MUMBAI, June 22 (Reuters) - Tata Motors, the auto arm of India’s iconic Tata group, said it will challenge in court a government decision to reclaim land, another instance of conflict over land that is the biggest block for rapid growth in Asia’s third-largest economy.
Tata Motors , India’s top vehicle maker, abandoned plans in 2008 to build a plant on the land to manufacture what it says is the world’s cheapest car, the Nano, in eastern West Bengal state after violent protests by farmers.
Returning the land to farmers was a central point of the campaign by the populist Trinamool Congress party during elections in the state in April, which saw voters throw out a three-decade old communist government. Trinamool is the largest ally of the federal ruling Congress party.
Debasis Ray, a Mumbai-based spokesman for Tata Motors said on Wednesday the firm would contest the decision by the local government in the High Court in Kolkata, the capital of West Bengal, but did not elaborate.
Across India, several multi-billion dollar projects are being delayed as poor farmers resist the forced takeover of their lands, often at below market prices. Analysts warn this could deter foreign direct investment (FDI) and trip up plans for speedy industrialisation in India.
West Bengal has pledged to improve conditions for Indian and foreign investors after the state was shunned for years. Major companies are forced to look at each of India’s 28 states when deciding where to invest as rules, often opaque, differ from state to state, a fact that often deters investors.
On Tuesday, local protests forced local authorities to stop acquiring land for South Korean POSCO’s $12 billion steel plant in eastern Orissa state, further delaying what would be the single largest FDI into India.
Federal and state governments have dithered on taking firm decisions, mindful of the wrath of the over 500 million farmers who make up their core vote base, but also wanting to accelerate economic growth to double digits.
That ambition is overshadowed by declining FDI, policy paralysis from a series of corruption scandals and slowing industrial activity due to high inflation and interest rates.
Economists, bankers and industrialists have said that without structural reforms, India could go into a slump that would be difficult to recover from.
India plans a new land acquisition law that will give farmers market or better rates for their land, taking off the edge from protests. The current law gives little or no compensation for land taken over for a “public purpose.”
It remains to be seen whether the Congress-led government in the capital will push through the legislation in parliament given it is fighting an increasingly assertive opposition bent on blocking proceedings over rampant corruption. (Writing by C.J. Kuncheria; Editing by Paul de Bendern)