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Modi pulls off a coup, Nano will roll out from Gujarat now ......... How The Deal Was Swung

Money, it seems, really doesn't know any colour, shifting from red to saffron in the space of a few days.

Gujarat doesn't offer sops, but the Tatas got a package matching Bengal's.

Gujarat chief minister Narendra Modi should know, for in a dramatic twist to the spiralling Nano-gate mess, he's managed to get the Tata Group to shift its prestigious small car project from Singur to Sanand. Apart from the boost to Gujarat's economic report card, it's a political coup for Modi as elections approach. The mood in Gujarat can be aptly summed up by an sms doing the rounds: "Every Gujarati talks about Jyotigram (round-the-clock power in the state) while the rest of India talks about Nandigram. Feel the difference between Sanand and Singur."

How did Modi swing it? While competing states-Maharashtra, Karnataka, AP and Uttarakhand-went public in wooing the Tatas, Gujarat slipped silently into the reckoning. A team led by K. Kailasnathan, principal secretary in the CM's office, Gauri Kumar, principal secretary (industries), and D. Rajgopalan, additional chief secretary (finance), apparently burnt the midnight oil for over 10 days to get the deal through. Such was the obsession with secrecy that Rajgopalan's meeting with Tata Motors MD Ravi Kant was held in the Gujarat State Petroleum Corporation chairman's office rather than the more public state secretariat.

The groundwork began a month ago, when Tata Motors decided to suspend work at the disputed Singur site. Industries secretary Gauri Kumar reached out to the Tata Motors' top brass, offering alternative sites: apart from Sanand, Mundra in Kutch and Maroli near Navsari in southern Gujarat were put on the table. For a while, Mundra was in the reckoning as the Tatas have bagged the 4,000 MW mega power project there. But then, the fact that Gujarat had 1,100 acres of land readily available at Sanand was the clincher for the Tatas.

"Though other states like Karnataka had offered land, there was no firm availability. In Andhra, there was some resistance. Maharashtra was ruled out with the state assuring only 12 hours power for the proposed plant," adds Shashikant Hegde, CEO of ProjectsToday, which tracks all project investments in the country. Hegde adds for good measure that Gujarat still maintains third rank in attracting investments.

At a time when land acquisition is such a big problem across India (see box), getting land near Ahmedabad without encumbrances was the key. Even the small bits to be acquired-some 50.88 acres adjoining the area to build an approach road to the site-was done in a jiffy, taking barely six hours to wrap up the day before the formal signing of the MoU.

Certainly, the Gujarat government's quick decision-making played a big role, Ratan Tata even saying he was "truly amazed" and that this "had a bearing on the final choice". For a state that doesn't usually give concessions to industry, it also handed out a package which, though under wraps, broadly matches what Bengal had offered at Singur. It helped that Modi has been dreaming of converting Gujarat into an automobile hub. The Indira Gandhi Institute for Development Research's Ashima Goyal says, "On the face of it, the move may seem a swing from the extreme Left to extreme Right, but it isn't so.The Tatas are an ethical company...and Gujarat always had a face of being pro-economic growth."

Economist Bibek Debroy says the Tatas are moving in because the state has some of the best economic / infrastructure indicators. "We have to recognise that there is an economic aspect and a political aspect to every state and that in Gujarat, the two are often not easily de-linked, though they ought to be," he says.

Apart from the decent labour environment, the state also has good connectivity. The planned Delhi-Mumbai Industrial Corridor passes through Gujarat and the proposed development of Dholera port and an international airport nearby were sweeteners. Moreover, areas around Rajkot are emerging as an auto ancillary hub with about 30 per cent of Nano suppliers already based there. "We hope to keep the time (for the launch) and priceline, launching the car in the last quarter of '08-09," Kant said at the signing.

While commentators were careful not to link politics to the decision, there are lessons here for state governments and companies. Says a central government official: "The signals (for West Bengal) may not be very negative. This could well persuade the state to be more proactive and avoid a repeat of the Singur and Nandigram agitations, both of which were the outcome of poor handling of land acquisition and rehabilitation... which remains an emotional issue." Adds Debroy: "I don't think Singur should be interpreted as a victory or failure of a strong or weak state over another. In the context of land acquisition, there are certain recognised avenues in a democracy that need to be followed." That's the key takeaway for India Inc.

Published in Outlook, issue date: October 20, 2008