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Home > India > Business > Columnists > Guest Column > Mahesh Vijapurkar

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Treat the farmer as a joint-entrepreneur

August 28, 2008

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By talking about 'compensation' to those who have held out against their land being acquired in Singur, the West Bengal government has taken the debate back to the basics. And by crying over the possible shift of the Tata Nano plant to any other location -- many states are salivating at the prospect of them being chosen -- the intelligentsia, including the industry lobbies, have shown their wrong priorities.

And scant respect to the farmer in a country where farming is not exactly a lark. If the Rs 1,500 crore invested in the Nano plant is a big financial setback to the Tatas -- one sympathises with their plight -- the loss of land is a bigger one to the guy who has barely existed with a small patch of land. By handing over a cheque or an alternative piece of land, he does not get compensated. And here's why: The land is his identity, his roots are there and socially he is intertwined with the society where he lives.

Both the interests of the Tatas and others who want to expand and those who are farmland owners have to be protected and furthered. That is possible by a new doctrine where the landowner is made, by law, a significant stakeholder in what is sought to be done on his land. But despite two years of Singur and Nandigram and other assorted incidents, the State has not got its act together yet. That's because of the tragic and arrogant assumption that a farmer can be forced or wheedled out of his holding.

Every landholder who was forced out without gains with the State acting as the broker who pays less than what the project pays to the government, is like that of a person who loses his land to an irrigation project. The dam has come up on his land and he got not a chew for that but those downstream reap the harvest, year upon year. Now read industrial project for 'irrigation' and the perspective is clear.

Much has already been said about the inequity of all. But little has been done so far to find a way out. This, despite having to trim the size of several special economic zones and even abandonment of some plans. Yes, there is talk of amending the draconian, over a century old, Land Acquisition Act which gives the State the eminent domain right to appropriate anyone's land without even paying market values, despite Supreme Court pronouncements, but that is not enough. A whole new way of making the farmer is required and I make two suggestions.

If the eminent domain ceases to exist, and cease it must, market forces have to operate, and merely paying market value -- it can differ from plot to plot, and who is to determine the common, acceptable denominator? -- would not be enough. The private sector cannot be trusted entirely, despite their tall talk of governance norms and a formula has to be put in place by enacting a statute which would replace the eminent domain concept. All the talk of State rehabilitating when it cannot judge the true value of a significant asset like land to the farmer is nonsensical.

Option one: When acquiring land, the farmer could be made a partner in the industrial enterprise that comes up on his land. This has to be by way of issue of equity shares in the same manner as the promoter does because without that land, no project can conceivably come up. This share in the stake is not in lieu of the market price owed to him but over and above that because he is brining in a valuable asset. He is a joint-entrepreneur, so to say, and has to have some value, in contradistinction to a price put on his contribution.

This would put an end to industry looking at land as a cheap resource, doled out by the State to the investing industrialist as an incentive to come and locate the project in their region. Notwithstanding the cascade of benefits that accrues to the region by industrialisation, the State has no right to appropriate someone's property -- right to property is guaranteed in the Constitution, remember? And who is the State to decide, in connivance with the investing industrialist, that my land, and not the one in the neighbouring village, is best suited?

There are some examples of this, like Pune's Magarpatta City, but it has only inspired a few farmers to try forming their own companies to promote SEZs. It has been admired but not copied. Once the law says the landholder automatically becomes a shareholder -- say 10 per cent of the equity to be shared by all those who lost their lands to the project -- this would be a reality.

Option two: This is a more complicated model which presumes that it is difficult to pin down the price of land because the market prices are in relation to demand and supply at a specific location between those who curtail their holding by selling to those who want it to expand theirs. Sale of farmland to non-farming activity, except for the gradual erosion of that commodity on city fringes caught up in urbanisation, is not a normal activity. The terms of trade change when it is for non-agrarian purposes.

When a sudden demand arrives on the doorstep, a maelstrom has to be faced and it is here that he has no choices at all; someone else decides for him as to who he would need to sell to and at what price. Their lives would rapidly change and what is paid does not help them to develop new livelihoods. Even their uncertain but in a way predictable life goes on a rollercoaster. And here comes the rub: Those who did not lose their land actually find better value for their holdings!

That is because when a project is built on cheap, appropriated land, those who are in close proximity get gains far in excess of the others forced into a sale. That is because the project has changed the economic dynamics of the area and outsiders have come in and they need land which can be bought and sold at negotiated prices or not at all. They are needed for new housing, new commercial activity that could even be in the informal sector to support the project. So those who were not acquired gain more. This is patently inequitable.

This forces an acknowledgement that land is an input that is not akin to others that go into a project. This model requires the payment of an initial price based on the market value, which is far higher than the Ready Reckoner used by the State since 1894, and then pay the different in price of procurement price and the price of lands whose prices went up because of the project, say in the next 10 years. Every time a piece of land is sold in a defined time window, a slice has to go to the original owners of the first block of land.

Complicated, yes, but equitable.

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