bengal,�with�one�of�the�tiniest

land�holdings�in�the�country,�to�the�volatility�of�market�prices,�even�as�his�peers�in

other�states�have�the�cushion�of�greater�state�procurement�and�lower�electricity

tariffs.�

Currently,�the�minimum�tariff�for�rural�domestic�supply�is�INR�2.09�per�kWh�and

for�agriculture�is�INR�1.5�per�kWh�for�metered�consumers�while�it�ranges�from

INR�6,750�to�10,800�per�annum�for�un-metered�consumers,�which�is�amongst�the

highest�in�the�country.�Paddy�cultivators�have�been�hit�with�rising�input�costs,

particularly�in�irrigation�(rising�prices�of�electricity�and�diesel,�on�which�an

estimated�75�percent�of�tubewells�run,�have�increased�production�costs).

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9

China continues to innovate in hybrid rice technology

China’s success in hybrid technology has been well documented. Two-line hybrid rice was successfullycommercialized in 1995, following the success of three-line hybrid rice in the 1970s. In 2002, two-linehybrid rice covered 2.6 million ha, or 18 percent of the total hybrid rice cultivation area. The latter’syield is 5 to 10 percent higher than that of existing three-line hybrid rice.

Since the initiation of the super rice research programme in 1996, encouraging results have alsobeen achieved in developing super hybrid varieties: several pioneer varieties have shown a yieldadvantage of around 20 percent over current three-line hybrids on a commercial scale.

In 2002, the area planted under super hybrid rice was 1.4 million ha with an average yield of 9.1tonnes/ha in 2002. At the extreme, a two-line super hybrid P64S/E32 and a three-line superhybrid II-32A/Ming86 create record yields of 17.1 tonnes/ha and 17.95 tonnes/ha respectively.

Current efforts are focused on developing second generation super hybrid rice, with a yieldtarget of 12 tonnes/ha. In 2005, five locations with 7 ha each in Hunan Province, saw an averageyield was over 12 tonnes/ha. If super hybrid rice covered an annual area of 13 million ha inChina, and yielded an incremental 2.25 tonnes/ha, the additional production of 30 million tonnescould feed 75 million more people every year.

China has also exported its hybrid technology to other rice growing countries with encouragingresults, A number of experimental trials and large-scale demonstrations in farmers' fieldsconducted in these countries showed that hybrid rice can significantly outyield local varieties.For example, in the Philippines, a super hybrid rice variety called SL-8 was developed andplanted in about 3 000 ha in 2003.The average yield was 8.5 tonnes/ha -more than double thecountry's average. On the basis of this achievement, the Government of the Philippines made anambitious plan, with a goal of 3 million ha of hybrid rice planted by 2007.

At�the�same�time,�wholesale�paddy�prices�have�been�stagnant�for�much�of�theperiod�from�1999-00�to�2006-07,�while�input�costs�have�risen.�In�this�period,�stateprocurement�at�the�minimum�support�price�in�West�Bengal,�has�been�lower�thanin�other�rice�producing�states.�For�instance,�in�2002-03,�when�the�WPI�was�at�itslowest�in�this�8-year�period,�state�procurement�in�West�Bengal�was�1.26�lactonnes�compared�to�74.9�lac�tonnes�in�Punjab.�Even�its�peak�procurement�of12.75�lac�tonnes�in�2005-06�was�smaller�than�17.85�lac�tonnes�for�Orissa,�49�lactonnes�for�AP,�31�lac�tonnes�for�UP,�20�lac�tonnes�for�Haryana,�88�lac�tonnes�forPunjab�and�32�lac�tonnes�for�Chhattisgarh.

West�Bengal’s�farm�sector�is�in�need�of�greater�support�in�subsidies�4 andprocurement.�While�a�full�fledged�investigation�is�beyond�the�scope�of�this�report,we�think�there�is�scope�for�Public-Private-Partnership�(PPP)�in�activities�likedevelopment�of�rural�roads�or�canal�irrigation�(which�would�be�a�form�of�indirectsubsidy�as�production�and�logistics�costs�would�come�down).�Procurement�iseasier:�contract�farming�and�organized�retail,�by�reaching�out�to�the�producerdirectly,�can�deliver�a�better�price�to�the�farmer.�Contract�farming�delivers�otheradvantages,�like�subsidized�seeds,�pesticides�and�fertilizers,�adoption�of�scientificfarming�practices,�and�institutional�credit.

4 A�cornerstone�of�electricity�distribution�reforms�has�been�the�emphasis�on�moving�tariff�closer�to�costof�service,�and�phasing�out�cross�–�subsidies.�However,�such�a�step�would�be�pointless�if�consumersremain�too�poor�to�afford�electricity,�light�bulbs,�or�other�electrical�implements.�A�case�in�point�is�ruralelectrification�in�Bengal,�where�82�percent�of�villages�are�electrified�while�only�37�percent�householdshave�access�to�electricity.�The�government�has�to�design�an�effective�subsidy�delivery�mechanism�thatdoes�not�rely�wholly�on�industrial�and�commercial�consumers�to�pay�for�agricultural�consumption.�If�thesubsidy�is�to�be�funded�directly�by�the�government,�there�is�a�need�to�increase�tax�revenues,�which�onceagain�underscores�the�need�for�industrialization�in�the�state.

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Survey Results - 1

‘Minimum support prices should be provided’

Eighty three percent of our respondents strongly agreed that contract farming could helpagriculture become more financially viable in the state. The respondent from a large companyoperating the agribusiness space felt that building trust with the farmers was very important,and providing guaranteed minimum prices was a vital part of that.

The same respondent also pointed out that acidic fertilizers were still being used in the highlyacidic soil of Purulia, which implied inadequate knowledge transfer and training. Anotherrespondent, a top bureaucrat, shared this view, and said that long term sustainability of thefarm should be a key concern underlying any contract for farming. He added that the durationof the contract should be for a short period like five years or less, after which the farmer wouldhave the opportunity to re-negotiate terms to his advantage.

The respondents also identified lack of corporate involvement in farming to be one of thebiggest weaknesses of agriculture in the state. Other reasons which received a median ratingof 8 on a scale of 0 to 10 were lack of access to modern farm practices, lack of mechanization,and fragmentation of land. Contract farming would address three out of the top four issues,while land fragmentation is a problem that needs to be resolved through a government-ledinitiative like forming co-operatives (discussed in the next section).

A policy on contract farming needs to be framed

West�Bengal’s�fragmented�landholdings�create�a�problem�for�contract�farming�5.

Typically,�a�firm�would�like�to�negotiate�as�few�contracts�as�possible,�so�that

monitoring�costs�are�low.�Small�farmers�could�circumvent�this�problem�by

organizing�themselves�into�co-operatives,�similar�to�fruit�growers�in�the�U.S.

selling�to�large�canneries.�However,�the�process�should�be�facilitated�by�the

state.�We�are�of�the�opinion�that�the�state�should�lay�down�the�rules�of�the�game,

communicate�the�same�to�all�stakeholders�(farmers,�consumers,�corporates),�and

facilitate�their�adoption.�The�first�step�would�be�to�have�a�contract�farming�policy.

5 Generally,�corporates,�find�it�more�profitable�to�contract�with�small�landholders�where�the�crop�grownis�labour-intensive.�The�farmer’s�family�supervises�their�farming�operations�for�free,�whereas�with�largefarms�the�cost�of�extra�supervisory�manpower�has�to�be�factored�in.�However,�even�this�has�its�limits.For�instance,�to�procure�40,000�tonnes�of�tomatoes�at�an�average�yield�of�52�t/ha,�as�Pepsi�was�doing�inPunjab�(see�box�overleaf),�the�total�area�under�contract�would�be�769�hectares.�If�the�average�size�ofland�holding�was�1�hectare�per�farmer,�the�contractor�would�have�to�negotiate�and�monitor�769�contracts–�not�an�easy�task.

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11

A�detailed�discussion�of�a�model�contract�farming�policy�for�West�Bengal�isbeyond�the�scope�of�this�report,�but�we�would�like�to�highlight�some�points�itought�to�cover:

• Operating�model�for�co-operatives:�While�success�of�a�mammoth,�state-levelco-operative�like�Amul�for�agricultural�produce�in�general�is�a�challenge�6,�it�ispossible�to�have�state-level�co-operatives�for�specific�products�like�potatoesand�chillies.�Alternatives�would�be�to�have�co-operatives�at�the�level�of�adistrict�for�all�or�specific�crops,�or�to�leave�their�formation�to�market�forces,with�just�a�minimum�size�specified.

• Fit�with�overall�strategy:�A�common�fear�voiced�against�contract�farming�isthat�it�could�lead�to�dwindling�food�security:�crops�would�get�diverted�to�foodprocessing�industries,�or�the�export�market,�leaving�little�for�domesticconsumers.�Ordinarily,�any�demand�supply�imbalance�would�be�met�by�trade.But�food�supply�is�limited,�and�cannot�rise�in�response�to�demand�as�quicklyas�a�manufactured�product,�if�it�can�rise�at�all.�The�consequences�of�two�orthree�independent�state-level�policies�could�be�profound:�let�us�take�rice�as�anexample.�While�at�the�moment�India�has�a�surplus�of�rice�that�is�also�becauseartificially�boosted�Minimum�Support�Prices�have�given�farmers�a�perverseincentive�to�grow�rice�in�areas�that�are�not�suitable�for�its�cultivation.�As�aconsequence,�the�water�table�in�states�like�Punjab�and�Haryana�have�recededsignificantly.�Now�if�this�market�distortion�were�to�be�corrected,�and�even�25percent�of�the�acreage�under�rice�cultivation�in�these�states�were�diverted�forother�uses,�the�resulting�shortfall�could�be�3�million�tonnes.�If�West�Bengal�atthe�same�time�were�to�reduce�its�output�of�rice,�there�would�be�no�choicebut�to�import.�The�question�is:�from�where?�The�large�exporters�of�rice�in�theworld�are�Thailand,�Vietnam,�China,�U.S.,�Pakistan�and�India�itself.�The�impactof�India�becoming�a�net�importer�on�global�prices�could�only�be�to�send�themsoaring�upwards.

Therefore,�a�contract�farming�policy�cannot�be�developed�in�isolation�from�theoverall�strategy�for�agriculture�in�the�state.

• Regulatory�body:�The�contract�farming�policy�should�specify�the�nature�androle�of�a�contract�farming�regulator.�Ideally,�the�regulator’s�principal�functionsshould�be�to�lay�down�market�rules�within�the�broad�framework�of�thecontract�farming�policy�body,�administer�licenses,�monitor�compliance�andframe�model�contracts�till�the�market�matures.

• Model�contracts:�While�a�contract�price�protects�the�producer’s�downsideprice�risk,�it�also�prevents�him�from�reaping�windfall�profits�when�marketprices�soar.�A�suitable�contract�would�balance�risks�and�rewards�bycontracting�for�less�than�the�farmer’s�total�produce,�and�leaving�him�with�anamount�to�sell�in�the�open�market.�Similarly,�it�would�specify�mechanisms�fordispute�resolution�and�penalties�for�default;�spell�out�violations;�and�cover�thelegal�and�administrative�angles.�The�regulator�would�have�to�frame�severalalternate�model�contracts�that�can�then�be�adopted�by�the�farming�co-operatives�or�individual�farmers.

6 Amul’s�success�rests�on�an�efficient�supply�chain,�the�key�feature�of�which�is�that�it�carries�a�singleproduct.�Economies�of�scale�can�be�thus�achieved�in�storage,�transportation,�handling�and�distribution.

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Additionally,�since�IFRS�are�principal-based,�there�is�significant�room�for�exercise

of�judgment�and�detailed�implementation�guidance�is�often�not�available.

However,�U.S.�GAAP�is�generally�rule-based�and�detailed�implementation

guidance�is�available.��This�may�result�in�application�differences�between�IFRS�and

U.S.�GAAP,�even�in�areas�where�there�are�no�conceptual�differences.

12

Haryana’s contract farming policy

In August 2007, the Haryana government notified the Punjab Agricultural Produce Markets(General) Haryana Amendment Rules, laying down the rules for contract farming. Salientfeatures of these rules are:

• Registration of parties wishing to sponsor contract farming. Applications to beaccompanied by information on the sponsor’s financials, IT returns, proof of registrationand detailed project report

• Contract to be as per model agreement laid down in the rules. As per this modelagreement:

- If the farmer is forced to sell his contracted produce in the open market as a result ofthe buyer reneging on his terms, then he would be compensated by the buyer. Thecompensation amount will be the difference between the contract value and therealized value to the farmer, on selling in the open market.

- In case of the seller reneging on his commitment, the buyer is entitled to ask forcompensation from the prescribed authority under the Rules.

- The farmer cannot mortgage, lease or sell his property during the period of theagreement.

- The buyer has the authority to enter the farmer’s fields and monitor his progress

• Minimum contract price specified as the Minimum Support Price for the proceeding yearor, in its absence, the prevailing market price

• Sponsor has to deposit a security amount or bank guarantee equal to 15 percent of thecontract value with the agricultural marketing committee.

Contract farming of tomatoes in Punjab – A case study

In 1989, Pepsico set up a tomato processing plant at Zahura in Punjab for producing pastes andpurees for the international market. However, the plant’s crushing capacity of 30 MT per hourneeded a total of 40,000 tonnes of high-solids processing-variety tomatoes over a procurementperiod of 55 days for efficient operations.

Not only was the required variety not grown in Punjab, but also the state’s average yield was16 t/ha., and its total annual output a mere 28,000 tonnes.

Pepsico embarked on a then – novel contract farming initiative, in which it also involvedPunjab Agricultural University (PAU) and Punjab Agro IndustriesCorporation (PAIC).

Ten year later, the yield was up to 52 t/ha, with an annual output of 200,000 tonnes. Whatmade this change possible? – Planting hybrids, doubling the growing season from 28 to 55days, and adopting scientific farming practices.

Contrarian opinions have described Pepsico’s contract farming operations as a failure, in lightof the fact that its tomato processing plant was sold to HLL in 1999. However, the facts arethat Pepsico is still actively pursuing contract farming operations in Punjab, while the benefitsof higher yield and larger output to the state are undeniable.

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Industry

Diversion of agricultural land for industrialization needs consideration

West�Bengal�has�only�37,574�hectares�of�land�classified�as�‘barren�and

uncultivable’.�This�includes�around�6000�hectares�of�degraded�mine�land�of�the

Ranigunj�coal�field�in�Burdwan,�4500�hectares�in�the�Northern�hilly�areas,�and

4700�hectares�in�the�Terai-Tista�flood�plain,�areas�far�from�demand�and�supply

centres,�and�with�poor�connectivity.�The�total�area�of�vested�non-agricultural�land

available�in�the�state�for�industry�is�even�smaller,�at�only�9073�hectares;�–�only

half�of�that�land�is�in�South�Bengal.�Land�required�for�all�the�proposals�pending

before�West�Bengal’s�commerce�and�industries�department�is�36,437�hectares.

That�prompts�the�question:�can�industrialization�proceed�without�acquiring

agricultural�land?

Although�the�land�required�for�industry�amounts�to�about�0.6�percent�of�total

cultivated�area,�acquiring�even�this�quantum�of�land�is�proving�to�be�a�problem.�In

the�meantime,�critics�have�advocated�theories�of�all�shades�to�argue�against�land

acquisition,�from�the�rational�(e.g.�circle�rates�underestimate�market�value),�the

emotional�(land�is�one’s�mother),�and�the�notional�(food�security�would�be

threatened).

Of�these�explanations,�the�argument�of�food�security�is�the�weakest.�As�pointed

out�earlier,�average�yields�in�West�Bengal�are�two�or�three�times�lower�than

domestic�or�international�benchmarks.�The�problem�is�not�so�much�about

availability�of�land,�as�the�efficiency�of�its�use.

Food�security�is�a�serious�issue�for�not�only�West�Bengal�but�also�for�India�as�a

whole,�addressing�it�would�require�making�public�investments�in�irrigation�7,

adopting�high�yielding�varieties,�correcting�market�distortions,�shrinking�the

population�dependent�on�agriculture,�and�changing�cropping�patterns.�The�loss�of

less�than�1�percent�of�cultivable�land�would�not�make�a�difference�if�the�more

pressing�issues�were�addressed.�

At�the�same�time,�this�does�not�mean�that�industry�should�necessarily�be�sited

on�agricultural�land.�Indeed,�a�number�of�our�respondents�felt�that�land�acquired

for�industry�should�be�barren�or�of�little�fertility.�From�a�practical�point�of�view,

this�also�makes�sense�because�fewer�people,�including�(presumably)�illegal

settlers�and�sharecroppers�would�be�dependent�on�it,�compensation�would�be

restricted�to�a�smaller�set�of�people�and�would�be�easier�to�administer,�and

landowners�would�be�more�willing�to�sell�in�areas�where�the�land�market�is

relatively�illiquid.

7 Public�investment�in�irrigation�would�include,�most�significantly,�canals.�West�Bengal�has�701,000�haunder�canal�irrigation,�which�as�a�percentage�of�net�irrigated�area�is�ahead�of�only�UP,�MP,�Gujarat,Jharkhand,�Himachal�Pradesh,�Goa�and�Rajasthan.�There�are�differing�points�of�view�about�whether�WestBengal�is�adequately�exploiting�its�groundwater�resources.�While�on�the�one�hand�data�suggests�that�it�isusing�only�48�percent�of�its�groundwater�potential,�which�would�not�qualify�as�overdrawal,�there�is�theissue�of�arsenic�contamination.�A�19-�year�study�by�SOES-DCH�(a�collaboration�between�School�ofEnvironmental�Studies,�Jadavpur�and�Dhaka�Community�Hospital)�showed�that�9�out�of�West�Bengal’s�19districts�have�severe�arsenic�concentrations�in�their�groundwater.�There�is�substantial�reason�for�WestBengal�to�invest�canal�irrigation,�whether�or�not�groundwater�is�harnessed�further.

13

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Singur�and�Nandigram�have�demonstrated�the�administrative�difficulty�in�acquiring

fertile�land�for�industry.�But�low�yielding�agricultural�land�found,�for�instance,�in

the�arid�parts�of�Purulia�and�Bankura,�should�probably�present�no�such�problem

(see�box),�and�have�been�suggested�as�more�acceptable�alternates.�The�financial

viability�of�building�industrial�growth�centres�in�these�areas�should�be�studied

closely�by�the�state�government.�While�the�natural�growth�centres�of�industry�are

close�to�demand�centres,�close�to�existing�industrial�areas�8,�or�to�supply�centres

like�coal�mines,�sociopolitical�dynamics�in�West�Bengal�might�limit�options.

Acquisition, compensation and the need for a land policy

Assuming�that�the�majority�of�people�–�even�the�illiterate�or�uneducated�–�would

act�in�accordance�with�their�financial�interest,�emotional�arguments�against�land

acquisition�could�stem�from�other,�very�practical�concerns:�for�example,

unrecorded�sharecroppers�and�illegal�occupants�might�fear�that�they�would�not

be�entitled�to�any�compensation�in�lieu�of�their�loss�of�livelihood.

Survey Results - 2

‘Should try to acquire non arable/ single crop land’

87 percent of the respondents felt that industrialization needed agricultural land to be divertedfor it. “The CEO of one company suggested that less fertile pockets should be selected andprovided with adequate infrastructure to make it attractive for potential investors”.

86 percent of our respondents strongly disagreed with the assertion that acquiring less than 1percent of agricultural land would impact food security, arguing that the shortfall can be madeup for by planting high yielding varieties, and increasing the percentage of net sown areaunder irrigation.

8 New�industrial�hubs�in�post-reforms�India�have�tended�to�cluster�around�existing�hubs.�Thus�forinstance,�Bharuch�has�developed�close�to�Baroda,�Chengaianna�close�to�Madras,�and�Raigarh�and�Thaneclose�to�the�Greater�Bombay�industrial�belt.�A�study�of�investments�over�the�period�1992-1998�revealedthat�the�single�biggest�determinant�of�the�quantum�of�industrial�investments�in�a�district�wasinvestments�in�nearby�districts.�Neither�proximity�to�demand�centres�nor�quality�of�infrastructure�weresignificant�explanatory�variables,�though�proximity�to�ports�was�a�factor.

14

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Rational�arguments�against�land�acquisition�have�tended�to�revolve�around

compensation,�in�particular�–

1 How�to�value�the�land

2 Whom�to�compensate

3 How�to�structure�the�compensation.

In�addressing�the�first�question,�a�lot�of�attention�has�gone�towards�how�to

determine�the�current�market�value�of�the�land.�Since�the�value�of�land

transactions�are�often�understated�to�evade�taxes�and�duties,�circle�rates

available�with�the�government�may�not�be�a�correct�reflection�of�market�prices.

Furthermore,�in�areas�where�the�land�market�may�be�relatively�illiquid,�available

price�data�could�easily�be�stale.�The�market�price�(based�on�past�land�transactions

that�happened�prior�to�the�announcement�of�the�notified�area)�might�not�reflect

the�inherent�value�of�the�notified�land�to�all�categories�of�land�holders,�more�so

since�(as�we�know�it�to�be)�the�land�market�is�imperfect,�and�information

asymmetries�abound.

Finally,�there�is�the�question�of�fairness:�even�if�a�fair�estimate�of�market�price�or

an�acceptable�inherent�value�for�all�landholders�were�found,�it�would�not�capture

the�subsequent�appreciation�on�account�of�the�project�itself.�Therefore,

landholders�outside�the�notified�project�area�would�benefit�disproportionately,

while�the�original�land�losers�would�get�what�in�relative�terms�would�be�marginal

amount.�For�instance,�farmers�whose�land�was�acquired�for�the�SEZ�in

Sriperumbudur�in�2002�were�paid�INR�5�lac�per�acre,�at�(supposedly)�market

rates.�After�Motorola,�Flextronics,�Foxconn,�Samsung�and�Dell�came�in,�land�rates

went�up�to�INR�80�lac�an�acre.�This�benefited�the�1,500�farmers�living�just

outside�the�notified�area�of�the�SEZ,�but�not�the�original�landowners�whose�land

was�acquired.

There�is�thus�a�problem�with�determining�not�only�the�current�market�value�of

land,�but�also�a�more�fundamental�one�of�whether�to�use�the�market�price�as�a

benchmark�for�acquisition.9 Unfortunately,�none�of�these�problems�are�easy�to

address.�For�instance,�how�does�one�define�a�fair�price?�One�attempt�could�be

thus:�there�should�not�be�a�stark�difference�between�the�economic�returns�to�the

land�loser�compared�to�those�to�people�living�in�the�immediate�neighbourhood�of

the�acquired�land,�over�a�long�enough�period�of�time.�The�problems�then�would

be�to�determine�an�acceptable�definition�of�‘neighbourhood’�–�do�we�mean

contiguous�or�extending�some�distance�beyond�that?�–�and�‘long�enough’:�10

years,�20�years,�one�generation?

9 The�Nobel�Laureate�Prof.�Amartya�Sen�pointed�out�an�additional�problem�in�land�valuation,�speaking�inthe�context�of�Singur:�if�companies�were�free�to�compete�with�each�other�to�acquire�the�same�piece�ofland,�its�market�value�would�go�up�even�further�(‘…While�the�compensation�paid�is�greater�than�thevalue�of�the�land�seen�as�agricultural�land,�the�compensation�paid�by�the�government�is�less�than�whatthe�value�would�have�been�had�it�been�free�for�competition�with�industries.�If�you�are�part�of�the�marketeconomy,�then�you�have�to�take�into�account�what�the�value�of�the�land�would�have�been�had�it�beenfreely�available�for�industry…’)

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The�second�question,�of�whom�to�compensate,�is�particularly�relevant�for�West

Bengal.�We�do�not�have�estimates�for�the�total�number�of�unregistered

sharecroppers�or�illegal�occupants�in�West�Bengal,�but�Singur�and�Nandigram

indicate�that�the�numbers�could�be�considerable.�For�all�their�legal�status,�these

are�by�and�large,�poor�people�who�survive�on�their�farm�produce.�It�would�be

difficult�and�morally�questionable�to�acquire�land�without�their�buy-in.�The�real

question�then�is:�how�does�one�get�their�buy�–�in?�We�think�a�sustained�public

communication�campaign,�backed�up�by�a�sound�land�(acquisition,�compensation

and�rehabilitation)�policy,�are�key.�This�is�discussed�in�the�next�section.

The�third�question�is�complex�again.�Table�1�illustrates�the�pros�and�cons�of�some

select�modes�of�compensation.�The�trade�off�is�between�convenience�(best

illustrated�by�a�one-time�payment)�and�fairness�(an�extreme�of�which�would�be

allowing�everybody�to�customize�their�own�compensation�package).�

Mode ofcompensation

Pros Cons

Annuity

Steady�source�of�incomeAssumes�all�land�losers�have�the�same�return�expectation�and�risk

appetite

Exposed�to�inflation�risk

Requirement�for�ongoing�monitoring�and�grievance�redressal

One-time cash

paymentEasy�to�administer

Assumes�land�loser�has�sufficient�financial�acumen�to�use�his

money�wisely

Employment

Provides�an�alternate'way�of�life':�no�idleness

Employer�may�not�find�the�skills�commensurate�with�the�job

requirement.��Candidate�may�not�be�fit�for�employment�even�after

training.��Nature�of�job�offered�may�not�interest�the�land-loser.

Length�of�employment�cannot�be�guaranteed

Equity

Shares�upside�reward Shares�downside�risk

Land�loser�not�likely�to�understand�risks�and�returns�inherent�in

stocks

Value�of�equity�participation�can�vary�greatly�with�the�acquirer’s

profile

Land / House

No�resettlement�issuesHousing�projects�will�require�the�consent�of�a�large�number�of�land

losers:�this�option�cannot�be�'tailor�made'�for�an�individual

Because�of�the�above,�the�minority�is�likely�to��lose�out

Table�1:�Modes�of�compensation

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Our�respondents�clearly�favoured�more�complex�modes�of�compensation�than�a

simple�one-time�payment�(see�box).�Following�the�Jindal’s�offer�of�shares�to�land

losers�in�its�INR�35,000�cr�project�in�Salboni�10,�spread�over�4,000�acre�

(80�percent�of�the�land�belonged�to�government,�which�is�now�transferred�and

only�20�percent�of�the�land�purchased�from�private�owners)�and�shares�if�the

project�are�being�offered�only�to�private�owners,�equity�participation�has�come�to

occupy�the�popular�imagination�as�a�desirable�element�of�compensation.

But�intricately�tied�to�equity�participation�is�a�host�of�issues.�If�such�participation

is�in�the�holding�company,�then�there�would�be�less�of�a�problem.�But�if�it�is�in

the�project�company,�then�the�risks�are�higher.�Technically,�it�is�possible�for

promoters�to�siphon�away�the�profits�of�the�project�company�well�before�any

substantial�dividends�can�be�given�out.11 Equity�participation�therefore�assumes

honest�intentions�and�good�corporate�governance.

Survey Results - 3

‘Definitely not one-time cash payment’ / ‘Industry has to stick to core capability’

Responses were mixed on the issue of favoured modes of compensation for land acquisition.While 57 percent favoured the inclusion of some form of annuity (including an upfront lumpsum payment) in the compensation scheme, 26 percent thought that a one-time payment wasall that could be asked of industry. One respondent said that a one-time payment was unwiseas the land loser would be tempted to spend it all and then be left with nothing. Anotherrespondent was categorical that while industry should pay a fair amount, it was anothermatter altogether to start customizing compensation packages, and then being saddled withunforeseen liabilities. It was preferable to pay the compensation amount at one go.

Shares and employment were seen as a desirable part of the compensation package by 39percent and 30 percent of respondents respectively; 22 percent respondents believed that theconstituents of a compensation package woud have to be determined on a case to case basis– the package for prime agricultural land in Hooghly could be different than that for wastelandin Purulia, for instance.

Land-for-land was mentioned as desirable by only 9 percent of respondents.

10 Salboni�is�a�backward�area�in�West�Mednipur�district�where�Jindal�Steel�Works�is�setting�up�a�10MTPA�steel�plant.�While�residential�houses�are�not�going�to�be�affected�by�the�project,�there�will�be�lossof�low-grade�agricultural�land.�Compensation�is�in�the�form�of�cash,�insurance�benefits,�and�shares.�Forevery�rupee�of�cash�and�insurance�benefits,�there�will�be�a�matching�value�in�shares.

11 Mechanisms�for�siphoning�money�are�many�and�varied.�Some�of�these�are�superfluous�service�oruncompetitive�purchase�agreements,�interest�free�loans,�loans�payable�out�of�dividends,�etc.

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West�Bengal�needs�to�have�a�land�policy�that�will�clearly�identify�the�areas

identified�for�industrial�use,�method�for�valuing�land,�modes�of�compensation,

parties�qualifying�for�compensation,�conditions�under�which�equity�participation�is

acceptable,�and�cases�where�the�government�will�invoke�its�right�of�eminent

domain;�as�well�as�establish�the�functions�and�responsibilities�of�an�arbitrator�for

dispute�resolution,�amongst�others.�The�policy�should�also�lay�out�the�minimum

share�of�land�that�investors�have�to�acquire�themselves.�This�is�set�out�at�70

percent�in�the�New�Policy�on�Resettlement�and�Rehabilitation�(see�next�section),

but�the�state�could�increase�the�bar.�A�majority�of�our�respondents�believed�that

the�onus�of�acquiring�land�should�not�be�with�the�government,�as�is�the�current

situation�(see�box).

Communication is important

Survey Results - 4

‘Investors should acquire, the government should facilitate’

A majority of our respondents felt that land acquisition cannot be entirely the government’sresponsibility. The prevailing point of view was that land should be acquired by investors, withthe government facilitating the process by, for example, stepping in to acquire the last 10-20percent, if landholders are unwilling to sell, and land contiguity could become an issue.

Most respondents also thought laws should be framed that would make it compulsory for alandholder to sell, if in a significant minority where the rest have sold out. One respondentmentioned that once a certain area was known to be earmarked for industrial development,chances of land grabbing would be very high. In that case, offering an attractive package tothe minority land grabbers could send the wrong signals.

'…You hadn't exactly gone out of your way to call attention to the building plans had you? Imean like actually telling anyone or anything.'

'But the plans were on display.'

'On display? I eventually had to go down to the cellar to find them.'

'That's the display department.'

'With a torch.'

'Ah, well the lights had probably gone.'

'So had the stairs.'

'But look you found the notice didn't you?'

'Yes,' said Arthur, `yes I did. It was on display in the bottom of a locked filing cabinet stuck ina disused lavatory with a sign on the door saying "Beware of The Leopard"

- Douglas Adams, The Hitchiker’s Guide To The Galaxy

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The�acquisition�of�36,437�hectares�of�land�could�displace�anywhere�between�6.19

lac�and�1.28�lac�persons�(corresponding�to�the�average�rural�population�densities

of�Haora�and�Darjeeling,�at�two�ends�of�the�scale)�.��While�having�a�well�thought-

out�land�policy�is�important,�it�is�also�necessary�to�communicate�it�extensively

and�effectively.

The�new�National�Policy�on�Resettlement�and�Rehabilitation,�2007�(see�box)

stipulates�that�the�community�to�be�displaced�be�kept�informed�at�every�stage

through�public�hearings,�notices�to�panchayats�and�newspaper�advertisements.

But�it�would�probably�be�as�good�an�idea�to�communicate�the�features�of�the

new�land�policy�well�in�advance,�and�to�make�information�on�all�deals�available�in

the�public�domain.�As�a�first�step,�the�government�should�commission�a�mass

communication�plan.

Some stipulations of New Resettlement and Rehabilitation Policy

(NPRR), 2007

• Wherever possible projects should be non-displacing, and the promoters of projectsshould come up with alternative sites when making requests for acquisition

• As far as possible, projects may be set up on wasteland, degraded or un-irrigated land

• Before taking up a project government should consider options that would minimize thedisplacement of people, the total area of land to be acquired and the acquisition ofagricultural land for non-agricultural projects

• A Social Impact Assessment (SIA) of projects is required that may displace a largenumber of people. SIA will be necessary for projects causing involuntary displacement ofat least 400 families in plains and 200 families in hills

• State governments will appoint a commissioner and an administrator of resettlement andrehabilitation who will oversee resettlement

• If the acquired land transferred to a private company remains unutilised for five years ormore, it will revert to the state

• If the land is sold or transferred, 80 percent of any net unearned income shall be sharedwith the persons from whom the land was acquired

• Land will be acquired at market rate. The compensation package includes land for landwherever possible, preference of employment to at least one member of the affectedfamily, training for jobs or self-employment, scholarships, preference to groups andcooperatives formed by affected families for allotment of contracts, wage employmentand housing benefits

• There are also provisions for financial assistance ranging from INR 10,000 to INR 25,000for construction of cattle sheds and shops; transportation costs, temporaryaccommodation, and infrastructural facilities and amenities in the resettlement area

• There are options of pension and shares in projects

• Landless labourers residing in the affected area for at least five years eligible forcompensation

• States can acquire 30 percent of the land for a project provided the investor has alreadyacquired the first 70 percent

• Solatium (an additional amount payable over and above the market value) has beenhiked from 30 percent to 60 percent.

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The private sector should step up its commitment to corporate social

responsibility

Corporates�in�the�developed�world�are�spending�time�and�money�on�philanthropy.

Consider�the�following�cases:

In�2005,�Kraft�Foods�bought�13�million�pounds�of�Rainforest�Alliance�certified

coffee�beans�grown�by�sustainable�sources�in�coffee-growing�communities

around�the�world.�Coffee�from�Rainforest�Alliance�Certified�farms�fetches�a�higher

price�in�the�market,�allowing�farmers�a�better�standard�of�living.�The�move�was

supposed�to�have�benefited�more�than�100,000�farmers,�families�and�workers,

and�preserved�more�than�50,000�acres�of�tropical�rainforest�forest�in�Central�and

South�America.

In�June�2005,�Bristol-Myers�Squibb�and�Baylor�College�of�Medicine�announced

the�creation�of�a�Pediatric�AIDS�Corps�to�send�250�doctors�to�Africa�to�treat

approximately�80,000�children�over�five�years�and�to�train�local�healthcare

professionals.�

In�2000,�Carrefour,�the�second�largest�retailer�in�the�world�worked�with�FIDH,�a

group�of�116�human�rights�organizations�from�around�the�world,�to�establish�a

monitoring�agency�to�help�Carrefour�enforce�a�code�of�conduct�for�its�suppliers.

What�drives�corporates�to�philanthropy?�Generating�goodwill�in�the�local

community,�governmental�regulations,�and�generating�goodwill�amongst�existing

customers�are�typically�seen�as�valid�reasons.�However,�studies�have�noted�that

while�a�small�percentage�of�consumers�would�avoid�companies�they�see�as

irresponsible,�they�would�not�modify�their�buying�behaviour�to�favour�companies

that�are�seen�going�the�extra�mile�in�social�and�environmental�stewardship.�

In�the�developed�world,�an�increasingly�important�driver�of�corporate�social

responsibility�is�in�fact,�investor�pressure.�According�to�the�Social�Investment

Forum�(2005),�in�2005�more�than�USD�2.3�trillion�or�9.4�percent�of�all

professionally�managed�assets�in�the�U.S.�were�managed�with�“social�screens”.�

The�California�Public�Employees�Retirement�System�(CalPERS),�for�instance,�has

since�1987�targeted�relatively�poor�performers�(on�social�behaviour)�for�partial

take-overs.�The�influence�of�CalPERs�as�a�major�shareholder,�or�a�significant

threat�of�de-listing,�has�been�used�to�focus�the�management�on�change.�Is�such

non-intuitive�fund�management�good�for�its�beneficiaries?�Interestingly,�a�Wilshire

Associates�study�of�the�“CalPERS�Effect”�on�95�companies�targeted�by�CalPERS

between�1987�and�1999�found�that�these�companies’�stocks�outperformed�the

Standard�and�Poor’s�index�by�14�percent�in�the�5�years�following�CalPERS

intervention.�

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If�the�number�of�funds�requiring�CSR�related�conditions�continues�to�grow�and

gather�significant�market�power,�this�segment�of�the�financial�market�could

eventually�become�the�single�most�powerful�relationship�driving�corporations

towards�increased�CSR.�Evidence�of�this�growth�is�found�in�platforms�such�as�the

UN�Global�Compact,�which�recently�received�commitments�to�its�“Principles�of

Responsible�Investment”�from�50�institutional�investors�managing�funds�totaling

over�USD�4�trillion.

Further,�in�the�U.K.,�the�Pensions�Committee�of�the�Environmental�Agency�of

England�and�Wales�(2004,�p.�35-36)�decided�to�become�an�active�shareholder�and

compel�managers�to�analyze�environmental�performance�across�the�entire

portfolio.

The government should act as a team

The�Shilpa-Bandhu,�which�was�planned�to�be�a�single�window�set�up�to�guide

and�assist�investors�in�getting�their�clearance�and�approvals�have�ended�up�as

little�more�than�information�bureau.�The�investors�want�more�active�involvement

of�Shilpa-Bandhu.�In�Gujarat,�for�instance,�investors�are�actively�pursued�by�most

sections�of�bureaucracy,�while�in�West�Bengal�their�involvement�was�at�best

passive:�a�case�in�point�being�Shilpa-Bandhu�itself.�The�Bandhu,�an�official

appointed�to�guide�investors�regarding�the�approvals�they�need�to�take,�and�in

what�sequence,�ends�up�as�little�more�than�an�information�bureau;�whereas�what

investors�want�is�a�little�more�active�involvement.

Survey Results - 5

‘CSR spend should be 1-2 percent of net profits’

A vast majority of our respondents thought that there was significant scope for the privatesector to step up its commitment to corporate social responsibility. Senior managet of an MNCthought that commitment for CSR should be between 1-2 percent. While it was felt that CSRshould be a voluntary effort and not be made compulsory, one respondent thought that at leasta social audit should be made mandatory.

In the unlikely event that land has been taken up for industrial development, the privatepartner should invest (especially for village land) in local community development initiativeslike water supply, maintenance of primary schools, community centers etc. For urban cities,CSR could include urban beautification and host of other initiatives.

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It�was�also�felt�to�be�a�lack�of�a�common�vision�–�with�the�lower�bureaucracy

displaying�no�such�urgency�in�garnering�investments�as�seen�in�the�government

and�senior�bureaucracy.�It�was�felt�that�investor-friendliness�was�a�matter�of

personal�-�as�opposed�to�collective�-�attitude.�Systemic�support�in�West�Bengal

was�low�on�this�score�(see�box).

Industrial relations are not a problem area, general strikes are

A�popular�perception�is�that�West�Bengal�suffers�from�worker�unrest.�Critics�have

sometimes�pointed�to�the�cumulative�number�of�strikes�and�lockouts�in�the�state,

the�highest�in�the�country,�and�used�that�to�support�their�assertion�of�pervasive

labour�problems.�However,�the�truth�is�that�except�for�certain�industries�like�tea

and�Jute,�where�industrial�relations�remain�poor,�labour�problems�are�not�seen�as

a�particularly�troublesome�area�anymore�(see�box).�

Survey Results - 6

‘Pursuing of investors should be system-driven’

Our respondents believed that the government and senior bureaucracy were supportive ofindustries. But the underlying concern was that key initiatives like active pursuing of investorsran entirely on the conviction and sincerity of a few individuals, and was not system-driven.

It was felt that a pro-industry attitude had not percolated to all sections of the bureaucracy,and the lower bureaucracy in particular was not industry-friendly. One respondent mentionedthat the bureaucracy on the whole was friendly towards big industry, but not particularlyresponsive to the needs of small industry.

The median rating of the opposition’s attitude to industry was low, but a few respondentsrated it a just notch below the government’s.

For an investor, West Bengal’s other politico-economic advantages were seen as its relativelack of corruption, generally good law and order (this was before the fresh outbreak of violencein Nandigram), and what are perceived as stable economic policies. Negative points wereperceived to be long lead times for approvals and clearances, and few state-level tax benefits.

Rating on a scale of 0-10

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An�analysis�of�the�disaggregated�figures�for�strikes�and�lockouts�is�revealing.

West�Bengal�has�had�far�many�more�lockouts�than�strikes�in�the�period�1991-

2005.�In�fact,�the�number�of�strikes�in�this�period�has�been�less�than�that�in�Tamil

Nadu,�Gujarat,�AP�or�Haryana.�Correspondingly,�the�number�of�lockouts�has�been

significantly�greater�than�for�any�other�state�except�Andhra�Pradesh.�But�AP’s

statistic�has�been�declining�every�year,�while�West�Bengal’s�has�risen�from�108�in

1991�to�172�in�2005.

Does�this�trend�point�to�labour�problems�forcing�the�management’s�hand�or�to�an

increasing�number�of�companies�facing�financial�distress�and�halting�operations?

It�could�go�either�way.�At�present,�we�don’t�see�any�evidence�to�pin�the�blame�for

West�Bengal’s�high�incidence�of�lockouts�on�labour�problems.�On�the�other�hand,

the�data�on�strikes�is�more�straightforward:�and�it�shows�that�West�Bengal�is

actually�in�a�better�position�than�many�other�states.�

Of�far�greater�significance�are�general�strikes�–�‘bandhs’�and�‘hartals’.�This,�more

than�any�problem�with�labour�unrest,�was�seen�as�the�single�greatest

disincentive�for�investing�in�West�Bengal.

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West Bengal should have more private ITIs

West�Bengal’s�approximately�4�lac�workers�in�the�organized�industrial�sector�rank

it�ahead�of�Haryana,�almost�at�par�with�Karnataka,�while�it�stays�significantly

behind�Gujarat,�Andhra�Pradesh,�Maharashtra�and�Tamil�Nadu.�In�the�unorganized

manufacturing�sector,�its�workforce�is�the�largest�in�the�country.

Its�average�wages�in�the�organized�sector�are�on�the�higher�side�,�on�account�of�a

large�percentage�of�its�workforce�finding�employment�in�the�79�PSEs�in�the

state.�This�raises�the�issue�of�whether�the�supply�of�low-cost�skilled�labour�might

be�limited.�Our�survey�respondents�did�seem�to�think�that�such�was�the�case

(see�box).�It�is�possible�that�such�a�supply�crunch�is�being�felt�in�other�states�as

well,�but�at�the�same�time�West�Bengal�is�clearly�lagging�behind�in�training.

In�2004,�the�total�number�of�seats�in�all�government�and�private�ITI’s�/�ITC’s�in

West�Bengal�was�one-eighth�of�that�in�Andhra�Pradesh.�Maharashtra,�Gujarat�and

Tamil�Nadu,�all�had�more�than�85,000�seats�as�compared�to�West�Bengal’s

12,824.�Even�Chhattisgarh,�Orissa,�Uttar�Pradesh�and�Bihar�had�greater�seating

capacity,�while�in�per�capita�availability�only�Bihar�comes�close.

Survey Results - 7

‘Better than Maharashtra, at par with TN’

On labour-related issues, industrial relations received a fairly high median rating of 7. The CEOof a INR 3,000 cr company, a market leader in its industry, commented that there was“…hardly any militancy at all in the organised sectors…never had any problem of go slow inlast 20 years.” Another response, from the MD of an Indo-European joint venture company,was that industrial relations in West Bengal were ‘better than (in) Maharashtra, at par withTN’.

The lowest rating of 3 was given by the CEO of a company which had seen labour unrest in therecent past, and was undergoing a massive restructuring exercise under a new management.

Clearly, companies have had very different experiences with their workers in West Bengal.Labour issues today would tend to be company-specific, rather than symptomatic of anyuniversal trend. The only exception that we find is in tea, where labour disputes are commonin the Dooars region.

For most other industries, and certainly for those in the southern part of the state, it would notbe incorrect to say that industrial relations are not a problem in West Bengal anymore.

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What�have�the�top�four�states�done�differently?�Maharashtra�and�Gujarat�have

simply�set�up�more�government-run�training�institutes,�while�Andhra�Pradesh�and

Tamil�Nadu�have�encouraged�greater�private�sector�participation.�While�West

Bengal�has�the�lowest�share�of�private�ITI’s�at�7�percent,�the�figures�for�Andhra

Pradesh�and�Tamil�Nadu�are�78�percent�and�72�percent�respectively,�while

Maharashtra�has�31�percent.�Only�Gujarat�at�19�percent�is�an�anomaly,�but�both

in�terms�of�both�percentage�and�absolute�numbers,�it�is�still�far�ahead�of�West

Bengal–�there�are�more�seats�in�private�ITI’s�in�Gujarat�than�total�seats�in�West

Bengal.

West�Bengal�should�look�at�PPP�models�for�improving�the�number�and�quality�of

ITI’s�in�the�state.�Here,�supply�can�be�created�ahead�of�demand.�Even�if

employment�opportunities�are�not�available�in�the�state�itself,�skilled�workers�can

always�find�work�in�other�geographies.�Punjab�and�Kerala�are�two�examples�of

economies�that�have�benefited�from�remittances.�One�also�suspects�that�Kerala’s

59,000�ITI�seats,�74�percent�of�them�in�private�institutes,�may�be�in�response�to

the�demand�for�skilled�manual�labour�in�the�Gulf.

As�a�first�step,�West�Bengal�should�determine�the�number�of�institutes�needed,

their�location�and�intake,�operating�model,�course�design,�staffing,�and�financing

requirements.�

Survey Results - 8

‘Onus of training lies with employer’

Our respondents saw a problem with the availability of skilled labour, while unskilled andsemi-skilled labour was perceived to be abundant in the state.

The shortage was seen to extend across the spectrum of skilled labour – manual workers, ITprofessionals, and managerial and financial personnel. Not all of these are specific to WestBengal, of course – IT and finance are facing a supply crunch all over the country, which hasresulted salaries rising sharply.

The quality of instruction in ITI’s was felt to be poor, with the result that even supposedlytrained personnel needed re-training on the job. The onus of training lay on the employer.

Lack of skills was a principal reason why labour productivity received a low median rating of 5on a scale of 0 to 10, although two of the respondents also saw an issue with workerattitudes.

West Bengal government is now asking private partners setting up large projects to invest intraining facilities for absorbing local manpower so that the villagers are “employable”.

Rating on a scale of 0-10

25

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As�mentioned�at�the�beginning�of�this�report,�West�Bengal�has�to�find�innovative

approaches�for�sustainable�development:�it�does�not�have�comparable

precedents.�West�Bengal�has�fertile�farm-land,�mineral�resources,�a�rich�cultural

heritage,�and�a�huge�pool�of�intellect.��What�it�does�not�have�is�‘time’.

The�action�points�highlighted�in�the�report�are�summarized�as�follows.

For the government

• To�have�a�draft�land�policy�for�West�Bengal�-�identifying�areas�to�be�acquiredfor�industry,�the�rationale�thereof,�and�the�mode�of�compensation�to�the�land-owners.

Industrialists�would�prefer�clarity�on�where�they�can�look�forward�to�settingup�industries.�Information�on�the�facilities�that�such�land�offers�likeconnectivity�and�natural�resources�should�be�available�to�the�investors�easily.The�process�of�acquiring�of�such�land�is�another�important�matter�whichshould�be�covered�in�the�land�policy.�People�living�in�the�areas�identified�asindustrial�land�also�need�to�understand�the�various�options�of�compensationthat�they�would�receive,�if�and�when,�such�land�is�acquired.�Although�theactual�amount�of�compensation�would�be�determined�only�at�the�time�ofactual�acquisition,�the�land-losers,�particularly�the�less�literate�ones�would�getmore�time�to�weigh�various�options.�An�informed�decision,�rather�thanemotional�outbursts,�would�help�in�achieving�the�right�win-win�situation.

• To�enable�the�formation�of�agricultural�co-operatives.

The�report�compares�the�productivity�of�rice�in�various�geographies.�Theproduction�of�rice�has�to�improve�further�and�adequate�result�orientedresearch�and�implementation�process�should�be�evolved.�The�existingresearch�institutes�can�be�utilized�for�this�purpose�in�addition�to�any�othermethod�undertaken.�Formation�of�agricultural�cooperatives�should�bepromoted�that�can�effectively�and�quickly�reap�the�benefits�of�advancedresearch.�As�pointed�out�by�one�of�the�respondents,�rice�by-products�can�bemore�gainfully�used�and�rice�itself�can�be�marketed�in�other�value�addedforms.�Agricultural�cooperatives,�rather�than�individual�farmers,�will�be�in�abetter�position�to�reap�such�benefits.

• To�frame�guidelines�for�contract�Contract�farming�/�partnership�farming inWest�Bengal�and�to�appoint�a�contract�farming�regulator�till�the�marketmatures.

Contract�farming�rules�have�been�laid�down�in�Haryana�and�several�companiesare�actively�pursuing�contract�farming.�Contract�farming�helps�in�directinteraction�between�the�industry�and�the�producers�which�help�in�buildingvalue�for�both�the�parties.�However�the�parties�involved�–�the�industry�and�thefarmers�–�represent�two�very�diverse�sections�of�the�society�and�thus�settingup�of�an�independent�monitoring�body�is�important�till�the�market�matures.

• To�encourage�the�private�sector�to�set�up�private�vocational�training�institutes.

Action Points26

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Trained�personnel�from�ITIs�and�other�vocational�institutes�form�a�veryimportant�part�of�manufacturing�industries.�The�number�of�seats�of�suchinstitutes�in�West�Bengal�is�much�lower�than�Andhra�Pradesh,�Maharashtra,Gujarat�and�Tamil�Nadu.�In�addition,�the�curriculum�and�quality�of�training�insuch�institutes�has�been�questioned.�While�it�might�be�difficult�for�stategovernment�agencies�to�quickly�add�capacity�on�its�own,�it�is�recommendedthat�the�private�sector�take�the�initiative�either�on�their�own�or�under�a�PPPmodel.�If�training�is�imparted�on�correct�trades,�i.e.�the�trades�required�by�theindustry,�it�is�possible�to�run�the�institutes�profitably.�In�addition�the�industrywould�have�access�to�quality�manpower�with�‘employable’�skills.�

• Sustained�communication

In�times�of�change,�sustained�communication�is�of�utmost�importance.�Thenew�initiatives�like�land�policy,�contract�farming�policy�etc.�should�beexplained�and�communicated�to�all�particularly�to�the�people�who�might�beaffected/�benefited.�It�is�important�to�develop�a�two-way�communicationsystem�in�such�a�manner�that�the�feelings�and�apprehensions�of�the�affectedpeople�are�diligently�documented�and�successfully�addressed�at�the�earliest'.

For the bureaucracy

• To�inculcate�an�investor-friendly�attitude�within�the�lower�bureaucracy

Most�of�the�respondents�have�given�a�high�rating�to�the�Government�and�thesenior�bureaucracy�on�this�subject�of�investor�friendliness�but�the�sameenthusiasm�is�not�visible�for�lower�bureaucracy.�Respondents�see�theprocesses�involved�as�being�more�‘person�driven’�rather�than�being�‘systemdriven’.�Respondents�spoke�about�how�in�one�of�the�states�the�governmentmachinery,�at�various�levels,�goes�out�of�the�way�to�pursue�investors�as�soonas�a�potential�investor�is�spotted.�It�is�important�to�develop�the�same�level�ofconfidence�for�investors�in�West�Bengal

• To�act�as�a�team�with�the�government.�The�primary�responsibility�for�effectingsuch�attitudinal�changes�would�lie�with�the�top�bureaucracy

One�of�the�respondents�remarked�that�‘West�Bengal�has�overcome�theperception�problem�but�needs�to�replicate�the�same�at�implementation�levels’.Some�respondents�feel�that�there�does�exists�high�levels�of�efficiency�inpockets.�The�top�bureaucracy�which�acts�as�the�link�between�‘vision’�and‘implementation’�needs�to�take�a�lead�on�institutionalizing�the�processes�thatare�system�driven.�

For Industry

• To�step�up�its�commitment�to�corporate�social�responsibility

While�benefits�of�CSR�to�the�society�is�obvious,�studies�show�that�CSRactivities�have�a�marginal�effect�on�the�minds�of�consumers�from�purchasedecision�point�of�view.�One�of�the�respondents�felt�that�CSR�activities�that�arelimited�to�weekend�involvement�or�donations�to�organizations�have�good�butlimited�effect.�Clearly,�commitment�to�CSR�has�to�increase�and�there�is�meritin�weaving�it�around�the�regular�activities�of�the�firm�that�will�have�moreimpact�and�generate�harmony�between�the�industry�and�the�society.

27

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For Political Parties

• General�strikes�are�undesirable

In�respect�of�labour�relations�nearly�all�respondents�expressed�satisfactionthat�the�industrial�relations�in�the�state�have�improved.�However,�therespondents�voiced�concern�about�imposition�of�strikes�and�bandhs�in�thestate�by�various�political�parties.��While�the�right�to�protest�peacefully�is�ourbirthright,�disrupting�economic�activity�and�causing�inconvenience�to�public�isnot,�however�justified�our�grievance�might�be.��A�vital�day�is�lost�and�thestate’s�reputation�gets�dented.��Potential�investors�watching�the�state�havemany�other�options�in�India�and�other�emerging�economies.��Losing�themwould�only�hurt�the�state�in�the�long�run.����

Additional Action Points

There are certain action points that we have not touched upon in the previouschapters, but would like to mention them in these concluding paragraphs:

West�Bengal�is�emerging�as�a�power�surplus�state�but�has�most�of�its�electricitygeneration�coming�from�coal.�Options�in�coal�gasification�and�nuclear�powergeneration�should�be�explored,�and�the�harnessing�of�renewable�resourcesincluding�wind14 and�tidal�should�be�actively�encouraged.�

Some�respondents�have�pointed�out�that�primary�education�requires�a�renewedfocus�and�a�greater�emphasis�on�knowledge�of�‘English’.��Knowledge�of�thelanguage�enhances�the�employment�options�of�the�individual.��Denying�him/herthat�as�an�outcome�of�misplaced�emotions�only�hurts�the�student’s�futureoptions.��

Drop-out�from�schools�needs�to�be�arrested.��The�mid-day�meal�initiative�of�theschools�run�by�Kolkata�Municipal�Corporation�has�yielded�interesting�results�andneeds�to�be�replicated�all�over�the�state.�

Entrepreneurship�has�to�be�promoted�in�West�Bengal�and�both�media�andeducational�institutions�need�to�play�an�important�role�in�this�respect.�Mediashould�take�a�lead�in�communicating�success�stories�about�entrepreneurship�-however�big�or�small.�It�was�noted�by�many�respondents�that�though�the�mediais�promoting�this�concept,�it�needs�greater�impetus�so�that�the�‘entrepreneurialattitude’�strikes�a�chord�with�the�youth�of�the�state�in�general.�The�educationalinstitutions�can�also�play�a�role�in�shaping�young�minds�and�enhancing�requisiteskills.

West�Bengal�is�at�a�turning�point�in�its�history.�Intelligent�decisions�have�to�bemade�about�its�future�course�of�progress,�and�they�have�to�be�made�now.�WhileSingur�and�Nandigram�have�been�branded�by�some�sections�of�the�media�assignificant�setbacks�to�investor�confidence,�we�believe�that�immediate�eventsalways�tend�to�cloud�one’s�perspective,�and�there�are�reasons�to�be�optimisticabout�West�Bengal’s�long�term�growth�prospects.�A�shared�vision�and�collectiveeffort�of�all�the�stakeholders�-�including�Government,�administration,�industry�andthe�farming�community�-�is�what�West�Bengal�needs,�to�reach�the�commandingheights�it�rightfully�deserves.

14 West�Bengal�has�a�technically�exploitable�wind�potential�of�450�MW�–�about�10�percent�of�the�state’scurrent�installed�capacity�–�of�which�only�0.34�percent�has�been�tapped.��Other�states�with�windpotential�like�Andhra�Pradesh,�Tamil�Nadu,�Gujarat,�Rajasthan,�Karnataka�and�Maharashtra�have�donemuch�better.

28

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List of respondents

S. No Company Name Person Interviewed Designation

1 Mr.�Tapan�Mitra Ex.�Managing�Director

2 Mr.�Debasish�Som Ex.�Managing�Director�(WBIDC)

3 Apeejay�Surrendra�Group Mr.�Sourav�Daspatnaik Director�(HR�Development�and�Strategy)

4 Bata�India�Limited Mr.�Shaibal�Sinha Director�(Finance)�and�CFO

5 Biecco�Lawrie�Limited Mr.�S.K.�Dutta Chief�(Electricals)�and�Chairman�-�IEEMA�(ER)

6 C&I�Department,�GoWB Mr.�Vikram�Sen,�IAS Special�Secretary�

7 Contemporary�Brokers�Pvt�Ltd. Mr.�Sidharth�Chatterjee Director�

8 Dayal�Industries Mr.�Sunil�Agarwal Partner

9 Deepak�Group�of�Industries Mr.�Ratan�Kr.�Bihani Proprietor

10 Department�of�Power,�GoWB Mr.�Sunil�Mitra,�IAS Principal�Secretary

11 DIC�(Jalpaiguri) Mr.�Gautam�Das General�Manager

12 DIC�(Mednipore) Mr.�Dipankar�Chakraborty General�Manager

13 Duncan Dr.�S.K.�Biswas Vice�President

14 Exide�Industries�Limited Mr.�S.B.�Ganguly Chairman�Emeritus

15 Haldia�Petrochemicals�ltd. Mr.�Swapan�K.�Bhowmik Managing�Director

16 Haldia�Petrochemicals�ltd. Mr.�Ujjal�De Senior�Vice�President

17 Haldia�Petrochemicals�ltd. Mr.�A.K.�Chattopadhyay Vice�President�and�Dy.�Company�Secretary

18 HDFC�Bank Mr.�P�K�Mukherjee General�Manager�-�Eastern�Region

19 Indian�Oil�Petronas�Pvt.�Limited Mr.�Zamrany�Hasral�Ismail Financial�Controller

20 ITC�Limited Mr.�Nazeeb�Arif Vice�President�-�Corporate�Communications

21 ITC�Limited Mr.�Arup�Ghosh Manager�-�Corporate�Communications

22 Jalpaiguri�Dabgram�Industries�Owners�Welfare�Association Mr.�Mohan�Debnath Director

23 Khadim�India�Limited Mr.�Suman�Barman�Roy President

24 Kolkata�Municipal�Corporation Mr.�Alapan�Bandyopadhyay,�IAS Municipal�Commissioner

25 Kusum�Industries Mr.�Rajesh�Agarwal Partner

26 Mjunction�services�Ltd. Mr.�Viresh�Oberoi Managing�Director

27 Mjunction�services�Ltd. Mr.�Souvik�Poddar Head�Finance

28 Modern�Malleable Mr.�Alok�Nath�Chaudhri Director

29 Munich�Re�Group Mr.�Sanjib�Chaudhuri Chief�Representative

30 Paharpur�Cooling�Towers�Limited Mr.�Arun�Singhania Vice�President�-�Finance�&�Co.�Secretary

Annexure29

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S. No Company Name Person Interviewed Designation

31 Phoenix�Yule�Limited Mr.�T.K.�Mukherjee Managing�Director

32 Public�Health�Engineering,�GowB Mr.�K.S.�Rajendrakumar,�IAS Principal�Secretary

33 R�Sen�Group�of�Industries Mr.�Premal�Sen Proprietor

34 Ramsarup�Group Mr.�Ashish�Jhunjhunwala Chairman�Cum�Managing�Director

35 Riverbank�Holdings�Pvt.�Ltd. Mr.�Sumit�Dabriwala Managing�Director

36 Shrachi�Group�of�Companies Mr.�Ravi�Todi Managing�Director

37 Siliguri�Tea�Auction�Committee Mr.�Shiv�K�Saria Chairman

38 Sub�District�Industry�Centre Mr.�SK�Majumdar Officer-in-Charge

39 Tata�Metaliks�Limited Mr.�V�B�Singh Vice�President�(Projects�and�Operations)

40 Tata�Metaliks�Limited Mr.�Manas�Kumar�Manna Asst�Manager�(Project�and�Technology)

41 Tata�Ryerson�Limited Mr.�Sandipan�Chakravortty Managing�Director

42 Tata�Steel�Limited Mr.�G�S�Rattan Executive�in�Charge

43 Techno�Electric�&� Mr.�P.P.�Gupta Managing�DirectorEngineering�Co.�Ltd.

44 The�Telegraph Mr.�Abhijit�Kumar�Datta Senior�News�Editor,�Business

45 The�Economic�Times Basistha�Basu Editor,�Kolkata

46 TIL�Limited Mr.�Arun�Grover General�Manager�-�Marketing�Services

47 West�Bengal�Industrial� Dr�Indrani�Banerjee EconomistDevelopment�Corporation�(WBIDC)

48 West�Bengal�State�Electricity� Mr.�Malay�Kumar�De ChairmanDistribution�Centre�Limited�(WBSEDCL)

49 Wipro�Technologies Mr.�Tamal�Dasgupta Senior�Vice�President

Some of the respondents requested confidentiality and hence their names are not included in the above list.

30

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in.kpmg.com

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The�information�contained�herein�is�of�a�general�nature�and�is�not�intended�to�address�the�circumstances�of�any�particular�individualor�entity.�Although�we�endeavor�to�provide�accurate�and�timely�information,�there�can�be�no�guarantee�that�such�information�isaccurate�as�of�the�date�it�is�received�or�that�it�will�continue�to�be�accurate�in�the�future.�No�one�should�act�on�such�informationwithout�appropriate�professional�advice�after�a�thorough�examination�of�the�particular�situation.

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KPMG�in�India

MumbaiKPMG House, Kamala Mills Compound448, Senapati Bapat MargLower ParelMumbai 400 013Tel: +91 22 3989 6000Fax: +91 22 3983 6000

Delhi4B, DLF Corporate ParkDLF City, Phase IIIGurgaon 122 002Tel: +91 124 307 4000Fax: +91 124 254 9101

BangaloreMaruthi Info-Tech Centre11-12/1, Inner Ring RoadKoramangalaBangalore 560 071Tel: +91 80 3980 6000Fax: +91 80 3980 6999

ChennaiNo.10 Mahatma Gandhi RoadNungambakkamChennai 600 034Tel: +91 44 3914 5000Fax: +91 44 3914 5999

HyderabadII Floor, Merchant TowersRoad No. 4, Banjara HillsHyderabad 500 034Tel: +91 40 2335 0060Fax: +91 40 2335 0070

KolkataPark Plaza, Block F, Floor 671 Park StreetKolkata 700 016Tel: +91 33 2217 2858Fax: +91 33 2217 2868

Pune703, Godrej CastlemaineBund GardenPune 411 001Tel: +91 20 305 85764/65Fax: +91 20 305 85775

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