Opinion Land,borrow,bank

Simultaneously,the continuing fragmentation of landholdings in rural India means that over three-fourths of the agricultural plots are now categorised as either small (less than 5 acres) or marginal (less than two and a half acres). Often this tiny holding is the only asset owned by rural families and,even at a subsistence level,provides a few months’ supply of cereals in a good monsoon year. Unskilled in any other profession,these households are traumatised at the prospect of losing even this marginal asset.

Compensation for land acquired by the state,given rural property markets are virtually frozen,is calculated using archaic methods; the methodology used prevents transparent price discovery. The result is that the transaction,though legally correct and often vetted by courts,is seen by the landholder as unfair and biased against him. Government and industry both seem to be on the defensive,unable to evolve policy which is on the one hand just and also ensures speedy access to land for public and private enterprises.

A totally new paradigm in land supply is possible were the government to realise its critical role: first as custodian of the welfare of those who stand to lose their land; and second,as the only facilitator with the necessary legitimacy and power to ensure that economic growth is not hindered because land is unavailable.

What would this recognition achieve? The answer is a change in the government’s stance from a defensive and episodic intervener in land-related disputes to a proactive agent — arranging land for housing,infrastructure and industry,while at the same time guarding the interests of those who make such land available.

How can these seemingly divergent objectives be achieved? This requires two immediate steps. The first would be to legislate the creation of an independent regulator on land issues,with jurisdiction across the country. India has created credible regulatory bodies in the past; this could also take much of the politics out of land supply.

The second part of any legislation would create a land bank authority,on the lines of the NHAI and similar bodies. This — the Land Bank Authority of India — would also have national jurisdiction,and its mandate will be to act as a repository of land required for non-agricultural purposes,above a certain minimum threshold. In other words the LBAI would only handle large land transfers. Once this mechanism is in place,all compulsory land acquisition will end and be replaced by 30-year renewable leases between the landowner and the LBAI on the one hand and the LBAI and the end-user (which may be a public or private entity) on the other. The LBAI in other words would act as an intermediary between the landowner and end-user,protecting the interests of both.

A key feature of the relationship between the landowner and the authority would be the payment of an annual lease rent by the latter to the former. This is where the land regulator comes in. It would fix a one-time premium when the land is banked with the LBAI by the landowner,and assessing a fair,transparently set annual rent by periodically evaluating the revenues generated from the end-use of the land being leased. Thus the landowner whose land is pooled with the LBAI has a long-term stake in the land leased out,with loss of possession being balanced by fixed annual income,besides the upfront premium.

It should easily be possible,following the example of warehouse receipts,to make the lease document between the landowner and the authority a negotiable instrument,enabling the former to raise a loan against it for other productive investment. The entire arrangement becomes one in which the true value of the land is unlocked for the owner over a long period of time,with loss of possession actually triggering a steady income stream.

For end-users,the LBAI would arrange a similar 30-year renewable lease,with provisions to collect the annual rent on behalf of the landowner plus a reasonable service charge,also fixed and revised periodically by the regulator. This would cover the administrative expenses of the agency and make it self-supporting. Both the landowner and the end-user interact only with the land bank authority,assuring each party of a long-term relationship,with the fiduciary aspect being supervised by an independent authority. This irons out the potential conflict between landowners and end-users.

Of course it must be stressed that the creation of this mechanism does not preclude outright sale transactions between landowners and end-users. However,for large infrastructure and industrial projects,this arrangement offers one way out of the present impasse.

The writer,a member of the MP cadre of the IAS,is currently Visiting Fellow at the Indian Institute

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