Why Nandigram Inc needs Kotak Mahindra | Narayanan Madhavan

For the CPM-ruled state, setting up industrial zones seems to be a perpetual problem, writes Narayanan Madhavan.
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Updated on Mar 29, 2007 12:55 AM IST
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None | ByNarayanan Madhavan

Bullets and blood are not what we expect in a place where a special economic zone (SEZ) is supposed to create jobs and prosperity. Yet, in the West Bengal village of Nandigram, we have only seen political turmoil and social unrest where industrial facilities are supposed to come up.

For the CPM-ruled state, setting up industrial zones seems to be a perpetual problem, even after the state government decided to befriend private capital.

Be it the car project involving the Tatas at Singur or the Haldia petrochemical project involving a series of failed partners, Bengal is not exactly friendly to private industrialists.

The case of Nandigram is unique because it is not only about a fair price for land, but a fierce opposition to the government itself. The economics and livelihoods of rural citizens is critical here.

We may quibble over ideological dogmas, organised trade unions, rivalry between populist parties and the nuances of rural politics, but one question towers above them all in the financial year when Tata Steel acquired Anglo-Dutch Corus group and the Aditya Birla group bought US-based aluminium products firm Novelis: why can’t our farmers be more like our industrialists? Why can’t Nandigram Inc enjoy some privileges available to India Inc?

That sounds a lot like Professor Henry Higgins in My Fair Lady who said: Why can’t a woman be more like a man?
The real issue is that the farmers do not know what they do not know. When the Tatas or Birlas want to buy or sell a company, they involve investment banking and accounting companies like Ernst & Young, KPMG or Kotak Mahindra to get them the best deal.

These financial engineers study the market, the industry, the cash flow requirements and the needs and aspirations of their clients and then offer them tailored solutions to suit their interests. Both Novelis and Corus are being bought under a “leveraged buyout” model in which the buyers use the acquired property to raise debt to fund the purchase.

Such sophistication, alas, is not available to poor villagers or farmers. They have no Ernst & Young or Kotak Mahindra. They end up relying on activists like Arundhati Roy or Medha Patkar to voice their grievances and in the process end up with more sympathy than productive cash or higher incomes. The government that buys their land or sells it to industrialists does so at what it believes to be the fair price, having little concern about how the farmers view their own future.

If a financial engineering company was involved, they could think of bridge loans for farmers or think up “special purpose vehicles” of the kind built for the Tatas and make farmers shareholders in that company and offer market-based price for their land, bringing in privileges currently available only to industrialists – such as negotiating skills, bargaining power, leveraged finance, recurring cash flows and steady, predictable, assured incomes.

Those who support industrialisation talk about the “greater common good” from the jobs they create, but market economics is about demand and supply, and state intervention for social purposes cannot deny to one section of the society the legitimate market practices available to other sections of the society.

A few years ago, West Bengal’s Left Front government was smart enough to engage global consulting firm McKinsey & Co to boost its industries. Why can it not involve Ernst & Young or Kotak Mahindra to help out its farmers?

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