Is there no limit to the profits industrialists make ?

-        the compensation amount the land owner gets is a pittance –

 

Stan Swamy

 

When it comes to industrial investments, what is high lighted are the thousands of crores of rupees the company is going to invest, the amount & nature of the product the company will produce and the amount of land, usually in several thousands of acres, the company will require. If one looks more closely the MoU agreed between the government and the company, one will also find other requirements such as how many million square feet of water and how many million kilo-watts of electric power the company will require for its production process. It is important to note that except for the monetary investment, all other requirements (land, water, power) are expected to be provided by the Indian govt !  Tragic but true, the Indian govt accepts to fulfil all these requirements of industrialists when it has not met these needs even to a minimal level to the great majority of its citizens.

 

So the investing industrialists start their production enterprise with a big boost from the govt. But once they set up their companies and start production, it is profits and ever growing profits. To make matters easier, they demand tax exemption from the govt ranging from 3 to 5 years, and our benevolent govt grants that too!

 

Is there no limit to the profits industrialists make ?

Since mining is the most prominent industry in Jharkhand, let us have a look at the enormous profit they make:

 

 

 

details of production	PANEM Company (private ltd) at Amrapara Block, Pakur Dist., Jharkhand	NTPC (public sector) at Karedari Block,  Hazaribagh Dist., Jharkhand
coal reserve	562 million tons	229 million tons
land required	3250 acres	1500 acres
average coal per acre	1,72,923 tons	1,52,660 tons
value of coal per acre @ Rs. 3000 per ton	Rs. 51,87,69,000               roughly Rs.51 crore p/acre	Rs. 45,79,80,000               roughly Rs.45 crore p/acre

 

Of this, NTPC has offered a maximum of Rs. 10 lakh per acre to the land-owner which would include compensation for land and resettlement such as housing, monthly allowance, infra-structural facilities. PANEM offered even less.

  

 

 

If we work out  a ‘income-and-expenditure’ account for the companies, it would work out some thing like this:

50% of income per acre may have to be spent in (1) cash compensation to land-owner, (2) setting up the factory, (3) purchase of machinery & equipment, (4) purchase of water & power from the govt, ( 5) resettle-ment of displaced land-owners, (6) employment of technical, non-technical, managerial staff, (7) royalty to the govt, etc.

That means, the remaining 50% of the income is pure and simple profit for the company. To put it graphically:

 

name of company	total income p/acre	50% expenditure in setting up industry p/acre	remaining 50%  pure profit          p/acre	pure profit for total land acquired
PANEM Company	Rs. 51 crore      p/acre	Rs. 25.5 crore    p/acre	Rs. 25.5 crore   p/acre	Rs.82,875 crore for 3250 acres
NTPC	Rs. 45 crore    p/acre	Rs. 22.5 crore     p/acre	Rs. 22.5 crore    p/acre	Rs.33,750 crore for 1500 acres

 

All this just from one mine! No wonder industrialists become millionaires and billionairs in no time.

 

Let us reflect now on the plight of the land-owner. With the Rs. 10 lakh he gets as compensation for his land, he has to start a new life as a landless person. He has to build a new house, look for alternative ways to sustain his family economically. From being a producer, he is reduced to being a pure consumer. He and his family now depend wholly on the few lakhs of rupees which they received as compensation. Since there is no other source of income, the few lakhs of rupees will soon be finished and the family will become landless labourer.

 

Here is the criticalness of the situation. The rich investor comes from outside, makes super profits and goes back richer. The poor land-owner, on the other hand, loses the little asset he had, and becomes poorer.

One concrete proof of this  is industrial production grows by 12% whereas agricultural production grows by 2%. The end result is national wealth (GDP) is increasing whereas development  of people is decreasing. Development should include all sections of society. Otherwise, it is growth without development.

 

1 September 2010