Gujarat has a ‘toffee’ model for land? Not really

Bibek Debroy 
Wednesday April 16, 2014, 02:56 PM

In an attempt to score political brownie points, people are prone to making wild allegations, without checking facts, or ignoring them, especially on an emotive issue like land. Everywhere in the country, there are two parallel tracks for acquiring land – private and government. In the case of both, there is a range of problems. It is easier to compensate those with clear titles, almost impossible to compensate those who earn a living from the land. What is the price used in the acquisition process? Is there a market price? How does one determine it, when registered transactions are under-valued? Is land bought at a premium over the market price? There may be a contract, but at some future date, once there is development, market prices may escalate. What happens if the farmer, perceived to be poor and an unequal party to the contract, decides to go back on the contract then? If land is privately acquired, it may be agricultural land and later, there is abundant scope for rent-seeking to get it converted to non-agricultural use. Finally, in an attempt to attract investments, most States offer cheap land and fiscal incentives. These are implicit subsidies. If one makes an argument against all such production subsidies, that’s an acceptable argument. But saying this is somewhat different from saying that these implicit subsidies were offered to a favoured corporate groups and not to others. That’s a discretionary argument.

Let’s move on to Gujarat. Isher Judge Ahluwalia recently published a book titled “Transforming Our Cities”. This has a focus on urbanization and urban infrastructure and the first essay is on town planning schemes for urban expansion in Gujarat. Isher Ahluwalia is hardly likely to be described as a person who has a pronounced pro-Gujarat view. For cities that are in the JNNURM ambit, that essay on Gujarat’s land acquisition policy, should be read, because it is rather laudatory. For State-driven land acquisition, there is a fairly elaborate valuation process to determine the price. Other than the generic problems I mentioned earlier, does anyone have any specific criticisms about the acquisition process followed in Gujarat? Not that I am aware of. Indeed, in a judgement (Justices Singhvi and Dattu), the Supreme Court signified its approval, compared to the approval processes followed in other States. Once the land has been acquired by the State, three questions arise. First, when was it handed over to a particular corporate group? What was the time-line? With the exception of a SEZ, the land handed over to the particular corporate group whose name is floating around, was done in the 1990s.

Second, is there evidence of discretion, in the sense of one particular corporate group getting land, but others not getting that subsidized land at similar prices? Again, I am not aware of anyone who has been able to substantiate that discretionary argument empirically. Third, what are the prices at which the acquired land is handed over to a corporate group? There too, there is a multi-tiered process, including a premium for the conversion of grazing land, with the premium handed over to panchayats. One can indeed advance an argument that land should be allocated on the basis of auctions. An auction-based process is likely to benefit the large corporate sector even more. Barring auctions, what is the specific argument against the present process (including prices), and this also extends to the SEZ? On the port or the SEZ, a piece of land can be developed and then sub-leased. Comparing a pre-development price to a post-development sub-leasing price is an apples versus oranges comparison. The one to whom the land was sub-leased presumably also recognized that the price of an orange wasn’t the same as the price of an apple.

I am not suggesting there was no wrong-doing. Perhaps there was. But to explore that possibility, one needs to know what the specific allegation is, rising above the tendencies of demagogues. Once a demagogue is specific, pedagogues can probe. Unfortunately, I haven’t yet been able to pin down the argument.

Source: http://blogs.economictimes.indiatimes.com/policypuzzles/entry/gujarat-has-a-toffee-model-for-land-not-really