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How to build new cities

You would not acquire any land at all, but merely propose a business model in which every group of landholders able to provide 500 hectares of land would be given 50 per cent equity in the venture that is a new city.

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Resources are not the problem. We need to change controlling mindsets.

India’s rapidly urbanising population needs space to live in, and providing that space in the form of new cities is easily within reach, provided we change our mindsets. No fresh resources are needed other than what is available within India’s Plan budget. But in order to see those resources, we should desire what Harry Potter figured out in the Room of Requirement — the object alone, and not how to do it or what can be done with it. It is the desire to control all processes and be the prime mover that renders us unable to see what should otherwise be evident. Let’s see what it would take to create 200 new cities over the next five years. Four cities in the periphery of every large one, only at a distance of, say, 50 km, so that people need not live in Delhi, Mumbai, Pune, Chennai or Hyderabad; they can merely commute and still lead a life of dignity and better in quality. It would take an average investment of Rs 2,000 crore per new city, or say Rs 400 crore every year for five years. The total bill comes to about Rs 80,000 crore per year for 200 cities.

How would we acquire the land, given its astronomical costs? You would not acquire any land at all, but merely propose a business model in which every group of landholders able to provide 500 hectares of land would be given 50 per cent equity in the venture that is a new city. The other 50 per cent would belong to the government. That way, the farmer would get a real share of the return on investment and a steady yearly income. Once it is clear to the farmer that the government is not planning to take away his land at rock-bottom prices to gift it to a real estate major for a commission, there would be a queue of farmers lining up, asking the government to develop their spaces into a liveable city. This is the kind of model used by Magarpatta City, a township next to Pune, spread over 430 acres and owned by 120 farmers, each a shareholder in proportion to his landholding. In Magarpatta City, farmers came together on their own and did everything by themselves. With some help from the government, the experiment could be widely replicated. The rub is that there is no agency that would benefit from such a proposition: only the people. Perhaps this is why no one has so far proposed what should be otherwise evident.

The next question is where the Rs 80,000 crore would come from. It would come from two sources. The first is the cost of food security for the nation and the second is the MGNREGA. Far be it from us to suggest that India does not need to feed its hungry or give them employment. It certainly does. If not for moral or ethical reasons, then for the reason that hungry and illiterate people can neither participate in nor contribute to a growing economy. But similar objectives can be achieved for one third their present cost, provided we scale down our desires somewhat and abandon age-old shibboleths. The basic proposition is that subsidies be limited to BPL families and small and marginal farmers. Here again, we repeat Harry Potter’s exercise. If we were to give the approximately six-seven crore BPL families an annual subsidy of Rs 5,000 to buy food, the bill would still be a third of the current cost of food security. What’s the balance being used for? To support organisations like the Food Corporation of India (FCI) and its operating costs.

The food subsidy bill is the operational deficit of the FCI, or the amount spent by it on market operations and buffer stocking over and above its sales realisation. This bill in the last budget was around Rs 90,000 crore. These operations serve dual objectives: to provide market support to farmers and also to subsidise consumers through the present public distribution system. If we were to provide cash subsidies for food to all BPL families, a similar objective could be achieved at Rs 35,000 crore, and if we were to further provide cash subsidies to all small farmers — even of Rs 2,000 per tonne for up to 30 million tonnes per annum as support against low market prices, it would take another Rs 6,000 crore. What you would not get would be the huge buffer stock India has been building for the last so many years.

This buffer stock, as also the FCI, is simply a relic of a time when the fear of famine dominated our mindset. The memory of PL 480 is bitter indeed, but surely we are long past that barrier now. Our cash reserves are no longer rock bottom. If needed, we can still engage in market operations to provide food. But leaving market operations to private traders does not mean abandoning all interest in the food market.

In return for dismantling the FCI, what the government would need to do is bring about transparency in food pricing and set about eliminating the hidden costs in food prices. The way is not difficult: set up internet-enabled markets in all cities for foodgrain and for fruits and vegetables, remove inter-state restrictions on movement of farm produce, impose checks on hoarding, abolish the agricultural produce market committees that function in the interests of traders and not farmers, and keep detailed records of transactions and markets. Removing all these hidden costs would bring down food prices far more effectively than any FCI or food security bill. These are the tasks the government seems unwilling to do. Surely, it is the government’s job to keep detailed records, conduct market regulation, pre-empt artificial scarcities and remove restrictions rather than be the prime mover.

As far as the MGNREGA is concerned, the recipe is even simpler. The scheme should be restricted to only the poorest districts. That’s the only way one can prevent it from interfering with the farm economy. A recent study shows that while Bihar, Uttar Pradesh, Madhya Pradesh and West Bengal — which account for 59 per cent of the rural BPL population — accounted for only 34 per cent of total employment generated by the scheme. Andhra Pradesh and Tamil Nadu, which account for only 8 per cent of the rural BPL population, provided 23 per cent of employment generated. Such anomalies can be sorted out only by restricting the MGNREGA to districts where it’s really needed. This would halve the MGNREGA bill of Rs 33,000 crore as per the last budget and free up scarce resources.

Doing these is not so difficult. This is far more a question of mindset than anything else. The great desire to control all decisions and the sneaking desire to make a private profit are the only obstacles that prevent us from building new cities, from making the investment in infrastructure that India really needs.

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