Capital expenditure vs Total expenditure

If the 6.8% Fiscal deficit was not bad news enough, here is something more to be worried about.An analysis of the Plan-Capital Expenditure from the 1995-1996 budget to the 2009-2010 budget shows that the government is spending a smaller percentage of its total spending on creating new "infrastructure" ( Capex in the Plan). The capital expenditure portion of the planned expenditure has dropped from about 10% in the pre 2004 period to about 4.5% now ( Yellow line) . And we are blaming the world economy for India's slowdown ?
And look at the hockey stick in blue ( Total expenditure). Insolvency in the offing ?




Here is the table

Year	Plan - Capital Expenditure	Total Expenditure	Plan Capex as % of Total
1995-1996	18262	183004	9.98%
1996-1997	22530	202298	11.14%
1997-1998	24510	235245	10.42%
1998-1999	26923	281912	9.55%
1999-2000	31264	303738	10.29%
2000-2001	33134	335523	9.88%
2001-2002	37320	364436	10.24%
2002-2003	41420	404013	10.25%
2003-2004	43421	474255	9.16%
2004-2005	47714	505791	9.43%
2005-2006	29638	508705	5.83%
2006-2007	28146	581637	4.84%
2007-2008	31913	709373	4.50%
2008-2009	41301	900953	4.58%
2009-2010	46751	1020838	4.58%

Direct transfer is the way to go

From the Indian Express

To a question by Lord Meghnad Desai — why can’t we transfer money, say a dollar a day, directly to the poor? — Chidambaram said, “Cash transfer Publish Postdirectly in the hands of poor is the single most popular program to poverty alleviation until we provide them jobs. But we need to have the money for it. We will need to dismantle the existing schemes and the system. I will do my sums tonight to see if we have the money.”

Mr. Chidambaram need not do the math. He can have all the information here
My calculations shows that each BPL (below poverty line) family can get Rs 2500 per month by cutting the subsidies which have been instituted to alleviate poverty. An biometric based Unique Identification Number is the way to go to prevent fictitious claimants for these transfers. Tying this to PAN & making PAN mandatory for all financial saving transactions can weed out the pretenders.

With great power comes great responsibility

From the Editorial of The Hindu 09 May 2007

However, the order of a local court asking the police to register a case against the Minister on the charge of culpable homicide not amounting to murder is another instance of misplaced judicial activism. The Minister has been named as the seventh accused in the case filed on the orders of Additional Chief Judicial Magistrate S. Gopalakrishnan. Others named as accused include doctors, nursing superintendents, and a labour room cleaner. Ministers and administrators must certainly be held accountable but little is achieved by pinning over-the-top charges against them before the investigation is complete. On the same principle, will a Railway Minister be prosecuted for culpable homicide not amounting to murder when there is a train accident causing multiple deaths? Or a Prime Minister or Defence Minister for a military operation gone wrong? Or a Chief Minister or Home Minister for fake encounter killings by the police? What is needed is exemplary action that addresses the issues at stake, including issues of legal culpability — not a witch-hunt.

Hmm.. I wonder if the Editorial team at The Hindu looked at this judgement delivered on the 19th of April 2007.

The Supreme Court has ruled that top rung officials like chairpersons, managing directors and directors of a firm can be held liable for criminal prosecution if a cheque issued by their company bounces at the bank.

The burden of proving that they were actually not in charge of the company at the time when the cheque was issued would rest on the officials, a bench of Justices Tarun Chatterjee and P K Balasubramanyam said while upholding an appeal filed by public sector BSNL.

So if top officials of a company are responsible for what the company does, why should not the honourable minister be held accountable for his/her department. If one wants to enjoy ministerial perks, one better be prepared for being accountable for one's actions/inactions while holding that office.

To take the editorial's argument forward, does this mean that The Hindu feels that we should absolve Warren Andersen of culpable homicide in Bhopal Gas case? After all the poor guy was only the Chairman of the holding company, sitting thousands of miles away, and many levels of hierarchy away from the scene of the action.

Perhaps Hindu in its urge to rush in and defend a member of the party it supports, forgot to think through the whole issue. It should remember that with great power comes great responsibility. If Ministers can't handle the responsibility they should not hanker for the power.

Time to relearn 5th standard civics ?

From NDTV

It is the duty of the Parliament to legislate and the duty of the executive to implement and the judiciary's duty is to see it is implemented,'' said Sitaram Yechury, Leader, CPI(M).

For a moment consider this situation. Tainted legislators rises from the the current 25% to say 51% and then they pass a law to provide immunity to legislators from charges of "human trafficking" . Would we expect the judiciary to ensure its implementation ? or would we expect the judiciary, as the safe keeper of the constitution, to throw this law into the dustbin it belongs ?

If the above quote of Honourable Member of Parliament Sitaram Yechury conveys the understanding that an average parliamentarian has about the roles of the branches of government, it is not surprising that we constantly hear that the legislature & the judiciary are on collision course.

Perhaps Mr Yechury should take a little time off from his busy schedule and relearn his 5th standard civics lessons.

Water Woes

The Cauvery tribunal took 16 years to reach a verdict and as expected it hasn't satisfied all the parties concerned. Karnataka feels let down, so does Kerala. So far Tamil Nadu seems happy with the verdict but I expect in the coming days they too will feel cheated ( or at least pretend to feel cheated). The verdict is in, but the issue has not gone away and it would be a miracle if it goes away. At the root of the dispute, is the question of how the water in river should be shared.

My take on the issue is that there are two different questions in this issue and resolution is possible if they are separated. The first question is who owns the water ? The second question is who should be allowed to use it ?

The answer to the second question is simpler. People who are willing to pay get to use the water. There are broadly two types of users. Those that use the water for navigation, fishing, recreation etc and those that use for irrigation,industry and domestic purposes. The first set of users do not lessen the quantity of water by their usage. The second set do lessen the quantity of water by using it. The first set should probably be pay an annual fixed price and the second set should pay in proportion to the usage.


The first question is more complex. Going forward, we can expect water to become a sufficiently scarce commodity. The aim of defining the ownership of water, should be to encourage increasing the amount of water that is available in the river. The main contributors to increasing the amount of water in the river would be communities in the catchment area & communities in the flow area. These communities should own the water in the river. They should be allowed to manage the flow ( through Dams etc ), use the water & sell the water. Land ownership in these areas could be used as proxies for arriving at water ownership with higher weight given to lands in catchment areas.

An ill advised ordinance

From The Hindu Govt clears ordinance to ensure sports feed on DD

With just weeks to go for the cricket World Cup, the government today approved promulgation of an ordinance, making it mandatory for private broadcasters to share live feed of important sporting events with public broadcaster Prasar Bharati.
.....
The decision will ensure that millions of cricket lovers in non-cable houses and radio listeners would receive live feed of Indian team's one-day matches, wherever it plays. However, for test matches, the government has said live feed would be required only for matches played in India while for those played abroad, the highlights would be sufficient.

Time for the cricket/sports fans to celebrate? Not really. The government may succeed ( if it can defend the legal challenges that are bound to follow) in creating an illusion, that it has got sporting action to everyone who has access to a TV set for free. But did any one tell them that there are no free lunches? The likely result of this move, would be lesser money in the hands of sports bodies. Is any one going to bid fancy prices for sporting events in India in the future? Lesser money in the hand of sports bodies means either lower spending on developing the sport or larger handouts from the government to keep the sport going.

Is any one going to try developing a PHL type tournament in any other sport ? No ! For the moment it is successful, DD will walk in and take away the advertising rupees that one was counting on. So Indian sports, like Indian education, can now wait for philanthropic hand outs.

The loot in the name of the poor

It is budget time again and most of the focus seems to be on where the tax concessions are going to be or where the tax increases are going to be. News papers the day after the budget, headline with the tax concessions given or the increases. There is focus on new schemes, but there is very little focus on where the money goes & for whom. The Government when it doles out subsidies, often claims that it is for the poor. A short analysis below tries to to figure out some of the amounts involved.

Subsidy from the Central Budget 2006-2007
Food : 24,200 Crores ( From Indiabudget.nic.in)
Fertilizer : 17,252 Crores ( From Indiabudget.nic.in)
Petroleum : 27,863 Crores ( From the previous blog post )

Subsidy from the State Budgets 2006-2007
Education : 93767*(100-1.2)/100 = 92641 Crores ( From RBI & RBI ) . 1.2 = % of cost recovered from users
Electricity : 35,632 Crores ( From RBI
Health : 25775*(100-4.8)/100=24537 Crores ( From RBI & RBI )
Irrigation : 14911*(100-16.9)/100 = 12,391 Crores ( From RBI & RBI )

Just these expenses add up to 2,34,517 Crores. This translates to Rs 31,980 per family per year for the bottom 1/3 of the population [ Assuming population of 110 Crores & family size of 5 ]. This is just a fraction of the money allocated & spent in the name of the poor, none of which seems to have much impact on poverty. A very large loot, in a country which has so many poor people.

And we have not even touched on such heads like Social Security (13,171 Crores) [No, Social Security is not employee pension] , Nutrition (5148 Crores), Transportation & Communications ( 13,957 Crores), Agriculture (23,634 Crores).

Would it not be better if we just scrap these schemes and instead transfer the money to the poor families? With Rs 31,980 a year or an extra Rs 2,500 a month these families will definitely have a greater chance of pulling themselves out of poverty ( If they do not automatically come out of it by just this transfer)

The biggest issue with doing some thing like this would be to correctly identify the beneficiaries. Technology could help us here. I see having a single unique biometric based national identity as the starting point, something like the US social security number. More on this in a later post.

Domestic Fuel : A case for targeted subsidy

From The Hindu

The government plans to restrict subsidised domestic cooking gas (LPG) and kerosene to poor people only, Petroleum Minister Murli Deora said today.

"Yes, we are in agreement with the suggestion that there should be dual pricing (subsidised price for poor and market price for the people who can afford) for cooking fuels," he told reporters here.

Public sector oil firms sell kerosene at just over Rs 9 a litre, cheaper than a bottle of mineral water, he said, adding kerosene was being subsidised by over Rs 15 a litre while LPG was being sold at a discount of Rs 155 per cylinder.

"Why should subsidised LPG cylinder come to my home or to any other people who can afford it," he said.

This is a welcome move. I do not see why the government should subsidize the rich or for that matter parts of the Hotel industry that thrives on diverted subsidized LPG.

What is the size of the subsidy bill we are talking about ?
From Business Line 23 March 2006

The Ministry hopes to deliver domestic LPG and PDS kerosene to households across the country at affordable prices during 2006-07.

It plans to make available 118 lakh kl of PDS kerosene and 74.42 crore domestic LPG cylinders to households at subsidised prices.

LPG subsidy alone would be 150*74.42 = 11,163 Crores. & subsidy on kerosene works out to 1180*15= 17,700 Crores. That is a total subsidy bill of 27,863 Crores.

A simple back of pad calculation shows that this amounts to Rs 3800 per family per year if targeted at the bottom 1/3 of the population ( Assuming pop=110 Cr & avg family size=5 ). This is a significant sum of money. It makes immense sense for the Government to target this subsidy at the poor instead of handing it over to every one in the country.

One way of operationalizing this, would be to restrict LPG subsidy to those families that possess a white ration card/Below the Poverty Line ( BPL) ration card. The scheme could be that if you possess a white ration card & want to avail of the LPG subsidy, you need to register that card with your Gas supplier. The gas supplier can then endorse your card. This would mean that you will get a lower supply of subsidised kerosene. So the BPL family can decide whether they want to take the fuel subsidy in the form of Kerosene or LPG. All the others would be supplied unsubsidized LPG and Kerosene. To prevent subsidy leakage, you would still need to impose rules that limit the number of subsidized refills that one can avail in a year, the gap between each subsidized refill etc.

What are the major weaknesses in the above scheme?

1. BPL card administration is weak. It is possible for the undeserving to get hold of these cards
2. BPL card administration is a state subject. One would need to convince states to fall in line with the above plan

The first weakness is manageable. After all instead of subsidizing every one, you are now subsidizing all the deserving & some undeserving. The second weakness will be quite tricky to overcome. One option could be the Central government restricts supply of subsidized LPG to each state. So states that are unwilling to implement that plan can devise their own ways of targetting who should get the subsidy.

Light at the end of the tunnel ?

Just read on Apmedia that the Supreme Court has turned down the various objections (excuses ?) that the State Governments had come up with, as to why they could not implement the September 22 judgement on police reforms. The September 22 judgement was given wide publicity, and then we heard that States would be filing an appeal. What was not widely reported, was that the Supreme Court had turned down the appeal by the State Governments. It looks like the long over due reforms in the police force will finally see the light of the day.

Who is the Knowledge Commission working for ?

From Zee News: Knowledge Commission against inviting foreign universities

The move to invite foreign universities to offer education in India today came under attack from Vice Chairman of National Knowledge Commission P M Bhargava who said it would lead to commercialisation of higher education.

"This move is to commoditise education. Education is not at all a commodity," Bhargava said at the seminar on "Education Commission: Revisiting the Commission's Premises, Vision and Impact on Policy Formulation," organized by National University National University of Education Planning and Administration here.

What is commoditization? Wikipedia has two answers. (It redirects commoditization to Commodification)

• In the business world, commodification is process that transforms the market for a unique, branded product into a market based on undifferentiated price competition. Consumers usually benefit from commodification, since perfect competition usually leads to lower prices.

• In Marxist political economy, commodification takes place when economic value is assigned to something that traditionally would not be considered in economic terms, for example, an idea, identity, gender.

I presume Dr. Bhargava did not mean the first option. So let us assume that he was using "commoditise" in the Marxian context. In simple terms this boils down to higher education being a public good & hence needs to be supported out of Governmental revenues.

Given that in India, access to even secondary education is extremely limited, [Refer page 5 of Secondary Education in India - Investing in the future By Wu & Dar] this subsidized higher education is unlikely to reach the bottom quintile and more likely to be grabbed by the middle class & the rich. So why is the Knowledge Commission fighting for the rich & middle class?

From the same article

"I strongly oppose the move of Commerce Ministry to invite the foreign universities into the country," he said.

Bhargava said the move will facilitate the second grade and third grade universities in abroad to come and set up their shops here.

"No good university will come. The second grade and third grade university will come and make profits in the name of quality education," he told a news agency later.

We have heard this story before. Remember the early 90's stories of Indian software engineers only working on low end maintenance projects? Or the early 2000 stories that only low end call center work is outsourced to India? What Dr. Bhargava says is likely to happen. The first that will test the waters are going to be younger educational institutions, those that have little to lose & a lot to gain. The Ox-Bridge/ Ivy Leagues will come in much later. But why should we quibble? Does the color of the cat matter as long as it catches the mice? If the new entrants offer value, they will have a market. If not, they will need to go back to the drawing board and rework their India strategy. Any one who is under the mistaken belief, that all a foreign university needs to do is to set shop in India and every one will flock to it, needs to read about the struggle of MTV, Pepsi, Coca Cola, Pizza Hut etc. to gain market share in India. India is an extreme value conscious market. You need to get your value proposition right to crack the market and the same will apply to higher education.

Who is the Knowledge Commission helping by keeping out foreign Universities? The immediate gainers are our private colleges, mostly owned by our ruling elite. They can continue getting away with providing third rate education in a controlled environment. The biggest losers are our middle class students ( who can't afford to study abroad) , our Professors ( who have fewer employment opportunities ) & our nation as the rich opt to study abroad spending over Rs 3000 Crores a year. So is the Knowledge Commission working to help India's elite maintain their stranglehold on education business?

PS : If Dr Bhargava is speaking in his personal capacity, then I would like to know why he thinks education should not be "commoditised" but egg/sperm donation can be ?

Power crisis in Andhra Pradesh

The one good thing about the rapid change, that seems to characterize the world we inhabit in, is that the chickens are coming home to roost much faster than expected.

The free power for all farmers was introduced with much fanfare in May 2004. The Spin doctors got into the act and praised this wonderful scheme that in their view had no cost associated.
From Business Line 21 May 2004 : Free power, waiving of arrears to boost power utilities' cash flow

"Now, the uncollected power bills would be paid by the Government. Besides, as the power is provided free of cost, there would not be any cases of power pilferage. This meant that the State Government would also be paying for the loss incurred by APTransco so far on account of unauthorised agricultural and one-bulb connections in cash. The corporation has also been relieved of the headache of collecting electricity charges and its operating staff can concentrate on other services," the officials stated.

Even a year back it was all hunky dory
From Hindu 23 March 2005 : No change in power rates for 7 categories

In case of the agriculture sector, the commission endorsed the Government's free power scheme and the internal arrangements thereto. Accordingly, farmers cultivating dry lands and those having less then 2.5 acres of wet lands and using up to three pump sets need not pay anything whether or not they implement demand-side management devices like capacitors. Corporate farmers and IT asses sees will have to pay Re. 1 per unit with such devices and Rs. 2 per unit without them.
.....
The APTransco would have surplus availability and might be in a position to sell power to other States.

And here we are two and half years from when the free power was introduced and things don't seem to be going right ...

From Hindu 27 December 2006 : Power supply turns critical in AndhraPradesh

Irate farmers attacked electricity installations and offices across the State as the power supply situation turned critical for the second time during this season on Tuesday in the wake of a severe shortage of 10 million units a day.

From Hindu 27 December 2006 : Power cut schedule notified

Faced with a worst power crisis leading to protests from farming community all over the State, the Government has announced power cuts in urban areas from Wednesday onwards. The load relief schedule for Ranga Reddy district has been officially announced on Tuesday.

So what went wrong? Why are the farmers, for whose benefit this scheme was conceived, agitating ? Nothing really. Fifty years back you could have announced such a scheme, and then won a couple of elections based on the scheme's "success" before running into problems. Now the speed at which knowledge disseminates, the rate at which people adapt to new conditions has changed and you just run into problems earlier than expected.

One possible solution : Change the way the scheme is organized. Instead of giving free power ( and not monitoring its consumption), bill every farmer for his power. Offer him a subsidy equivalent to amount he would spend if he used an energy efficient motor for the number of hours that you wish to subsidise. Lets say your target is small & marginal farmer, running three 5 HP pump. You want to subsidize one crop a year. You could then say exempt, 3*5*.746*8*30*4 = 10800 KW( Assuming subsidy is only for three, 5 Horse Power pump, given .746 KW = 1 HP, run for 8 hours , 30 days a month , 4 months a year ) or charge this at the current rate 20 ps per KW. Any power consumed above this limit will need to be paid for at the market rates.

The advantages
1) You need not restrict the farmer on which crops he can grow. If he wishes to grow paddy for both Rabi & Kharif he can do so.
2) The subsidy is more targeted. The big farmer ( who runs multiple pumps) can at most claim subsidy for three pumps. For the rest he would have to pay market rates.
3) Since power is not free, there will be judicious use of it. You need not exhort farmers to install capacitors & other energy saving devices, They will do it themselves as it makes sense to them
4) If all farmers are billed, you can no longer hide the power pilferage under broad heading of supply to agriculture & T&D losses.

Will this scheme or any thing that tides over the current distress get implemented? No. The biggest gainers of the free power are our big farmers, people who have so much land that they do not know how much they have, like our CM and every other politician that you can think of.

Should we expect more from politicians in India ?

From North Country Gazette
Embattled Comptroller Hevesi Resignation Likely Friday

Sources have indicated that the Queens Democrat will resign his position Friday in order to avoid being indicted by an Albany County Grand Jury for using state employees to chauffeur his ailing wife for three years.

If this is standard that we held our politicians to, in India too, I wonder how many would still be holding office ? Some times I feel we set too low a standard for our politicians and even the best ones try and meet it or just exceeed it a little.

Dark Days ahead for the Tamil Movie fan

From The Hindu : The Tamil Nadu Government has capped the ticket prices in theatres in the state. Rs 50 is the maximum that a theatre with AC can charge, Rs 10 is the minimum.

When will the people ( and therefore the Government) learn that the best way to counter rapacious pricing is not trying to fix the prices but increasing competition.

Here is my view of how the future for Tamil Theaters & Tamil Movie industry is going to play out.

These wonderful price controls ( assuming they stand legal challenges that will follow ) will lead to one or more of the following response

1) Supply will dry up. New theatres will not come up, old theaters will become marriage halls etc. If you have an option between investing in a movie theater where prices are controlled and say a mall/restaurant/shop where prices are not controlled, where would you put your money ? Does not take a genius to figure that

2) Quality of supply will fall. Would you as a theater owner not try cutting your AC cost by setting optimum temperature at 28 C? Since no new competitors will be entering the market, you can get away with this. Why should you repair half broken chairs ? or rid them of bugs ? Since demand will be greater than supply, you are always sure of selling your seat ( buggy/broken or not ) or why should you invest in the latest sound systems ?

3) Bundling will increase : You can no longer buy just a movie ticket. You have to buy a movie ticket + chips/pop corn + soft drink all for Rs 150 ( or what ever price) , all sold as a package. So you would need a new legislation to force unbundling. Also be prepared to pay more for parking

4) Black Market will increase : The theater owners will have a greater incentive to sell tickets in the black. So don't be surprised if soon the only way to buy tickets will be in the black.

5) Shorter movies would be screened : Theatres would prefer to screen shorter movies ( Mostly English ) as they can then run extra shows per day. So you would need to legislate to fix a minimum quota for Tamil movies.

6) Fewer Movies : Fewer theaters ( Assuming scenario 1 happens ), would mean fewer movies can be released. This directly benefits big budget movies as they will have the clout to get the theaters for their movies. Small budget movies will find it difficult to release. So movie making will get increasing concentrated in fewer hands, You will only have super stars & extras. You will find fewer people risking money on new directors/actors as the cost of failure is very high.


So in the end if you are a fan of the Tamil movie .. it is dark days ahead. So hold off the rejoicing and put on your thinking caps.


Addendum : On second thoughts, if I were a theater owner, I would convert my theater to free seating ( i.e first come , first served for seating) and charge a premium for reserved seating. and yeah you would now need to legislate to cap the cost on this service :) . Cap that, and I have the next service ready, you can only book tickets online, for which I will charge a premium and so on. This should buy me the few years needed to recover my investment and then bye bye to owning theaters and back to sand quarrying :)

Cap on College Fees

A couple of days back I had commented that the Indian education system was in such a bad state, that a very large percentage of those that emerge from it can't reason. They can remember, but can't apply. Refer to the India Today Report . Here is another example of that.

The Hindu reports that the AP Government is planning to restrict the fees charged by Corporate Colleges & I see the congratulatory messages on this brilliant move pouring into news papers like Deccan Chronicle.

Can't these people see that if you successfully cap prices ( the previous attempt was unsuccessful as these colleges found a loophole), either supply will disappear, or will be of inferior quality? These corporate colleges are in the business of education. Recognize that ! You squeeze their profits, they just move to a different business and you will be stuck with finding "good" colleges for yourself / your kid(s). Of course if you are an offspring of the ones making these laws or the ones holding the pen to sign them, you can get a seat in the few colleges that would remain by using your pop's/mom's influence. For the rest of the folks, get ready to face enormous pressure to secure good marks in your 10th standard exam.

And anyone who thinks that with the kind of fees mentioned below they still will have a college to go to is living in a dream world..

Prescribed fee

He said that tuition fee of Rs. 451 and Rs. 495 had been prescribed for the first and second year for 2006-07 in private aided junior colleges and Rs. 903 and Rs. 993 for the first and second year in private unaided/cooperative junior colleges.

Here is a back of pad calculation
Lets say you need a student teacher ratio of 30 to have some semblance of an education. So even if all the money paid by the students goes towards teacher's salary, the teacher's salary would be a princely sum of 993*30= 29,790 a year or a monthly salary of Rs 2,482. And you expect some one to teach you 11th & 12th standard subjects for a salary less than what an average house maid in the city makes ?

And people still find this move something to congratulate the government about ?

A tale of two approaches to governing

Here is a news article about CET being abolished. From the looks of it the Tamil Nadu Government is planning to do that this year.

Here is another news article about 12th Standard marks being given weight age for determining your Engineering/Medical entrance ranks. This is planned for 2009.

Irrespective of whether either of the above decisions are right or wrong, what I like is the way in which the AP government is going about implementing this system. It has given enough notice to the student community, of over three years atleast for them to be prepared . All those who are still studying in 10th, can go about choosing their college taking this extra requirement into view.

Whereas if you are a student in Tamil Nadu, you still don't know if you need to study for the entrance test or concentrate only on your 12th Standard even for the current year.

Wish more Governments set a clearly drawn timetable when they propose big changes, not just in education, but in other areas too

Land acquisitions, the way out

In response to Confused's post Gaurav made a point that restoring Fundamental right to Property will solve the issue. I had also made the same point here. Is the current dispensation at the Centre in a position to push for Fundamental Right to property ? I doubt it. So what is the way out?
Get the Government out from the process of buying land and handing it out to the industry. Lets say Tata Motors wants 1000 Acres to set up a factory. Government should restrict itself to approving the project and stating that as long the land is not an ecologically fragile zone it will covert the land for factory use. It is up to Tata Motors to identify a land suitable to them, negotiate with the owners the terms etc.
This process leads to the following
1) Land owners get market prices i.e No artificial pricing which states that a multi crop per year land is just twice as valuable as a single crop land etc.
2) Tata Motors(or any Industry) gets land that it is looking for. It also means that since it is paying market rates, It will rework its land requirements to suit its budget and make appropriate trade offs ( i.e will a four floor plant office be cheaper than a single floor plant office, if it can result in acquiring 2 acres less etc )
3) Government does not use its powers unjustly to coerce citizens. It gets the credit for the development without getting the flak for power misuse.