Friday, 27 February 2015

Opposing the Land Reforms Bill – Economics or Politics??

No doubt India is a sham democracy. Blind populism has become the cornerstone of Indian political system, where if someone wants to free the system from bureaucratic red tape and deliver transparent, speedy governing system and create opportunities for work, earn and live a better life – it is frowned upon as favouring crony capitalism. This is the principle obstacle to India's development. The Nehruvian economic model of leftist economic policies robbed India of 60 years of development and kept two post-independence generations in poverty by refusing to create opportunities for work for the common men. These so called leftist socialist pro poor political parties have made the whole system of governance populist, so that uneducated/semi educated people only fall for populist slogans & the common men have been made to believe that any political party which supports economic and systemic reform is anti-poor. This monster has been created in the minds of generations of Indians raised on expectations of govt. freebies. Such individual centric promises are a natural progression from their well-known practice of purchasing votes by allurements of liquor & cash. This Frankenstein state, created by Congress and it’s leftist socialist allies for vote bank politics over 60 years, found newer ways to extend itself by creating hurdles in systemic  reforms of governance and their opposition to the NDA’s amended Land Reform Bill of 2014 is just one such example.

UPA legislated a growth-retarding land acquisition law in 2013, which would result in an artificial land shortage for infrastructure and manufacturing, so that  the interests of the “Land Sharks”, who are mostly land owners and land hoarders (like Robert Vadra) with their vested lobby of middle men, govt. officials, politicians and benami owners are protected. They are just using the poor common men of India as pawns to argue their own case. The so called failed anti developmental activists like Medha Patkar are working for the anti-India global lobby and even an ignorant Anna Hazare has joined them to show that he is still alive and kicking. I am sure, Anna Hazare has not even read the amended Land Reforms bill and compared its merits with the earlier bills which were in force as law. Even some of the journalists and intellectuals are openly supporting the mind less agitation against the bill just to protect their financial and political masters.

Hence, it is important to understand why the original “Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act”  – which is the official name of this Act, which the NDA Govt. wants to amend, is reqd to be amended and who was benefiting from the earlier act. Once we analyse it, we find that it was definitely not the poor who were getting benefited.  

In India while land is scarce, there are simply too many people engaged in land intensive employment activities like agriculture resulting in low productivity and thereby low wages resulting in lower standard of living. The proportion of the work force of some 478 million is approximately 52%, 14% and 34% in agriculture, industry and service sectors respectively in India.  India’s rural population, most of whom work in agriculture, averaged 79% of the total population in the decade of 1970-79 and 71% in the decade of 2000-2009, so a decline of 8%. But India’s total population increased dramatically over this 40-year period.  As a result, the average rural population, which was 479 million in 1970-79, grew to an average of 775 million in the decade of 2000-2009, which is an increase of 62%. At present, the overwhelming majority of farmers earn very little. So, the only way of economic upliftment of this large population is to push the low productive, low earning population out of agriculture based employment activities to industrial and service sectors.  This shift in employment will rebalance the economy by improving the productivity of both the industrial and agriculture sectors. This will free up land for making it available for infrastructure, industry and housing resulting in growth of job opportunities in rural areas – making land sellers benefit both from higher value for their land and new job opportunities. It’s also important to provide alternate job opportunities to the landless poor, who are dependent on seasonal agricultural employment for livelihood. Wages will rise as infrastructure projects start blooming in the rural areas. This will reduce the pressure of migration to the cities by making employment in rural areas attractive.  This will also lead to improvement in yield of food grains by use of modern technology and free up land for cultivation of higher-value crops which will bring greater remuneration to farmers. The assumption that giving up land will impact food production/security is completely false. Food production depends on improving agricultural productivity, which is achieved from land consolidation, use of improved technology, mechanised farming and more contract (or even corporate) farming etc. None of it is possible if Indian agriculture is burdened with supporting so many mouths. Not just industry and infrastructure, even agricultural growth needs land consolidation by getting people to discard smaller uneconomic land holdings and move to non-agricultural jobs.

Quicker land acquisition process will, make it easier for farmers to earn more value from their land. It is wrong that land prices can be mandated to rise only through govt. fiat. Land values rise when more land shifts out of agriculture as is visible in Gurgaon and Noida etc. and this cannot happen if acquisition is made tougher. The UPA’s 2013 Land Act would have resulted in keeping market prices of land artificially low than they should be due to the stiff acquisition clauses. This would have deprived land sellers of justified price for their land and made only the “Land Sharks” benefit. Hence most politicians want the UPA’s version of the act to stay for the simple reason that if land acquisition becomes tougher, middlemen and landlords will benefit from the resultant scarcity.  Most politicians are big landlords especially in the rural parts of India and they gain the most if industrialists and businessmen have to fill their pockets to buy land. Also land aggregators, village officials and other middlemen will benefit from graft if the process of acquisition is made difficult through the need for 70%-80% consent and Social Impact Assessment studies. It has been estimated that acquiring a large  tract of land under the UPA’s  2013 Act would take four to five years – enough time to make any project unviable as all cost estimates will go for a toss. To develop a proper market for land, NDA Govt. is trying to make transactions transparent, faster and easier, not slower and more complicated. The basic purpose of the Act, as per its name is to ensure fair compensation, rehabilitation and resettlement and  none of these are affected by the NDA’s 2014 modifications of the UPA’s Act of 2013. All other major conditions of the UPA’s act remains the same viz., the compensation (2 to 4 times of market value depending on rural or urban area), rehabilitation of the affected by mandatorily proving them job in the proposed project and resettlement in another place if the affected desires so.  In fact, by making acquisitions easier, poor  land sellers will be able to  get market price, realize their money faster and thus get rehabilitation faster. There is ample evidence to suggest that farmers will happily sell their unproductive land, if the price is right. For instance, the Yamuna Expressway, paid about $25,000 per acre to farmers between 2007 and 2009 to acquire land. This explains why the Yamuna Expressway project took off whereas similar infrastructure schemes elsewhere in the country have not.

The NDA’s bill is trying to amend a  few historic wrongs. The main difference between the bills enacted as law by the UPA govt. in 2013 and the NDA’s amended bill of 2014 are on four points – 1. Land acquisition has been made easier only for 5 purposes by removing the 70% consent clause. They are defence, affordable housing, rural infrastructure, industrial corridors, public-private (PPP) projects. So there is no question of favouring private sector for land acquisition for profit as they still need to take consent of 80% of the land owners for acquisition, 2. The removal of  the clause of Social Impact Assessment, where rules impose an obligation on the central or state govt. to appoint an independent organisation as the assessment unit, whose job is to maintain a database of independent practitioners and social activists to  regularly conduct studies and formulate strategies for improving the quality, efficacy and transparency of the assessment process. While on paper, it looks like a great idea, the fact remains that it is an instrument to blackmail as one can be rest assured that no land will ever be sold or brought if it is going to be subjected to a public audit or inquisition, 3. The UPA Act’s provision for the return of land in case it is not developed in five years after acquisition made no sense. Infrastructure projects need more than 5 years to be completed and hence if only a part of acquired land is utilized in 5 years and balance has to be returned for non-utilization, the whole project will be in jeopardy and no sane investor will come ahead for such projects. Moreover, the prices of land don’t stay same over a few years and hence landowners can’t hope to get the land back at the same price they sold it for. So the idea of returning land is not only faulty but impossible to implement. The NDA’s amended  act  removes this absurd clause and 4. The NDA govt’s  move not to include special provisions for safeguarding food security in the ordinance as food security comes not from large unproductive cultivation but  from improving agricultural productivity by using modern techniques.

It is important to note that most state govts — cutting across party line from Congress to Communist to Socialists (SP, JD(U)) to BJP — are most keen that these changes be introduced and have told the NDA central govt. during their meetings before the bill was brought. Even during the UPA rule their own central ministers like Anand Sharma to Congress CMs from Maharashtra, Haryana etc. wrote officially to the then PM to change the earlier bill to include the above amendments.  Therefore, at the heart of the opposition to the modification of this act and all the agitations  lies politics and not economics.