Kolkata: A new law to free thousands of acres of land locked up in the closed factories of West Bengal may fall short of state government expectations, after it emerged that a large part of the acreage it was eyeing is mortgaged with lenders.
When the West Bengal Estates Acquisition Bill, 2009, was passed less than two months ago, the government had estimated that as much as 254,000 acres could be freed from closed factories and tea gardens across the state.
A recent report by Webcon Ltd, a state government-owned consultancy, said 347 closed factories in Kolkata and its suburbs had at least 42,000 acres in their possession.
Closed food processing factories have 26,426 acres, and almost 6,000 acres is locked up in abandoned iron and steel and engineering factories, said the Webcon report reviewed by Mint.
The new law did not envisage that most closed factories in the state had mortgaged their fixed assets—such as land, plants and machinery—and that many of them owe money to workers. According to Webcon, the closed units it studied collectively owed Rs1,638 crore to their employees and Rs3,854 crore to lenders.
“It would be impossible to recover worker dues if the government seized the land from closed factories,” said an official of the land and land reforms department, who did not want to be named because he isn’t authorized to speak to the media.
Finding land for industrial projects is a major challenge in a state where just 1% of land is fallow.
Resistance to the acquisition of agricultural land has halted many industrial projects. Tata Motors Ltd abandoned a small car factory in Singur and moved to Sanand in Gujarat in October 2008 after violent protests by locals.
Many closed factories were acquired by real estate developers. For instance, an engineering unit in south Kolkata was converted into the city’s tallest condominium and shopping mall called South City.
Alongside, companies such as footwear manufacturer Bata India Ltd and car maker Hindustan Motors Ltd are developing residential and commercial complexes on surplus land in their factories in the suburbs of Kolkata.
All these projects were approved by the state government—before a section of lawmakers decided to put an end to it.
The aim of the new law, said land and land reforms minister Abdur Rezzak Mollah, is to ensure industrial land is used only to build new factories. “The law has made it impossible for the state cabinet to clear real estate projects on factory land.”
Under the new law, Mollah also wanted to seize “surplus land” from running factories, but his move has met with resistance from Kolkata’s business community.
Sanjay Kajaria, president of Indian Jute Mills Association—an industry lobby—said no land in a jute mill could be called surplus. Some jute mills in Kolkata even have golf courses. “For jute mill workers, land is the biggest security,” Kajaria said.
“As long as there’s land, workers can recover their dues even if the mill is abandoned by its owners,” he added.
The state government has now stopped giving factories ownership of land—it leases them land to make sure they can’t mortgage it.
The lease agreement clearly mentions how the land is to be used. If the purpose of allotting land isn’t fulfilled, the government can cancel the lease agreement.
West Bengal hasn’t, however, cancelled the lease of the 997 acres leased to Tata Motors and its component suppliers in Singur.
The company has agreed to vacate the land, but wants compensation for what it spent on the project in Singur before deciding to move out.
The state government hasn’t yet found a taker for the plot who would compensate Tata Motors.