CAN BUDDHA SMILE AGAIN : Part II

(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.

***

CAN BUDDHA SMILE AGAIN

(The acute dilemma facing the government in West Bengal after Nandigram and in the second part, a suggestion for a revised payment mechanism for land acquisitions with potentially far reaching implications)

In the way of tragedies, Nandigram goes well beyond what the common perception would believe. The official version, possibly a model of understatement, says 14 people were killed. They died because in our sixth decade as a democracy, we are still unable to manage our differences and carry out our debates within the bounds of civilised conduct. The other tragedy, with lasting detriment to the people across West Bengal, is that a set of sensible economic policies much needed to pull that state out of its economic morass, has now been laid to rest.

West Bengal is a state where the land reforms agenda is more or less dealt with and now, by all accounts, desperately needs a transition to industry led growth. The fact is that land reforms are not always the unmixed blessing they have been made out to be. In the beginning, the original beneficiary may well get land adequate for his needs and sustenance. But later on, as it gets sub-divided into two, three or more plots, there is very little to live on. In West Bengal, land reforms were pursued with missionary zeal and the state is littered with farming households subsisting on marginal holdings (Official statistics suggest that 91.4% of its farming households have land holdings less than 2 hectares against a national average of 78%.)

Moreover, it is well known that the process of economic development tends to marginalise agriculture, with a steadily declining share of the national income. In India, 70% of our population is engaged in agriculture (mostly small and marginal farmers) and we are just about able to feed ourselves. The US on the other hand has less than 3% of its population employed in agriculture and is capable of feeding almost the entire world. Across the developed world, the proportion of people engaged in agriculture is minuscule compared to those in services and industry. Put another way, these countries have attained development because, among other important reasons, they were also successful in diverting employment away from agriculture, towards industry and services. Land reforms, in this context, can actually be counterproductive over the long term. And that is because by providing a sense of comfort (false, or at best temporary) it merely delays this inevitable and secular movement of people away from agriculture. It is not so much a remedy as a palliative that postpones the pain without doing much for the disease. Worse, with those superficial improvements, it gives rise to an impression that the disease is under control when all along it might well be getting worse.

Of course, when talking about a movement away from agriculture, the underlying assumption is that industry and services are being allowed to develop unhindered to their potential. In West Bengal, ruled for long by wise folks who sincerely believed they knew best what was good for its people, this has singularly not been the case. The official Party line was always about the development of agriculture and the welfare of the rural areas where (and we were often reminded thus) the great majority lived. As for the industrial sector, the Party either did not care or cared only to the extent that it was a hunting ground for its CITU goons.

And that is why West Bengal presents us with something of a double whammy. On the one hand, there is severe pressure on land from the second generation beneficiaries of land reform. On the other hand, there is very little development in the industrial and services sector to offer them an alternative worth pursuing. Incidentally, it is also a pointer to why a centrally planned economy is always a disaster over the long term. Because planners (and they may all be well-meaning economists, politicians and bureaucrats) try to address today’s problems with the tools and solutions available today. The opportunities presented by new developments and the long term trends (including the impact of technology) are rarely grasped because their true significance is seldom realised in time. Nearly 30 years after the Marxists took over power in the state, NSS data indicates that the average consumption level in rural West Bengal is well below the national average and only about four percent higher than in rural Bihar. For a party that has laid claim to rural development as its focus, it is unhappy news indeed. This is not to suggest that the agricultural pie in the state has not grown, only that even as it has grown, there are more and more hands clamouring for a share, because the industrial pie has shrunk and there are no other options open.

Severe pressure on land with no alternative employment, this is the predicament that Buddhadeb Bhattacharya and the Marxist led government of West Bengal find themselves in today. They have scorned at and negated the role of private industry for too long. Now, there is belated realization that the state desperately needs to regain its lost industrial footing. It’s difficult to believe that West Bengal was once in the forefront of India’s industrial growth. Unfortunately for the Party leadership, they have cried wolf so often about profiteering, exploitation (the most exploited word in the leftist lexicon) and other evils of private enterprise, they are now the victims of their own past success. A generation of the rank-and-file indoctrinated by Marxist dogma finds it difficult to let go of its ideological hang-ups and embrace the new-found pragmatism of its leaders.

The Titanic is heading towards an iceberg. The captain is aware of it, but the crew below the deck are yet to get the message.