Journalists have become so accustomed to reporting bad news and underlining disturbing portents that when something unambiguously good happens, they are often at a loss for words. One such event occurred last week. The annual general meeting of the Federation of Indian Chambers of Commerce and Industry (Ficci) would have been a routine affair had it not been for a singular, and unexpected, convergence of views between the government, political parties and industry.
This did not centre around the need to maintain the high rate of growth, to improve global competitiveness through further targeted reforms and to break the growing infrastructure bottleneck.
Following the dismantling of the command economy in the Nineties, these have been shared goals for the past many years, and the only development of note in the last 12 months is a visible maturing of public-private partnership and a concurrent increase in trust between the government and industry. The new area of convergence is on how to reconcile growth with equity. On this crucial issue, industry is no longer willing to sit on the sidelines.
This was made clear by the outgoing Ficci President, Saroj Kumar Poddar. Referring to the controversy that has erupted over the acquisition of land for industrial, mining and infrastructure projects, he said that the one sure way to safeguard the interests of farmers/owners of land was to allow them to negotiate the terms of sale directly. The system of land acquisition by the State had to go for, he implied, it always went against farmers’ interests. The State had no business intervening in what should be a private transaction.
What followed could have been choreographed, but wasn’t. In his keynote speech, Prime Minister Manmohan Singh announced that the government was preparing a new rehabilitation scheme for displaced farmers and landowners, which would be unveiled in three months. Development was not a zero sum game, he pointed out. It was one in which everyone could emerge as winners. Its aim would be to make everyone stakeholders in development.
In his luncheon speech, Leader of the Opposition LK Advani made it clear that while his party is committed to creating world-class industrial facilities in SEZs, no system of outright purchase, whether direct or mediated by the government, would suffice. Landowners needed a stake in the project or an alternate arrangement that would yield them a regular income. Only then would they become partners in development.
Thus, after decades of political insouciance, in which government acquired land at throwaway prices and fought lengthy law suits against the owners, land acquisition has finally become a political issue. The credit for bringing this must go to Mamata Banerjee of the Trinamool Congress, who led the charge at Singur, where the government is attempting to acquire land on behalf of Tata Motors to build a car plant.
But Singur is only the thin end of a very fat wedge. In the past few months, land blocks have been auctioned for mining by the private sector, and large tracts notified for acquisition to permit foreign investors to set up plants. Tata Steel needs 6,000 acres for a new steel plant in Orissa.
Since March last year, state governments have created on an average one new SEZ a day — a celerity that they have never displayed even once in the last 60 years — and notified or earmarked almost half a million hectares of land for acquisition. And to underpin this growth, the country needs motorways and power plants.
The Bangalore-Mysore highway corridor is to swallow 12,000 hectares of land; Reliance Energy is reported to have been given 2,000 acres in Haryana — about three times as much as it needs — to build a power plant, and its fraternal twin, Reliance Industries, is being allotted 10,000 Ha for a SEZ in Maharashtra.
The political response has not come a day too soon. While the acceleration of growth now taking place has raised the threat to the rural poor from expropriation to a new level, the consolidation of 22 Naxalite groups into the Communist Party (Maoist) in October 2004 has given them an alternative, albeit destructive, way of seeking redress.
Not surprisingly, the Maoists have been recruiting tribals and landless persons in large numbers and launching attacks on trains, small towns and on police vehicles in the rural areas with ever increasing impunity. Today, the writ of the government has ceased to run in large parts of the country.
One does not need to point out that it will take only a handful of targeted and publicised attacks upon employees of large construction companies to make domestic and foreign companies shy away from taking up projects in disturbed areas. This could bring infrastructure development to a halt. Bihar has already had a dose of this medicine.
During the long night of Lalu Yadav’s reign, Plan funds allocated for Bihar regularly lapsed. A special Rs 1,000-crore Bihar revival package, prepared by the Planning Commission in 2000, failed to get off the ground because the government could not find any contractors prepared to take up the infrastructure projects it envisaged.
Making landowners permanent beneficiaries will nip the incipient unrest in the bud. By far the easiest way to do this is to announce the change in land use and leave it to the market to decide its price. This has the inestimable advantage of being transparent and even-handed.
However, where titles are customary and therefore clouded, and the ‘owners’ of the land, in the modern sense, are hard to identify, the State may feel it necessary to play an intermediary role. It must then ensure that the owners are compensated in ways that make them partners in, and beneficiaries of, all the development.
This can no longer be done by giving the evacuees land for land. The answer, therefore, lies in making them shareholders in the enterprise they have helped to create. There are many ways of doing this, ranging from assigning royalties on the use of the land to issuing preference shares, debentures and equity to the landowners. It is for the central government to work out the most appropriate way. Advani has proposed an all-party meeting to frame a set of principles that will guide the process of compensation. The PM would do well to take up his suggestion.
The convergence of views that Ficci’s annual general meeting revealed reflects the many advantages of democracy over other political systems in dealing with the social and economic conflict that rapid development creates.
In China, where provincial and township authorities threw millions of farmers off prime agricultural land in the frenzy to build SEZs in the late Eighties and early Nineties, the anger it unleashed is still being vented in tens of thousands of demonstrations and riots every year that went largely unreported until Premier Hu Jintao decided to face the problem squarely and sensitise the party and government to the need for ‘social harmony’.
In India, our Mamata Banerjees provide the essential early warning that prevents such accumulations of anger from getting to the explosion point. They need to be thanked, not reviled.