Articles and debates

A debate. The headings are numbered and set in bold font.


1. Real estate, unreal methods
Hindustan Times
By Abhirup Sarkar February 7, 2007

Animosities over acquisition of agricultural land for non-agricultural uses have reached dizzying heights in West Bengal, Orissa and other parts of the country. In January 2005, several people were killed in police firing in Kalinga Nagar, Orissa. The feud had originated from an attempt of land acquisition for a mammoth steel plant proposed to be built by the South Korean steel major Posco.

More recently, history has repeated itself in Singur and Nandigram, both in West Bengal. In Singur, the strife is over land acquisition by the state government on behalf of the Tatas for constructing an automobile factory. Most recently, in Nandigram, a mere rumour of land acquirement for the purpose of building an SEZ by the Indonesian Salim group has led to bloody fights between rival political bands and the death of seven people.

The basic issue is one of industrial and infrastructural development at the cost of displacing sections of the agricultural population. The issue, which is being hotly debated both inside and outside the state and central governments, has deep relevance for the future course of progress of the country. Apart from crude economic calculations, there are problems with finer political, social and moral nuances that need to be carefully analysed.

As far as we can see, two fundamental questions are involved in the current debate. First, how far is it necessary, at this stage of development, to shift resources from agriculture to industry? In particular, how much should we worry about an unchecked and desperate sacrifice of agricultural lands imposing threats to future food security? Second, how far should the governments indulge themselves in the act of acquiring land, by force if necessary, from farmers and hand them over to profit-maximising investors? How far can we justify this infringement on private property rights?

The first question has a straightforward answer. For the employment-starved still predominantly traditional Indian economy, where an overwhelming majority of the labour force is struggling to earn a living in the agricultural sector, development entails growth of industry and services. Indeed, for the country as a whole, there is hardly any alternative but to shift labour from the low productivity primary sector to high productivity secondary and tertiary sectors. The globalisation endeavour has given a jumpstart to the industrialisation process. But this is yet to make a dent into the backwardness of a large section of the population. To drag this unfortunate lot into the mainstream development process, the country needs to embark upon an industrialisation drive on a much larger scale.

But industrialisation cannot be pulled out of thin air. To build factories, townships, roads, bridges, seaports and airports — all integral parts of industrialisation — one needs land. In a country like India, where the land-man ratio is pretty adverse and where most of the available land is already being used to grow food for the masses, any attempt to acquire land to build up industry and infrastructure must impinge on agricultural land. But that should hardly put a threat to our food security, for the fact of the matter is that the land requirement for industrialisation is minuscule in relation to the total agricultural land available in the country.

For example, the West Bengal government is contemplating acquiring around 1.25 lakh acres of land for its entire industrialisation drive (the Tatas requiring not even a thousand acres for their automobile project) which constitutes less than 1 per cent of the total arable land in the state. The situation should be similar in other states as well. Thus, acquisition of agricultural land cannot possibly impose any threat to our food security.

The problem, however, is microeconomic. It pertains to those who are losing their land and their livelihood. It pertains to the tillers of the soil and to others who depend for their daily bread on the appropriated land, to owner-cultivators, sharecroppers, landless agricultural labourers and even small local traders whose economic existence had so far been rooted in the tiny plots of land that are proposed to be handed over to the industrial investors.

In Orissa, West Bengal and some other states the government and political organisations are intervening in a big way to make sure that unwilling sellers do not impede quick land transactions. This is certainly important for attracting actual investors to the state and for sending the right signals to distantly potential ones. But the trouble is that this act of intervention, this feat of land acquisition by special power — by force if you will — is blatantly violating property rights. We have seen this violation in Narmada, and now we see it in Kalinga Nagar, Singur and other places. This brings us to the second question: how far should the government involve itself in acquiring land, especially for private investors whose interests are strictly confined to narrow profit motives?

Ronald Coase of the University of Chicago had a Nobel winning theorem which could be of relevance in the present context. According to the Coase theorem, initial distribution of property rights does not matter provided property owners can freely transact with one another. Indeed, through free market transactions they would reach the social optimum where the person who has the greatest use for a property would pay a suitable price and acquire it.

In the present context, the Coase theorem would imply that if the initially unwilling farmer were offered a high enough price, it is most likely that he would sell his land voluntarily. And if the government had allowed the investors to freely acquire their land by directly bargaining with the owners of the soil, not only would there be a smooth transfer of land but also the market would have ensured an efficient outcome.

Coase theorem, however, is unlikely to be relevant for land acquisition in India for a couple of reasons. First, small sellers of land are not in a position to bargain successfully with big multinationals and the government has to intervene to protect the interest of the small sellers. Second, if investors are asked to acquire land directly from the market, it might lead to speculation, holding up of land in the expectation of higher prices and unnecessary delay. The delay might even compel the potential investor to pack up and go elsewhere to set up his factory which, in turn, justifies government intervention in the process of land acquisition.

The only thing that needs to be ensured, however, is adequate compensation. Compensations are important not only because the government, which is acquiring land in the name of public interest, has a moral responsibility to compensate the loser, but also because the loser is the least likely candidate to get any employment in the factory to be set up by the investor. Moreover, the entire transaction process has to be made transparent. For, if land is acquired in public interest, the public has a right to know exactly what is going on.

Abhirup Sarkar is Professor of Economics, Indian Statistical Institute, Kolkata



2. Sukla Sen < suklasenpatyahoo.co.uk> wrote: There is as yet no concept of compensating loss of livelihood and far less selfhood linked to work. If at all, only loss of property rights are compensated.

3.
Sir,
Abhirup Sarkar (Feb. 8) claims that "the finer political, social and moral nuances" of the drive to acquire land for new industries have not been "carefully analyzed." He then buttresses it with some gems of wisdom that I now summarize: that we should be g;sd because the quantum of arable land that needs to be acquired for setting up new industries in West Bengal is too small to threaten the future food security of the state's people, but sad because many of the same people will lose their livelihoods; glad because the process will be swift now that many political players are involved in the process, but sad because private property holders will be dispossessed; glad because a theorem of economics makes such acquisitions "socially optimal", but sad because the theorem does not apply to West Bengal; glad because adequate compensation to first-to-be-fired, never-to -be-hired land losers is all that needs to be ensured, but sad because the process of doing so remains abysmally dark, whereas all things done in the public interest should be transparent. It is thus okay for a State to commit mayhem in the public interest as long as it does so transparently (my addition).

Sincerely,
Meher Engineer

4.
Abstract
Globalization Challenges and the Need for Institutional Reforms: India's Ongoing Land Battles

Dr. Abhijit Guha
Dept. of Anthropology
Vidyasagar University
Medinipur: 721102
West Bengal,
India
E-mail: abhijitguhavuatrediffmail.com

No development policy in India could avoid the issues of reforming land legislation and of protecting those losing their lands to industrial and urban development. The common theme that runs through long periods of India's history is the encounter between the state and the people, who negotiated, bargained and often fought each other for control over this vital natural resource.
The State's recent reform policy for giving free field to the demands of globalization, by liberalizing the economy and confiscating lands through eminent domain on behalf of private enterprise ventures, facilitates the entry of private foreign capital investments. But it also creates, however, great social contradictions.
While the policy of economic liberalization assumes the creation of employment, the absence of a national legislation on displacement from land and on the state's obligations vis-à-vis peoples' resettlement paves the way toward the immediate dispossession and disempowerment of great numbers of people. Thus, the Indian State's democratic policies and institutions are receiving severe blows.
In this paper, we will describe this process with examples of development-caused displacements and impoverishment. We would also report the findings of the author's empirical and archival research in a district of West Bengal, India, which shows how the land management policy of the West Bengal government is being transformed, but at the same time is resisted by the people. The paper reviews atrocities committed in the process of imposing forced displacement without adequate mitigation, and describes the powerfully growing protest movements in West Bengal, and elsewhere, against such impoverishment. Finally, the paper searches ways for institutional reforms able to create a system of land management fitting for a democratic state.

5.
Abhijit Guha <abhijitguhavuatrediffmail.com> wrote: Date: 11 Feb 2007 11:16:09 -0000From: "Abhijit Guha" < abhijitguhavuatrediffmail.com>To: "meher engineer" <mengineer2003atyahoo.com>Subject: Re: Re: Re: Singur, Nandigram, Kashipur, Kalinga Nagar: Dispossession as 'Development'

Dear Prof.Engineer,
Please find the news item attached.It is interesting how the govt.is moving to combat critiques on land acquisition.The Trinamul led opposition is yet to raise the point that land acquisition ultimately affects land reform and also Panchayati Raj.This opposition, I believe will never raise this crucial point.No opposition in the W.B. Assembly or outside ever raised this point probably because every political party knows that if it shates power at any level of government it will support land acquisition for so called public purpose!!!That is why there had been no move towards changing the colonial law by any political party in India.No one is an exception.This is one of my findings which I depicted in my Ph.D thesis. It is only the NGOs who have demanded it.This is the irony of movements against development caused displacement in India.

Regards,
Abhijit

IN ALL UNFAIRNESS - Disappointments and disruptions in West Bengal

http://www.telegraphindia.com/1070123/asp/opinion/story_7295103.asp
IN ALL UNFAIRNESS
- Disappointments and disruptions in West Bengal
ABHIRUP SARKAR
The author is professor of economics, Indian Statistical Institute, Calcutta
Much has been written on the comparative growth performances of India and China, but few have actually emphasized the role of property rights in creating the observed differences. The classical development process, which entails a shift of resources from agriculture to industry and services, requires, among other things, transformation of arable land into cities, roads, factories and airports. This, in turn, involves displacing farmers from their land and traditional livelihood, creating social tensions, riots and turbulence. Weaker property rights and authoritarian governments make the transition easier, at least in the short run. They help to quicken the course of industrialization and urbanization by making a coercive process of land-grabbing by the government look semi-legal and by suppressing voices of protest. Indeed, no one can miss the obvious connection between the swift pace of industrialization in China, its rapidly transforming villages into modern metropolises and its loosely defined farmers' property rights coupled with an autocratic government at the top.
Those who are entrusted with the important task of acquiring land for industrialization in India are probably realizing that the process of land acquisition here has got to follow a different path than that in China. For one thing, we have a democracy, however imperfect. And being a democracy, we have never fully capitulated our individual property rights to the faceless collective entity called the State. This, in turn, has made property rights deeper rooted in our country than in China. It has also made it mandatory for any economic transformation to go through the acid test of public consensus. More so for West Bengal where farmers were given user as well as ownership rights over land a couple of decades ago through carefully implemented land reforms. Now it will require a special effort to take those rights away from them.
How does one know if there is public support behind the recent land acquisition drive in West Bengal? How does one check if the farmers in Singur, Nandigram and other places are willing to part with their land? It is reasonable to assume that, barring a few possible exceptions, individuals do respond positively to price incentives. So if the prices are right, there is no reason why farmers, on an average, would object to the land acquisition move. This narrows down the query to the basic question: are the compensations announced so far by the government acceptable to the farmers?
Government sources reveal that in Singur an acre of Sali land — that is, land where a single crop is raised each year — is being offered a price of Rs 8.70 lakhs. For an acre of Suna or multi-cropping land, on the other hand, the compensation is Rs 12.76 lakhs. Is it enough compensation? If we put Rs 12.76 lakhs in a fixed deposit we can earn an annual interest of 8 per cent. This gives an annual return of Rs 1.02 lakhs or an income of Rs 8,500 per month, which is indeed a comfortable sum of money, more than double the income an acre of multi-cropping land can currently yield. So why should the owner disagree to sell his land?
One must realize that owing to inflation, while the real worth of Rs 8,500 will decay over time, the nominal income from land will keep on increasing roughly at the rate of average price-rise. Therefore, if the owner holds on to his land, he can hope to maintain his standard of living in future, but not so when he sells his land and keeps the money in a bank to earn interest. In other words, 8 per cent does not quite reflect future return on deposits; one has to subtract the rate of inflation from the nominal rate of return of 8 per cent to arrive at the real rate of return. The current rate of inflation is over 5 per cent. So subtracting this number from the nominal rate of return, one gets a real rate of return of 3 per cent. At this rate of return, the inflation-adjusted monthly income from a deposit of Rs 12.76 lakhs works out to be around Rs 3000, which is unlikely to exceed the current monthly income from an acre of multi-cropping land. Compensations, therefore, are not necessarily adequate.
One may add to this the predicament of the registered bargadar or sharecropper who is the actual tiller of the soil. A quarter of a century ago, land reforms had earned him a share of 75 per cent of the produce, provided he was prepared to bear the entire cost of cultivation, along with a guarantee that he would never be evicted from his land. The merciful masters of the state, however, are unable to keep their promise; the bargadar is now evicted from his land and he is being paid only 25 per cent of the sales proceeds. Indeed, if his rights over land were interpreted in the true spirit, he should have got 75 per cent and not 25 per cent of the compensation.
One may add further to this the condition of the unregistered bargadar and the landless labourers who have been promised nothing from the sales proceeds so far, and one would get a feel of the frustration and desperation prevailing in the villages where land is proposed to be acquired. Bargadars, registered and unregistered, and landless labourers constitute the overwhelming majority in the pool of village labour force.
But this is not the end of the story. Even to an owner-cultivator of the soil, land is worth much more than what its market value actually reflects. The market value merely reflects the sum of discounted incomes land can yield in future. But to the owner-cultivator, land is an entitlement to work. He would have remained partly unemployed over the year if he did not have any land. He would certainly like to get compensated for this benefit, in addition to the market price of land, when he is parting with his means of livelihood.
The crux of the matter is that a fierce competition is going on between the Indian states to attract private investment in an environment where fresh investment has an inclination to flow to already developed areas owing to increasing returns. The industrially disadvantaged regions like West Bengal are, therefore, competing with a handicap. In addition, the left rulers in Bengal have the task of undoing its past ill reputation of investor unfriendliness. All this, taken together, has the made the government somewhat over-zealous. Investors are being offered land at throwaway prices, so much so that the government has not been able to gather up the courage to reveal the actual price at which land is being handed over to the potential investors. But while one may accept the fact that at this initial stage of industrial take-off some subsidy needs to be given to the potential investors, it is not at all clear why the farmers should bear the burden of this subsidy. More so because the people displaced from their land and livelihood are among the least likely to benefit from industrialization at once.
Justice demands that the burden of subsidy be borne by those who are likely to derive an immediate gain out of it. This points to the privileged layer of the society which has the necessary education, skill and finance to take advantage of the emerging industrialization process. We propose that an industrial cess be temporarily imposed upon these people to mop up resources to finance the cost of industrialization and the displaced cultivators be offered a generous package of compensation and rehabilitation. This will not only be fair but also prudent, for it will reduce disappointments, discontents and disruptions.