Flooding of the river Narmada: City of the dammed

Usman Bhai lives amid ruins. All around his house lie the piles of rubble and broken pieces of wall where his neighbours lived. His house is one of only a handful of buildings still standing amid the wreckage of an entire town. The shops are gone, the houses are gone. A town of 22,000 people has been torn down. Grass is pushing up where the streets were once busy.

Goats, Usman's new neighbours, clambering over the bits and pieces of wall that are still standing, living in the remains of the houses. One stands on top of a wall where only half of a painted advertisement for life insurance remains. The waters that will soon flood the town have arrived. The main street is under water. From his rooftop, Usman points out the shops he used to own on the main street: you can just see the top floors of the remains sticking out of the water.

This is Harsud, the 700-year-old town in Madhya Pradesh that was torn down by its own residents. They demolished their homes with their own hands, many pulling down houses where they had spent their entire lives.

They didn't want to. Many were weeping as they did it. They were forced to demolish their homes by the government, because Harsud stood in the way of one of the biggest and most ambitious infrastructure developments in India's history: the massive Narmada dam project.

The dam project is the one that Arundhati Roy, the celebrated Indian novelist and Booker prize winner, has been such a vocal opponent to. It is a scheme to build 30 major dams and thousands of smaller ones on the river Narmada and its tributaries, flooding huge tracts of land. It's supposed to provide hydroelectric power and irrigate agricultural land, but its opponents say the cost to the environment and to people who will be displaced from their homes, is not worth paying.

Harsud was due to be flooded, and so the authorities decided the town had to go. Usman is one of the few who refused to leave. Many rejected the compensation offered by the government as too little. When The Independent visited last week, the floodwaters had just arrived. They were metres from Usman's front door, but still he refuses to go.

"This is my land. I have lived here 23 years, all my life. My forefathers lived here," he says. Now he is staying, with his wife and baby daughter, in a town where there are no jobs, no electricity, no future. Under the government's relocation scheme, the town's inhabitants were to move to New Harsud, some half hour's drive away. "If you go to New Harsud, the life is the same as this," says Usman bitterly.

"There are no jobs there. There I will weep for the rest of my days. Why not weep here for a day and then die?"

But the waters that arrived last week will not engulf the entire town - not this year anyway.

This is the story of Harsud, the town that has come to symbolise the failure of the Indian government's rehabilitation policies for those displaced by the Narmada dams.

Last month, in a landmark ruling, the High Court in Madhya Pradesh state ordered the flooding of this area to be stopped and put on hold for a year. The waters will come into Harsud, but they will stay at their current level. The court gave its ruling because, it said, the authorities had failed in their obligation to look after those forced to move.

The court order came too late for Harsud. It is in ruins, the people are gone. But the new ruling will affect residents of 91 villages that were to be evacuated this year as the final stage of the Indira Sagar dam.

The Indira Sagar dam, named after former Indian prime minister Indira Gandhi, has been 21 years in the making. At 92 metres from top to base, it is the second biggest dam in the Narmada project, and should create the largest reservoir in India, submerging more 220,000 acres.

As well as Harsud, 249 villages will be flooded. The dam was supposed to be completed and the reservoir flooded this year. But after more than two decades' work, it has been held up at the 11th hour, because the court ruled the authorities had failed to live up to their own commitment to rehabilitate the displaced. It is a development unlikely to encourage future foreign investors.

Until last year, Harsud and its inhabitants had been a thorn in the authorities' side. The residents were refusing to evacuate, saying the government was offering them far less than their property was worth as compensation. Desperate to get them to move out, the state government started releasing water last year to cause floods nearby and unnerve the residents. When that didn't work, they sent 300 police to march through the town.

The deadline for residents to move out was 30 June. The people stayed put. Then on 1 July, the government sent loudspeaker vans into the town to issue an ultimatum: rehabilitation grants would only be paid to those residents who demolished their houses that night. Harsud gave in. Most of the people started tearing their houses down.

Today, there are perhaps 10 families living amongst the ruins. The town's Muslims refused to tear down the local mosque because they said the compensation money offered for it was not enough, and at prayer time, Usman Bhai and the few other men gather to pray in the blue mosque, surrounded by the rubble of other buildings.

"They refused to pay me compensation money for my house because they said I couldn't prove I owned the land," says Usman. "They said I had to produce the documents, but my family has lived here for generations."

Nirmala Khandelwal is living with her extended family in a house just feet from the water's edge. The water has brought a host of mosquitoes, eagerly joining in as you sit in her small front room, crawling over your lips and into your mouth, flying into your eyes. "The government has done an injustice to us," says Ms Khandelwal, who looks far older than her 52 years. The Khandelwals were a wealthy local family. Today there are four households crammed into one tiny house - the only one still standing. Ms Khandelwal says the four household's land was worth 40m Indian rupees (£500,000). The compensation received was just Rs9.5m.

With no work left in Harsud, and the farmland all gone, they have been living off that compensation. They have no idea what they will do when it runs out, but they insist they will not leave their demolished town until the government gives them the compensation they say they are owed. "We will be submerged but we will not leave," says Ms Khadelwal's daughter from the corner, where she is nursing her five-month-old baby. "We will die here but we will not move from this place." Everyone from Harsud claims they were paid far less than their land was worth. But the effects have been more far-reaching that just stripping people of their possessions.

Across the town, a group of men and women sat on the roof of one of the buildings still standing. Arjun Singh Yadav explains that he and his friends are among the thousands who demolished their homes last year and moved to New Harsud. They came back because they heard that the first water had arrived. "Our town is sinking, but we feel we should be here to see it happen," he says. He lost his job as a tractor salesman - there is far less demand for tractors in New Harsud.

Harsud was a farming town. Rajindra Kumar Prajpati, a farmer and one of the group of visitors from the new town, explains how the government's compensation policies destroyed the local economy. "I got compensation for losing my farmland but it was too low. They valued my land at Rs40,000 per acre. But when I try to buy new farmland, it costs Rs120,000 an acre."

New Harsud is an economic disaster. The new town is full of new houses built by the people with their compensation money. But the new shops are empty. No one is doing any business. Harsud's economy was dependant on the farmers: others worked in sectors that revolved around agriculture, trading in produce, selling fertiliser or tractors. Now the farmers have been impoverished, the effect is rippling out to everyone else.

One grain merchant told us that in Harsud he used to have a turnover of Rs10m a year; in New Harsud it is just Rs1.5m a year.

Farmers used to come from miles around to sell their produce at the town's market. But even those farmers whose land is not being flooded do not come to new Harsud: the new town is simply too far away, and the market has shifted elsewhere.

Out of 5,600 families who left, only 2,000 have moved to New Harsud. No one knows where the rest have gone. They have disappeared into the vastness of India, trying to rebuild their lives somewhere new.

The new town is a failure. The authorities have destroyed an entire rural economy with their compensation policies.

"In some ways it was better for those who were displaced from the villages," says Silvi Palit, an activist from the Narmada Bachao Andolan, the Save the Narmada Movement. "The villagers got land. The government didn't have to provide them with a livelihood. But they did have to give the people from Harsud one and they didn't do it." Many activists have accused the Madhya Pradesh state government and the National Hydroelectric Power Corporation (NHPC), which is in charge of the Narmada project, of deliberately undervaluing the compensation in order to save money.

Arundhati Roy has said that the chairman of the NHPC and two former Chief Ministers of Madhya Pradesh are "criminally culpable" and "in any society in which the powerful are accountable, would find themselves in jail". Added to this, there were widespread allegations of corruption at the time.

Everyone you meet in Harsud tells you about "the 56" - 56 well-connected local politicians who bribed powerful friends and got paid far more than their land was worth. Many of the people of Harsud even say they didn't get the money for their land - because it had been falsely claimed by one of the 56.

Now the courts have intervened to protect the inhabitants of the last 91 villages scheduled to be evacuated from receiving similar treatment. The Madhya Pradesh High Court found that the authorities had ignored a requirement to provide compensation to the villagers a full six months before they were forced to move, so they could build new homes and set up a new life, and so they could dispute the amount if they believed it was too little. Even on the deadline for them to leave earlier this year, the compensation had still not been given.

The court has ordered a delay of one year, and that the compensation be properly monitored this time. Not until it has been paid and a delay of six months has been observed can the flooding proceed. Meanwhile, amid the ruins of Harsud, the few who stayed on are making legal challenges of their own, demanding that they be paid the full compensation they say they are owed before the town is finally flooded.

For most of Harsud, the court's move has come too late. Usman Bhai gazes from his rooftop across the town he has spent all his life in. "That was my school," he says, pointing at a pile of stones. "And that was the bank I went to every day," pointing at another. For now, the waters that are lapping in the main streets will not flood the town. But eventually they will rise, submerging Harsud's 700-year history.