Protest at Tata Plant Evidence of Indian Identity Crisis

At a price of just $2,500 each, Tata Motors Ltd.’s (TTM) Nano was billed early in its development as the world’s cheapest automobile and the only car that was both affordable and practical enough for India’s quickly burgeoning middle class. But the car that was emerging as a bright symbol of middle-class opportunity in fast-growing India could now epitomize something much darker: The human cost of rapid industrialization.

Company officials this week disclosed that the Nano might not debut next month as originally planned, because violent protests have erupted at the automobile’s main production site.

It’s a conflict that pits traditional Indian values against the country’s rapid industrialization.

Designed to target lower-mid income brackets, the Nano will sell for one lakh (100,000 rupees), or just over $2,500 — a price that undercuts Tata’s domestic rivals by about 30%. And it’s not just the car’s cheap price that’s creating such a domestic buzz: The Nano is also small enough to be considered practical in a nation that’s teeming with more than a billion people, and whose narrow, largely unpaved roads are overrun by mopeds, motor scooters and motorcycles.

Indeed, many analysts anticipated the Nano would revolutionize India in the same way Ford Motor Co.’s (F) Model T revolutionized America. Not only would it bring an affordable and practical car to the market; it would also generate jobs and create a steady income for a growing middle class. It was a good tale to tell; unfortunately, there’s been a twist to the intended plot.

Earlier this week, India’s Tata Group announced it would halt construction of a key Nano assembly plant in Singur, located in the state of West Bengal, so it could move production to another location. The reason, the company said, was that thousands of protestors were “violently obstructing” construction of the Nano factory.

The protests began two weeks ago, when the Trinamool Congress political party blocked a four-lane highway in front of the plant. The group erected tents and rallied a throng of local farmers who claim they were unlawfully displaced by the government to make way for the production site.

Legislation, first enacted in 2005, created a number of special economic zones, including a plot of land in Singur that was sold to Tata Motors for its Nano plant. However, many of the land’s former occupants argue that they were not adequately compensated for the land, and in some cases, were actually coerced into selling their property. The farmers, and the Trinamool Congress, are demanding 400 of the 1,000 acres allotted to Tata be returned.

Leaders of the Trinamool party insist the protests have been nonviolent, but Tata says the threats, violence, and police barricades are too much to subject their employees to any longer.

“The company is evaluating alternate options for manufacturing the Nano car at other company facilities and a detailed plan to relocate the plant and machinery to an alternate site is under preparation,” the company said in a statement this week.

Of course, shifting workers, supplies and equipment to different facilities — while also breaking ground on a new Nano factory site — could delay the Nano’s launch, and Tata is determined to launch the car by the end of the year.

“We are a company that wants to launch as we have planned and we would do everything possible to try to come as close to the planned launch as we possibly can,” Ratan Tata, Chairman of the Tata Group, told an industry meeting in New Delhi.

Agriculture vs. Industry

The situation is a difficult one for Tata Motors, which is not the focus of the protests. The company has simply found itself the victim of a cultural identity crisis in a country that is struggling to evolve from a collection of farms and villages into a cohesive industrialized machine with thriving urban centers.

In India, roughly 740 million people — or about two-thirds of the population — is scattered throughout 660,000 villages, The International Herald Tribune reported. And that makes the process of urbanization — the flood of workers trading farm fields for the factor floor — particularly difficult. In China, Russia and Korea, oppressive, authoritarian governments have subdued any resistance to what those countries’ rulers perceived as a natural evolution.

But India is a democratic nation, and its population has a profound connection with agriculture that dates back roughly 4,000 years.

“[Indians] derive their identity from land,” Suhel Seth, a longtime advisor to the Tata Group and the managing partner of Counselage, a strategic branding firm in New Delhi, told the IHT. “It also ties them to a certain social acceptability. Their entire societal being relates to the land that they own.”

Even when farmers sell their land, Seth added, “you’re creating a sense of displacement, and through that displacement you’re creating a sense of insecurity. This is why land has become an emotional issue.”

For farmers living in villages that are accustomed to growing their own crops, not only is a factory job unappealing, but money is of little value. In fact, many people have never even handled cash before.

Still, policymakers and businessmen are hopeful that future generations will be more willing to break with the past.

“As each generation develops, the children of the rural economy must decide whether they want to continue to work on the farms,” Ratan Tata, chairman of the Tata Group, told the IHT in an interview.

Many have already made that decision.

Goldman Sachs Group Inc. (GS) estimates that 31 villagers will move into an Indian city every minute for the next 42 years. And Tata’s threat to abandon the Singur project has been a huge blow to many who are ready to make the transition.

Earlier this week, Sushen Santra, a 65-year old resident of the Joymollah village who earlier had willingly forfeited his land to the Singur project, committed suicide after hearing the Tata Group would relocate.

Three of Santra’s sons were employed by Tata to work in the project area.

“My father came to know from a news channel last night that the Tata factory would be shifted out of Singur. My father had given one bigha land for the project voluntarily and received a cheque of Rs 3.5 lakh,” said Santra’s son, Bibhash, told Express India. “Since we have already spent the compensation money to renovate our old house, we have run out of money. Matters worsened after our contractors stopped payment following suspension of work at the project site recently.”

There’s a growing fear in the region that if Tata moves out of West Bengal, the prospect of luring future industrial or technological projects will be put in jeopardy.

“I don’t know what will the future of the industry,” Jhuma Mukhopadhy, an information technology specialist told “If Tata goes back, I don’t know what will be the future of the younger generation.”

For now, Tata is in last-ditch talks between West Bengal state governor Gopalkrishna Gandhi and Trinamool Congress representatives.

Asked if customers would be able to buy a Nano by October, Ratan Tata responded: “The question needs to be asked not to me but to others.”

By Jason Simpkins
Money Morning

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