There seems to be emerging a fair consensus across the political spectrum that it is not prudent to tamper with the ongoing process of land market reform that began a decade ago. The earlier “revenue laws” that governed the registration of titles came from a century-old colonial legislation. The imperial government of India kept almost complete control over land title and use — in order to dispense this finite resource as “inams” to a dependent class. In large measure, the freedom movement was created around changing that.
Additionally, there emerged the problem of benami transfers of land, which became widespread after we effected land reforms, particularly land ceiling legislation, in the second half of the last century. In many cases, while on paper the land was in the name of the tenant, effective control remained with the landlord. A new kind of problem emerged in the 1970s — small peasants started giving up their land to middle and large peasants because they found it easier and more productive to work as landless labourers rather than live off their share of the income from their meagre holdings. This phenomenon was described as “reverse tenancy” and in many northern and western states, up to a third or two-fifths of the land farmed by middle farmers was leased from small farmers.
The land legislation brought in by the UPA government retained the “eminent domain” powers of the state — but only at the margin. By and large, the legislation made a bold effort to create a land market and was an adjunct to the larger process of reform in the economy. The powers of the state were curtailed. If it acquired land for public purposes like the construction of roads, hospitals as well as other social and infrastructural facilities, it would have to acquire 70 per cent of the land with the consent of the land owner. The state could, however, use its powers of “eminent domain” to acquire the rest. This was sensible, since it eliminated the possibility of one or two people holding up the acquisition of land for social purposes and delaying the construction of a highway or a hospital and so on. In particular, defence- and security-related projects were subjected to a lower standard of procedural rigour.
But the UPA legislation also covered the acquisition of land to meet the requirements of manufacturing enterprises. Some experts were critical of this — I was one of them. It is true that land costs are rising and the procurement of land for industrial projects is difficult and can be problematic. However, this is a reflection of the basic scarcity and finite nature of the resource endowments of the country. India is short of water, energy and prime agricultural land. In addition, manufacturing enterprises prefer to be located around metropolises, even if land there has a high opportunity cost in terms of agricultural or rural needs. They don’t like to set up shop on barren land elsewhere. To be fair, we don’t practise land-use planning by building infrastructure for such alternative locations on a large enough scale.
But the manufacturing sector needs to learn to live with the real scarcities of the economy. In a sense, it is being argued that Indian industry has the benefit of low labour costs and a certain kind of technological expertise — but not that of scarce land near the metropolises. Long-lasting reform would require policymakers to look into the real problems, rather than regress back to the colonial mindset that the state knows better whom to endow with land.
It is interesting that no one has raised the issue that the land ordinance and now the bill are inconsistent with economic reform. Reform means that different economic agents pay the market price or opportunity costs of the resources they need, rather than rely on the state’s allocative powers. It is strange that when it has come to an opportunity for the farming community to make money from scarcity rents, the government, which swears by market reform, goes out of its way to deny them the economic benefit of leveraging such scarcities. It can be argued that non-market methods are needed to handle scarcities. But that is not the logic put forth for other commodities. So why discriminate against the farmer when at long last he has a chance to make some money?
Land-use planning may not be possible since planning itself seems to have been abolished. But the authorities could ask their policy commission to examine this problem, instead of follow the ordinance route.
The writer is professor emeritus, Sardar Patel Institute, Ahmedabad