West Bengal Chief Minister Buddhadeb Bhattacharjee may have succeeded in dissuading Tata Motors [Get Quote] from pulling out of Singur, where it had planned to manufacture the much-trumpeted Nano car. But the damage the entire controversy has caused to Bhattacharjee's reputation as an administrator is immense. There are lessons which all other state governments must draw from the Singur fiasco.

• Tatas shocked by Singur deal; to suspend work

Every chief minister has to strive hard to persuade large industrial houses to make investments in his or her state. Such persuasion yields quick results when special incentives are offered to an industrial house for taking an investment decision. These are incentives that are not ordinarily available to other investors. Such special incentives are justified because the state government treats such industrial projects as "anchor investments".

• Tatas have abandoned projects earlier too

In other words, these are investments that will help the state government attract many more industrial investments in adjoining areas or in other parts of the state. If the objective of a government is to expedite industrialisation in the state, offering special incentives to "anchor investors" need not always be frowned upon. This is particularly so in a state where due to its long history of an investor-unfriendly environment, industries are generally apprehensive of committing their investments and projects.

• Tatas to exit Bengal if protests continue
  

The West Bengal government treated Tata Motors as an "anchor investor" in Singur because it realised that it needed to break from the past and get some big industrial investments in the state, around which clusters of industries could be set up and the state could reap the benefits of rapid industrialisation with more jobs for its people.

Trinamool Congress chief, Mamata Banerjee, has questioned the policy of offering special incentives to Tata Motors, arguing why a preferential treatment was given to the Tatas and why the same incentives were not extended to other investors in other parts of the state.

• Singur farmers don't want Tatas to leave

This argument of Banerjee had few takers. That is the first lesson. Every state wishing to attract industrial investment has to look for "anchor investors" and, if needed, will offer special incentives for such projects. The manner in which such incentives are decided within the government should be transparent. And the details of the incentives should be made public.

If only Bhattacharjee had decided to make public his special incentives package for the Tatas for the Singur plant, Mamata Banerjee would have had no basis for accusing the state government of entering into a secret deal with the Tata Motors.

There is nothing wrong in attracting "anchor investors" with special incentives. But not making the incentives package public in advance raises suspicions and creates problems. The Left leadership in the state thought it need not be transparent and open about the deal on the special incentives because it had no opposition party to fear from in the state. That is where Bhattacharjee went wrong. Governance suffered somewhat because there was no transparency. Banerjee exploited that weakness very well.

The second, and more significant, lesson to be learnt from the Singur controversy is that political management of any large industrial project is as important as overseeing its economic management.

Ensuring allotment of land and other infrastructure support for a project the size of the Nano plant was important. Equally important was the need to assess and anticipate the mood of the ordinary people in the Singur area. The Left leadership failed completely in this area.

Nor did it realise that large sections of the Singur area had been won over by Trinamool Congress, as evident from the recently-held local elections there. Given this background, the West Bengal government should have gone out of its way to deal with the aggrieved people directly, instead of allowing Mamata Banerjee a field day.

Finally, the state government should not have allowed the Tatas to completely divorce themselves from the people of the Singur area. Modern industries have to function and prosper within a larger set of stakeholders including workers, shareholders and people living near the project.

In Singur, the Tatas were seen as negotiating only with the West Bengal government and securing for themselves a good deal. If Bhattacharjee had intervened and organised a closer interaction between the Tatas and the Singur farmers, we would not have seen the relationship of distrust that now prevails between the Singur residents and the Tatas.