Friday, November 09, 2007


(Suggesting a new payment mechanism for land acquisitions)

Much has been made of the fact that the land at Nandigram sought to be acquired was fertile farmland. The opposition to the idea of using fertile land for industrial purpose is fundamentally flawed. By this logic, any state blessed by nature’s bounty with fertile land throughout its length and breadth, will be condemned for eternity to agricultural pursuits only. Imagine we discover huge oil deposits beneath fertile farmland. Do we hold back from drilling because the land in question gives you two, three and more crops a year? The economic logic is very clear and we can ignore it only at our own peril. Land, like any other asset, must be put to that use which fetches the maximum returns.

What about the price offered to the land owners, was it too little? It is not easy to arrive at a conclusion one way or the other. All the same, it is human nature to feel short-changed and perpetually aggrieved in such matters. That is to say, the price could well have been double or three times of what was offered, without any significant dent in the opposition to the acquisition. Because, in addition to a fair price, there is also a very touchy emotional aspect to it: how do you put a price to the livelihood gone astray, especially where alternatives are hard to come by. That is why this is the right time to think about alternative approaches to payments for land acquisition by the government for purposes like setting up an SEZ.

I propose that instead of the government merely making a one-time payment as a “fair” price for their land (and livelihood), it should be declared at the outset that this is only the first of what may well turn out to be a series of payments. And here is how the remaining payments would be arrived at.One of the reasons why governments (both state and central) are keen to set up SEZs is that they increase our industrial competitiveness, generate employment and ultimately bring in increased tax revenues. Keeping a track of this increase in tax revenue may not be a simple task but it is also not very complicated in this age of information technology. The second part of the scheme would be a declaration that a certain (to be determined) share of the revenue earned by the government and attributable to the commissioning of the SEZ would be passed on to the evicted landowners by way of, say, an annual payment for a defined period of time. Obviously, the amount available for this purpose would depend on just how successful the SEZ is in bringing increased revenue to the government.

I believe this would go a long way in easing opposition in land acquisition because now there would be a reasonable expectation that the future too will have something good in store for them. Indeed, they would actually become stake-holders in the SEZ with a keen interest in its success, because the greater the success of the SEZ, the more their future earnings. And then, even as it satisfies the need for future security, it also does something for that gambler’s instinct that is there in all of us. What if the SEZ were to turn out to be a massive success? Wouldn’t I be rolling in wealth? The possibility is exciting and definitely worth looking forward to.

It takes only a little extra thought to realise that this mechanism has wider relevance. For example, tribal people displaced by the construction of a dam can be additionally compensated by a share from the future electricity generated. Or if an expressway is to be built by forcibly acquiring land, perhaps a part of the toll collected over the years should be passed on to induce people to willingly give up their land (and livelihood.)

We work not just to earn a living but also to feel good about ourselves. There is a sense of self-respect involved. The land that is sought to be forcibly acquired has a fair price, a market value. But not the sense of self worth arising from the ownership of the land and of being engaged in a vocation. That is why the present practice of a one-time payment of a ‘fair’ price, no matter what that is, is just not the best way to go about it.

There is a popular television ad for Mastercard that makes the point that the best things in life are priceless. It is a lesson our politicians, bureaucrats and economists sometimes tend to forget.