India needs infrastructure and urbanisation while fragmented and small holdings have rendered agriculture non-remunerative. If the agricultural land was restructured, not only would urbanisation and infrastructure improve, it would also open up job opportunities outside of agriculture. This will go a long way towards making growth inclusive by offering non-farm work, more productive than agriculture work, to the rural Indian youth. The reorganisation of land is an opportunity that, if executed properly, will enable employment growth along with that of the gross domestic product. The current land acquisition Bill can become a grand exercise in equitable distribution of the fruit of growth.
There are two major reasons land acquisition is being opposed by those whose lands are being acquired. First, most of them feel they are getting a raw deal when it comes to compensation. They see that the land, when put to alternative uses, creates value many times that of what the original use was supporting; however, this extra value is being extracted by those who had no stake in the land to begin with and, more importantly, this extra value is not being shared with the farmers. Second, as land is acquired and its use reorganised, the value of the adjacent land jumps many-fold and these owners make more money by selling their lands than those whose lands have been acquired. And, of course, the two together create a condition that is ripe for corrupt activities. So, if I am politically powerful and have land, I make sure that stretches of land around me are acquired for development purposes so that the value of my land skyrockets. And, I do so by ensuring that amenable administrators are bought off by making them stakeholders in some part of the increased value (for instance, by offering cheap accommodation in a multi-storeyed residential complex built on a part of the acquired land).
Suppose that Abhay owns farmland on which a road has to be built. Abhay’s land is acquired and he is paid a value that reflects the market value of agricultural land in that region. The government actually gives him more than the market value. Bhanupriya has an identical plot of land adjacent to Abhay’s. Once the road comes up on Abhay’s land, Bhanupriya’s land becomes adjacent to the road and it rises many times in value. Abhay realises that had the road been built on Bhanupriya’s land, Abhay could have enjoyed the same increase in land value. He wishes that the government had acquired his neighbour’s land. But Abhay knows that this would never happen since Bhanupriya is a close friend of a powerful politician. Bhanupriya’s neighbour, Charu, is on the other side to Abhay. He is not beside the new road as Bhanupriya is but is one plot (of land) away from the road. His land value also goes up but not by as much as Bhanupriya’s. Finally, beyond Charu is Deepti and her land value is not affected by the road passing over Abhay’s erstwhile plot since it is two plots away from the road. So, Bhanupriya is the envy of all, followed by Charu. Deepti feels unlucky while Abhay is angry at the windfall gains made by Bhanupriya and Charu.
The government, anxious to keep Abhay away from organising protests, offers to increase the compensation for acquiring his land. While everyone argues about whether to pay four times or six times the market value of agricultural land to Abhay, Deepti realises that Abhay will be paid from the money that she has paid as a taxpayer. Remember that though she may not pay tax on agricultural income, she does pay other taxes. So, while the road has not improved her land value but has increased the values of Bhanupriya’s and Charu’s lands, Abhay is being compensated not from the increased value of her neighbours’ lands but from the money she is paying as taxes. So, she decides to join the protest. Very simply put, this is what is happening to land acquisition, and our attempts at increasing the compensation paid to farmers like Abhay are not addressing the main issue. The real issue is that taxpayers’ money should not be used so that Bhanupriya, because of her contacts in high places, can enjoy a higher land value.
One way of solving this problem is for the government to acquire the lands of Abhay, Bhanupriya and Charu. Then, do two things. First, build the road on Abhay’s erstwhile land as was originally planned. Second, divide up the remainder of the acquired land (those that belonged to Bhanupriya and Charu) among them and Abhay in proportion to the amount they owned before the acquisition. Then the increase in the value of the land surrounding the road is equitably divided among those whose lands have been acquired. Also, Deepti finds that her taxes are not going in to soothe Abhay’s envious anger. The three are happier than what they were without the road, while the fourth is not paying for anyone’s compensation. Alternatively, after acquiring the three plots, the government can auction off the lands belonging to Bhanupriya and Charu and distribute the proceeds among Bhanupriya, Charu and Abhay in proportion to their holding in the total acquired land.
If the land is distributed as suggested here, no one’s livelihood is lost. Bhanupriya’s attempt to corner the fruit of the road is weakened because she has to share the gains with Abhay and Charu. Deepti suddenly realises that if she could get her neighbours to agree to this plan, the road could have been built on her land and she could have gained some additional value. And, thus, instead of clamouring against acquisition, people can get together to jointly decide how much land is to be reorganised so that they can get some additional value.
The author is research director, India Development Foundation