Nano car deadlock shows holes in India land policy

By Rina Chandran

NEW DELHI (Reuters) - A colonial-era law for land acquisitions in India has helped trip up several industrial projects, including Tata Motors' plans for the Nano, adding to calls for reforms to keep investors attracted.

Talks began on Friday to end protests by farmers over the loss of their land to the manufacture of what has been dubbed the world's cheapest car in the eastern Indian state of West Bengal.

The controversy has hurt West Bengal's image as an investment destination, and also reflects a wider conflict between industry and farmers unwilling to give up land in a nation where about two-thirds of the billion-plus people depend on agriculture.

Discouraged by the protests, which have been led by the local opposition Trinamool Congress party, Tata Motors earlier this week suspended work in Singur, despite having invested $350 million, and said it was looking at alternate factory sites.

"It's not good for India's image overall as a manufacturing destination, and the state has certainly suffered a setback," said Abdul Majeed, a partner at PricewaterhouseCoopers.

"On the positive side, perhaps now state governments will be more responsible and come up with clear policies for land acquisitions and compensations so this is not repeated."

Land acquisitions are largely governed by a British-era law dating back more than a century that allows states to buy land for undefined "public purposes".

Tata had leased the land in Singur from the state, and said it expects the project to create about 10,000 jobs.