Unusual asset

Published : Jun 17, 2011 00:00 IST

At Chandawali village in Faridabad, a farmer on his land that the Haryana government acquired for constructing an Industrial Model Township, in September last year. - SHIV KUMAR PUSHPAKAR

At Chandawali village in Faridabad, a farmer on his land that the Haryana government acquired for constructing an Industrial Model Township, in September last year. - SHIV KUMAR PUSHPAKAR

Governments can acquire land for public purpose while making sure that the displaced are compensated, relocated and rehabilitated.

THE violent conflict over land acquisition in Uttar Pradesh and the persisting resistance to land acquisition for the Posco project in Jagatsinghpur district of Orissa are merely recent instances that exemplify the growing stand-off between the Indian state and its people centred on land. On the one side are governments (both Central and State) that present land as an important tool to promote economic and (even) social development. On the other, there are those who see land as the means by which the state facilitates primitive accumulation by a few, at the expense of ordinary citizens, especially the peasantry.

The fact that the number of instances of such conflict has multiplied reflects not just the increase in the extent of acquisition of land by government but also the greater awareness and mobilisation of the affected. It is also related to the context in which acquisition occurs today. That context, shaped since the 1990s when governments openly embraced neoliberal development, is one in which higher GDP (gross domestic product) growth has been accompanied by evidence of a sharp increase in surplus incomes in the form of profits and rent, while wages and incomes from self-employment have stagnated or at most risen marginally in real terms. Whatever employment increases have occurred have been concentrated in the casual or self-employment categories, making the consequences of displacement from current livelihoods and locations potentially far more adverse.

The years since the early 1990s have also been a period when, as a result of long years of neglect by the state, the agricultural sector has been in crisis, with the viability of crop production under challenge in an environment of lower subsidies and higher costs. Yet, for lack of alternative opportunities, land remains an important source of livelihood for the majority.

For a few from outside agriculture, however, the diversion of land to new uses appears to be the route to substantial profits. This is partly because, during these years, governments, using the argument that they are strapped for funds, have presented the private sector as a far more important player than in the past in any strategy for development. The government's role is, therefore, seen as one of incentivising and facilitating private sector-led development. Towards that end, governments have chosen to reduce taxes and increase implicit and explicit subsidies to the private sector as well as to use access to scarce resources as a carrot ostensibly to persuade the private sector into investing for development. Among such scarce assets, one is land.

Competing demands

Land is an unusual asset. While limited in its availability, it is available in perpetuity and can, even after accounting for geographical characteristics, serve multiple purposes. This makes it more fungible than many other physical assets. So, as countries develop and populations expand, the demand for lands of particular types is bound to multiply. Not all competing demands can obviously be served. Hence, when first put to human use and at subsequent points in time choices have to be made as to whether a piece of land should be diverted from its natural state, be it forest or desert, and as to the use to which it should be put at any particular point in time. Land-use changes are unavoidable: what is at issue is how much of it should occur and whether such change is appropriate.

A second feature of land is that even in its natural state its value is substantially different. Some lands cover reserves of natural resources that are extremely valuable. Some are covered by forests that can be preserved, worked or logged. And some, because of characteristics such as the nature of the terrain, soil properties, moisture conditions and climatic contexts, are inherently more productive as cropped land than others. Thus, the social or private benefit that can be derived from land within any geographical boundary varies considerably.

Third, through processes too complex to be detailed or discussed here, in all contemporary societies land has become an asset whose ownership rights are assigned to states, particular communities or individuals. Needless to say, the long history through which the ownership and user rights to land came to be vested with states, communities or individuals is replete with instances of occupation, forcible eviction and acquisition ensured through the use of force. In the event, the claims of some are better defined than those of others. What matters is that, when well defined, such rights can be transferred, making land a tradable asset like any other.

Fourth, while limited in terms of physical availability, the value of land within a geographical boundary can be enhanced considerably by investment. Such investments can be directed not just at improving the physical productivity of land, but at building infrastructure, obtaining and exercising the right to mine resources, establishing factories or constructing living spaces. The returns on such investment include not just costs and revenues that can be estimated reasonably, but also the uncertain extent of appreciation in the value of that land. Given the way markets are structured, the prevailing prices of land do not reflect adequately the gains that would accrue to the buyer because of such appreciation. Thus, finding a price that shares fairly (between buyer and seller) the capitalised returns from land over some reasonable period is difficult.

Fifth, since the appreciation of land value that accompanies its first use and/or subsequent changes in its use is uncertain, the land market tends to attract investors who look to gain from appreciation and therefore look for land that is likely to appreciate or can be made to appreciate in value because of independent or influenced decisions taken by other agents.

Finally, since access to land and its appropriate use are crucial for development, governments have taken the view that the determination of land use cannot be left to the decisions to sell or invest of a fragmented set of private owners. They have, therefore, reserved for themselves the right to acquire land for public purpose, most often with the caveat that those displaced from their locations and livelihoods by the acquisition would be compensated suitably, relocated and rehabilitated.

Land transfer is even presented as a tool for social development, with governments setting conditions that require buyers to develop townships and provide health and educational facilities. There have been many deviations from or violations of declared intent in practice. The state has not always stated clearly the purpose for which the acquisition is made. In many cases it has not ensured that land is used always only for the purpose for which it was acquired originally. Very often acquired land remains unutilised for long. There have been innumerable complaints of paltry compensation relative to market value, and courts have intervened to provide partial redress. And efforts at relocation and rehabilitation have been absent, inadequate or unsuccessful.

These problems have gained even greater urgency after liberalisation, when the government has chosen to acquire land and hand it over to private developers or investors for use. Investors and speculators have been attracted by the gains that can be made by acquiring land originally acquired by the government, especially since such transfers are preceded or accompanied by public investment in infrastructure such as roads, electricity and water supply.

Moreover, State governments competing to attract investment and catch up with their more developed counterparts have made land their carrot of choice, offering it at a small price to entice private investors. Their investments, it is argued, will help increase employment and raise per capita incomes. Needless to say, in many instances these arguments are nothing but excuses to intervene in favour of particular private investors by acquiring land for their use or diverting to them land acquired for other purposes. Evidence of this is the overwhelming presence of real estate developers among those investing in the creation of special economic zones (SEZs) or assisting in industrialisation drives, in return, of course, for some freedom to deploy a part of the land for commercial purposes.

In the event, while some diversion of land (for appropriate purposes and with sufficient compensation and rehabilitation) is inevitable as a part of the process of development, it has become difficult to ensure that even such diversion takes place. Besides the context and ethos generated by liberalisation, four factors have played a role here. Governments have lost their legitimacy and their credibility in this regard because of the misuse of the right of eminent domain, involving at times a blatant display of favour to private capital, real estate developers or mere speculators.

Second, even when particular acts of acquisition are accepted as legitimate they are opposed because few believe that the government would offer fair compensation or meet its obligations with respect to relocation and rehabilitation.

Third, even when compensation is reasonable, since assessing how the value of land would appreciate is difficult, even those willing to give up their land turn wary, for fear of being short-changed. Moreover, competing private interests seeking to usurp land encourage the belief that much more needs to be paid.

Finally, oppositional political forces seeking to exploit the simmering discontent do not address adequately the issues of need and legitimacy, and ensure that such discontent spills over into protest.

This is unfortunate because often acquisition of land for developmentally necessary diversion to new uses becomes impossible even when projects that are clearly more for private profit than social benefit sail through. In the effort to protect the victims of what is partly a process of primitive accumulation aided and abetted by the state, the fact that some acquisition and diversion are necessary and inevitable tends to be ignored. This also strengthens the case of those who argue that the state should not mediate between holders of small and fragmented pieces of land, on the one hand, and corporate or other private interests seeking to make large acquisitions for investments that promise huge returns, on the other. If that argument wins, it will make matters worse. Given the structural context involved, a withdrawal of the state can only favour the rich and the powerful.

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