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Stepping out of terra incognita

india Updated: Nov 20, 2011 11:40 IST

Hindustan Times
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Uttar Pradesh chief minister Mayawati has launched a new land acquisition plan that attempts to extricate the process from the depressingly predictable politics surrounding industrial, urban and infrastructure projects in India. The announcement of plans by any state government to acquire land to build a new factory, township or highway immediately energises an opposition seeking to score political points through accusations of crony capitalism and sweetheart deals.

That most of these charges eventually stick says a lot about the Indian way of doing business. But a more sinister game is afoot. The affected people, mainly those who will be displaced, are sold the idea that they are being shortchanged by a state bent on acquiring land cheap for capitalist fat cats. This sparks a chain of agitation, often violent as the government wheels out its law enforcing apparatus. Ms Mayawati has drawn the right lessons from the Taj Expressway.

If this template has been with us for a while now, so has the solution. The most trenchant opposition devolves on the perception that those displaced are being paid for the resources they hand over at today’s market rates while profits are made on rates that obtain after a project is fully developed. This is readily addressed by breaking the compensation in two parts: an outright purchase and stock options in the company setting up the project. The idea of making the dispossessed stakeholders is ages old; it is a matter of actualising it. India Inc has learnt to live with job reservation for locals and it isn’t difficult to work out a quota for shareholding. Equity, being skill- and technology-neutral, is a more transparent currency for transfer of resources from one section of society to another. The alternative to symbiotic growth with the dispossessed is prohibitively high land costs that could stifle industrialisation.

The pace of infrastructure development will have to double for India to be able to house half its people in cities in a couple of decades. The State doesn’t have the money to do this on its own.

Private partners will have to be sought. The government’s stake in such projects is increasingly the land that private capital finds logistically and financially difficult to acquire. The recent experience with special economic zones has laid out a few guiding principles for land acquisition by official agencies. State governments would do well to heed them, as Ms Mayawati has done. Litigation resulting from cutting corners could slow them in the race for development. With tax arbitrage and energy subsidies no longer viable options in the competitive provincial market for big-ticket investments, states have to fall back on the one asset they can offer cheap to industry: land.

On its part, the Centre would not be remiss in nudging regional satraps into a viable growth matrix that doesn’t involve beggaring their neighbours.