governance, political economy, institutional development and economic regulation

The Land Bill 2013 is backward looking and shortsighted. Coming  119 years after the predecessor legislation in 1894, it fails on four counts.

First, it does nothing to assure citizens that it shall rein in wilfull and unnecessary acquisition of property by the State, as has been happening in the past.  Consider that there are many Public Sector Undertakings which own land far in excess of their needs, as do the “new age” power plants which have been given coal mining licenses. The Bill actually skirts around the issue of “when and how much” is it justifiable for the State to acquire property. It focuses only on the process and amount of compensation to be paid in the event of acquisition.  It is curious therefore that it is being lambasted by industry as anti-industrialisation, not because of the higher amounts they may have to pay for land, but on account of the anticipated delays and increased bureaucracy now proposed in the process. The Bill proposes to artifically enhance the price paid for acquisition to give the disposed a fair compensation and possibly also act as deterrent to “deep pockets” from acquiring and holding large tracts land. The deterrent is over estimated. Land ownership has an average ROR of above 25% per annum which will continue to attract investments on account of its scarcity value. The provisions for enhanced acquisition price are populist and are likely to be ineffective in ensuring that only minimum volumes are acquired. The only way the volume of acquisition can be rationalized is by severely restricting the definition of public purpose to the needs of Defence and Security. The Right to Property is an essential part of empowering the ordinary citizen versus the State, which is ignored by the Bill.  Opposition should have come from the BJP and other rightist parties but “industry wallahs” typically like an interventionist State (like China or Vietnam) if it intervenes on their behalf. it is election time and all are wary of upsetting either the “poor”, “industry” and “real estate” wallahs. The pro-poor “lobby” essentially has a “left leaning” mindspace. For them, owning property is equivalent to being an oppressive, extractive, arrack swigging, landlord cum money lender.  This is a politically attractive stereotype, which all parties publicly bow to, never mind that atleast 90% of the population owns land and property. Why not use the Bill to define this Fundamental Right better and proscribe the powers of the State? We are losing a historical opportunity.

Second, the Bill displays an unerring faith in the bureaucracy and its ability to protect the rights of the poor, manage a complicated acquisition, participation, resettlement and rehabilitation process efficiently, despite all the evidence to the contrary.  Citizens today want a simplification of administrative procedures, not additional miles of red tape. The more the red tape, the more time it takes to get things done and higher the transaction cost, for getting files moving. The Policracy must rise above its class interest and declog administrative processes, not add ever more onerous procedures. Current estimates for completion of the new land acquisition process is a full five years! Only a policracy with a faith (or a vested interest) in an “interventionist” bureaucracy could impose this on citizens.

Third, the Bill shows the medieval mindset of the “policracy” under which industrial and infrastructure development and service delivery were a preserve of the government or of public sector undertakings. Hence land acquisition for private educational institutions, private hospitals and private hotels are all excluded from the definition of “public purpose”. The very same institutions if owned by the government or a PSU would be eligible. This approach runs completely contrary to everything the government has said about the criticality of private investment in infrastructure and service delivery. It confers on government the near unique ability to aggregate land in industrial volumes and then to use this leverage to enter into Public Private Partnerships with industry. The opportunity for extracting “rents” is obvious with the well known downstream consequences of fraud and corruption.  Medievalism is also evident in the requirement that there should be no change in ownership, post acquisition of the property, without the approval of government. Presumably, this is to discourage businessmen, who are “fast track approval getters”, from becoming middle men, in the real estate game. However this is a very restrictive condition for the genuine, medium level, private investor. An investor wants “full” ownership over what she has bought. This includes the right to transfer when considered appropriate. Having to go back to the government, cap in hand, just perpetuates the “license permit raj”. Once the Socio Economic Assessment and the Expert Group are satisfied with the “public purpose” and reasonableness of the project, it hardly matters who the owner is.  Despite all the high sounding support for the private sector, and the bon homie with government in CII and FICCI events, businessmen continue to have the stereotyped image of exploitative, manipulative, stingy but high living, low thinking, self seekers. This Bill reinforces that image. 

Lastly, the Bill is well intentioned in recognizing that the alienation of land can result in hardships for a larger group than just the owners. These are those whose livelihoods were dependent on the land continuing to be used for the purpose it was, till the time of acquisition. Whilst unquestionably appropriate, from the equity perspective, the problem here is the implementability of the proposal. The low ability to identify those eligible, with the robustness required, in the absence of records of informal labour  and the potential for flagrant misuse and cost inflation are obvious deterrents to efficiency and effectiveness in implementability. Are we creating an unenforceable entitlement here for workers, which may actually dissuade farmers from using labour as in the case of industry?

It is tragic that a well intentioned Bill is turned ineffective and counterproductive because of the timing of its introduction. This is a part of the pro-poor pre election bonanza that no party can afford to distance itself from. It is consequently ill intentioned, disruptively regressive and anti-poor by being pro-bureaucracy, anti-efficiency, anti-investment and anti growth.

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Comments on: "Land Bill: political gains, future losses." (1)

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