Compensation not enough

SEZ developers can make farmers partners in economic development

The worm has finally turned. For half a century the government has been acquiring land for development projects and leaving only devastation behind. Today development is itself becoming a casualty of this callous disregard for the ‘collateral damage’ that economic development does. In state after state those who have been evicted from farm and forest lands acquired to build dams, power stations, mines, steel plants and  roads,  have been paid niggardly compensations that have soon slipped through their fingers and left them destitute. This may soon become a thing of the past. 

The catalyst is the opposition that has suddenly developed to the acquisition of land for setting up special economic zones.  Since law permitting this was passed a year ago, state governments have notified some 267 SEZs. These will be totally unlike the Export Promotion Zones of yesteryear. While those seldom covered more than a few hectares, the smallest of these will be a thousand hectares in size and the largest are slated to cover more than 14,000 hectares, or 140 square kilometres. 

Had the state been setting up these new SEZs, it is possible that the move, like its precursors, would have gone unnoticed. But these SEZs are going to be developed by the private sector. The state is only playing midwife in projects that will rake an estimated $80 billion into private hands. It is this brazen marriage of the state with the capitalist to take away the only thing of value that a large segment of the poor have, that has touched a raw nerve even in the urban middle class. 

The banner of protest has been raised by the Left. Prakash Karat, the General Secretary of the CPI(M), has demanded changes in the law to prevent the alienation of prime agricultural land; to double the area in the SEZs to be used for industry from 25 to 50 percent, and to eliminate most if not all the tax concessions that the central government has offered to big business. But even he has not touched the core of the anger that the government’s move has aroused.

It is not the type of land that is being acquired or the use it will be put to that is agitating the public. It is the mere taking of the land. Unlike a dam or a highway, there is no public purpose that the land acquisition is intended to serve. On the contrary its purpose is to make the private land developer rich. The state has thus knowingly aligned itself with the private investor to deprive the farmer of his most prized possession — his land.  

Some of the more farsighted land developers are aware of the need to cushion the shock to those who are losing their land. They have therefore offered to pay thirty percent of the price of the land in the form of shares which will appreciate as the SEZ prospers. 

In recent years the state governments too have been offering handsome compensation for the land they acquire — often in excess of its reigning market price. What neither has understood is that the farmer is going to feel cheated no matter what compensation  he or she is offered. For any compensation that is based upon the present use of the land denies the owner the gains that he would have made once the land use changed. That goes entirely to the developer. Thus when the state acquires land for the SEZs it makes itself a party to the expropriation of the future increase in the value of his land.

There is a simple way of preventing this. It is to give the compensation not as a sale price but as a royalty on the use of the land. In a single stroke this will not only remove the stigma of losing his land and becoming landless, but also make him a partner in economic development instead of its victim.

The 266 SEZs are likely to require half a million hectares but are expected to generate 80 billion dollars worth of added production. If just one percent of this sales revenue is paid as a royalty to those who lease their land, it will yield the owners an  annual return of Rs70,000 per hectare. This will be a source of income that will be largely shielded from inflation.

Many European countries already follow this method of land acquisition, but our hide-bound bureaucracy has resisted every attempt made so far to alter this colonial legacy.  The Congress party and the Left will do well to remember that there is not much time left to do it in. }

The state governments have already acquired 137,000 hectares for 67 SEZs and another 80 have been given ‘in principle’ approval. Soon the horses will have bolted. It will then be too late to bolt the barn door.  The only real gainers from the anger that the government is unleashing in the countryside will be the Communist Party (Maoist).

The writer is a political commentator.