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PP RUEHBI RUEHCI
DE RUEHCI #0411/01 2560713
ZNR UUUUU ZZH
P 130713Z SEP 06
FM AMCONSUL CALCUTTA
TO RUEHC/SECSTATE WASHDC PRIORITY 1148
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEHKA/AMEMBASSY DHAKA 0239
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 1032
RUEHGO/AMEMBASSY RANGOON 0164
RUEHKT/AMEMBASSY KATHMANDU 0239
RUEHCG/AMCONSUL CHENNAI PRIORITY 0399
RUEHBI/AMCONSUL MUMBAI PRIORITY 0399
RUEHCI/AMCONSUL CALCUTTA 1406

UNCLAS SECTION 01 OF 03 CALCUTTA 000411 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: EINV ETRD IN ECON
SUBJECT: COMMUNIST WEST BENGAL OPENS FOR BUSINESS BUT A LAND BATTLE 
LOOMS 
 
 
¶1.  (U) SUMMARY:  West Bengal Chief Minister Buddhadeb 
Bhattacharjee has received a vote of confidence from industry in 
recent months with the announcements of various large 
investments totaling several billion dollars.  Foreign and 
domestic corporations have publicized plans to construct new 
factories, build roads, bridges, highways and gas pipelines, and 
even to launch a large chain of retail stores.  The scale of 
these projects -- requiring significant tracts of land -- and 
the CM's cozying up to big corporate investment, however, are 
generating tensions within the Left, as the Left's 
unreconstructed members question the impact on farmers and the 
Left's traditional ideology.  The opposition, while problematic, 
does not appear to be slowing the pace of investment. 
END SUMMARY. 
 
--------------------------- 
Who is here, who is coming 
--------------------------- 
 
¶3.  (U) Over the past five years, the Communist Party of India 
-- Marxist (CPM)-led Government of West Bengal (GOWB) has 
cultivated investment in the IT sector.  IT giants IBM and WIPRO 
were initially attracted to Calcutta for its lower labor costs 
compared to other major Indian cities.  Those companies are 
expanding and now others are planning to set up operations as 
well.  WIPRO has already started construction on a 40-acre 
expansion with an almost doubling of staff to 5000 employees. 
IBM has announced a doubling of it size to 5,000 employees as 
well, and will be moving into a new 100,000 square foot facility 
in the Calcutta's suburban Rajarhat New Township.  Indian IT 
giant Infosys is negotiating for 100 acres of land and plans to 
have 5000 IT/ITES jobs in its future Calcutta facility. 
 
¶4.  (U) To support the burgeoning service sector, Delhi-based 
property developer Unitech has commenced work on a 250-acre 
multi-use development with residential, IT, hotel and convention 
facilities.  Unitech is partnering with the Jakarta-based 
Universal Success Group.  Unitech sources told ConGen that 
U.S.-based Marriott Hotels would manage the state-of-the-art 
convention center and five surrounding hotels. 
 
¶5.  (U) Investment plans are not limited to the service 
industries alone.  Manufacturing, a sector long moribund in the 
state, was given a boost by Indian consumer electronics major 
Videocon announcing its intent to invest USD 22 million for a 
liquid crystal display television manufacturing unit and an 
additional USD 177 million to branch out to ITES.  Tata Motors, 
part of the Tata conglomerate, proposes  setting up a small-car 
manufacturing plant at Singur, near Calcutta. TATA Motors is 
targeting the emerging middle class in the region, with a newly 
designed "economical" car to be priced at USD 2000.  As part of 
Tata's USD 222 million investment, the GOWB has arranged for 
Tata's acquisition of 1000 acres of land.  The company will also 
establish Telco Construction Equipment factory, a subsidiary of 
Tata Motors, at a cost of USD 500,000, in Kharagpur, 120 Km west 
of Calcutta, for manufacturing heavy automobile equipment 
 
¶6.  (U) Southeast and East Asian companies are also contributing 
to the investment climate.  Japanese Mitsubishi Chemicals plans 
to double the capacity of its petrochemical plant located in 
Haldia with an additional FDI of USD 370 million.  The biggest 
investment in W. Bengal is coming from the Jakarta-based Salim 
Group (Salim).  Salim has started work on a USD 500 million, 
390-acre integrated satellite township project, with full 
infrastructure, facilities and public services for a 
self-contained community.  Salim has also broken ground on a 
motorcycle manufacturing plant near Calcutta at a cost of USD 
250 million. 
 
¶7.  (U) In July, Salim signed a memorandum of understanding with 
the GOWB and the West Bengal Industrial Development Corporation 
Ltd (WBIDC) to create the New Kolkata International Development 
(NKID).  NKID will be a large infrastructure project requiring 
40,000 acres and valued at an estimated USD 4.5 billion, spread 
over the next 15 years with an employment potential of 1.7 
million.  The Detailed Project Proposal (DPP) submitted by NKID 
envisages a mega-chemical industrial estate, a multi-product 
special economic zone, a small and medium enterprises industrial 
estate, an expressway, bridges, townships, commercial blocks, 
training institutes, a health city and a knowledge city. 
 
CALCUTTA 00000411  002 OF 003 
 
 
 
-------------------------------- 
FDI and Plans for Infrastructure 
-------------------------------- 
 
¶8.  (U) Poor infrastructure consistently has plagued W. Bengal's 
economic progress and remains a potential bottleneck state's 
future development.  Recently, CM Bhattacharjee revealed his 
infrastructure wish list, which included a deep-sea port, a new 
international airport in Calcutta and an elevated light railway 
transit system for the city.  The GOI has already approved the 
concept of a deep-sea port and has announced plans to upgrade 
the existing Calcutta airport.  However, Bhattacharjee has 
expressed the desire to build a new airport on vacant land in 
the southern Calcutta suburbs and, contrary to the position of 
the CPM at the national-level, has said his state government 
would accept 100 percent FDI in the new airport and for it to be 
managed by the private sector.  The project is estimated to cost 
USD 267 million and will require around 4,000 acres of land. 
Consultant Engineering Services, an engineering consultancy 
firm, has conducted the preliminary study for this project. 
 
¶8. (U) The Chief Minister is also pushing for a USD 667 million 
light rail project for mass transit in Calcutta.  The 
Mumbai-based business tycoon Anil Ambani, together with the 
French company TGV, has already submitted a proposal. 
 
¶9. (U) In addition, the GOWB is establishing a 25,000-acre 
Special Economic Zone (SEZ) in Haldia - about 100 miles south 
west of Calcutta - that will house a petrochemical hub and a 
modern township.  GOI-owned Indian Oil Limited (OIL) has 
expressed interest in constructing a refinery in the proposed 
chemical hub. 
 
¶10.  (U) Large investments in retail have also been announced. 
While CM Bhattacharjee and the Left, concerned that small 
retailers and middlemen would be disadvantaged and possibly 
unemployed, have opposed FDI in retail, no objections have been 
expressed to Indian companies setting-up large retail 
operations.  Mukesh Ambani's Reliance Industries Limited (RIL) 
intends to set up a chain of agro-retail stores all across West 
Bengal following the model of Wal-Mart.  In June, the company 
submitted a detailed project report to the Chief Minister, 
outlining RIL's plans to invest approximately USD 400 million to 
set up over 50 retail outlets, with the complete retail backbone 
of cold chain and logistics network as well as five distribution 
hubs in the state.  The company will source agricultural 
products from farmers on a large scale and sell these through 
its own retail outlets.  RIL's retail plans aim at "transforming 
the agro retail sector in West Bengal."  The project claims it 
will link farmers to consumers and facilitate the transformation 
of the agro-industry in India to agro-processing.  Reliance 
Group will further invest an additional USD 400 million to link 
its Bay of Bengal gas field (the Krishna-Godavari basin in 
Andhra Pradesh and the Mahanadi basin in Orissa) to Haldia in 
West Bengal. 
 
¶11. (U) In June, Calcutta-based conglomerate Indian Tobacco 
Company Ltd. (ITC) proposed new investments of USD 215 million 
to include expansion of its hotel ITC-Sheraton Sonar Bangla and 
a tobacco factory at Khidderpore in Calcutta.  ITC also proposed 
to set up an IT project, logistic hub, a food factory and an 
agro-retail business. ITC wants to increase the number of rooms 
in its hotel in the city from 237 to 300 with an investment of 
USD 0.78 million. The company has sought to purchase an 
additional 10 acres for the hotel facility. 
 
¶12.  (SBU) Comment:   These recent plans by RIL and ITC Ltd and 
other major retailers like Big Bazaar and RPG Group to create 
retail operations and logistics networks, reflects the Indian 
corporate effort to develop large scale investment in retail 
while the GOI still blocks FDI in the retail sector.  Clearly, 
domestic corporate interest is a factor in the GOI's decision to 
restrict FDI in retail.  US-India CEO Forum member and Chairman 
of ITC Ltd, Mr. Y.C. Deveshwar expressed a strong protectionist 
stance to Treasury Under Secretary Timothy Adams against FDI in 
retail during the Under Secretary's visit to Calcutta in May. 
End Comment. 
 
------------------------- 
 
CALCUTTA 00000411  003 OF 003 
 
 
The Looming Land Conflict 
------------------------- 
 
¶13. (U) CM Bhattacharjee's success in attracting new, large 
investments is tempered by the emerging issue of availability of 
suitable land. He is also facing strong criticism from Leftist 
ideologues opposed to his support for large corporations and 
multi-nationals coming to the state.  The CPM and its Leftist 
allies came to power in the late 1970's by supporting land 
reform and distribution of small plots to the rural masses. 
Consolidating the land for large industrial projects runs 
counter to the long held principles of the Left, and the GOWB's 
bid to acquire agricultural land for corporate investors has 
already met with local resistance.  In June, many small-scale 
farmers protested the purchase and conversion of their fertile 
land for Tata Motor's small-car project.  CPM officials opposed 
to Bhattacherjee's industrial initiative supported the farmers. 
This faction includes those with agricultural constituencies, 
such as the Land and Land Reforms Minister, Mr. Abdul Rezzak 
Mollah and supporters of former Chief Minister and veteran CPM 
Politburo member Jyoti Basu.   Mollah, wary of factories being 
built on farmland, has suggested an amendment to existing land 
acquisition laws.  This was rejected by Commerce and Industry 
Minister Nirupam Sen. [Note: Recent news reports suggest that 
Maoists operating in the southern part of the state have offered 
support for the small-scale farmers who oppose the government's 
acquisition of land, raising concerns of violence should 
negotiations become contentious. End Note]. 
 
¶14.  (U) The CPM's Left Front partners, particularly the Forward 
Bloc and RSP, have been critical of converting agricultural land 
to industry.  The GOWB is planning a White Paper on its new 
industrial policy, which will outline the strategy behind land 
acquisition for industrial projects.  Contacts in the CPM 
indicate that the best approach to defuse this opposition is to 
ensure employment on a large scale in these factories. 
 
¶15.  (U) COMMENT:  Starting his second five-year term as Chief 
Minister, Bhattacharjee appears to be accelerating his efforts 
to reform the Leftist policies of his CPM-led government and to 
attract more corporate investment in West Bengal.  So far, the 
CM has been able to effectively push his plans for promoting 
growth and investment over the opposition of the more hard-line 
Leftist ideologues in his party.  However, his policies will 
face a real test in the villages.  Farmers have expressed 
objections, while some are conceding with the promise of new 
jobs, but the issue could easily become more confrontational as 
projects continue to be implemented and more land acquired for 
industry. END COMMENT. 
JARDINE