The Tatas' challenge to a West Bengal law that returns land to villagers in Singur, the site for a car factory, could help define the government's role in land acquisition across the country. If the courts - and this case looks headed for the Supreme Court - uphold Mamata Banerjee's gesture of gratitude to the cause that catapulted her to power, each action of the previous Left Front government in facilitating the transfer of land will come up for scrutiny. Some of them will pass muster, some won't. If, on the other hand, Ms Banerjee's law is found to be an act of unacceptable repudiation, provincial parties will in any case have drawn their lessons from the political upheaval in West Bengal over forcible land acquisition. In either case, no-go areas in the state's attempts to acquire land for industrialisation will have been marked out. The ballot box and the gavel speak louder than any federal effort to lessen the competition among states for capital.
The pace of infrastructure development will have to double for India to be able to house half its people in cities in a couple of decades. The government - both at the Centre and in the states - does not have the money to do this on its own. Private partners will have to be sought. The government's stake in such projects is increasingly land that private capital finds logistically and financially difficult to acquire. With tax arbitrage and energy subsidies no longer viable options in the competitive provincial market for big-ticket investments, states perforce have to fall back on the one asset they can offer cheap to industry: land. In this scenario, the Centre finds it difficult to persuade states to adopt a model law that frowns on excessive zeal in land acquisition. In a sense, the Centre has driven state governments into this frenzy over land by plugging tax giveaways and cheap power.
For sanity to prevail, all government land acquisition must internalise a basic premise: the people being displaced are paid for the land they hand over at today's market rates while profits are made on rates that obtain after a project is fully developed, be it industrial complex, mine or township. This is readily addressed by breaking the compensation in two parts: an outright purchase and stock options in the company setting up the project. The idea of making the dispossessed stakeholders in development is old, it is a matter of actualising it. Equity, being skill and technology neutral, is a more transparent currency for transfer of resources from one section of society to another. The alternative to symbiotic growth with the dispossessed is stifled industrialisation. Ms Banerjee has provided us with a glimpse of the latter; her deep insights into the issue could hopefully lead to the former.