by John Elliott
Land should be the source of economic growth for a country, and of increased wealth and security for people both rich and poor. Instead, it became a symbol of much that is wrong with India. In some states, it has been causing a high proportion of killings and criminal cases – in Bihar, 50 per cent of murders and 70–75 per cent cases of criminal assault are due to land, according to police figures,1 and the actual number could be higher.
Raghuram Rajan has noted that ‘the predominant sources of mega wealth in India today are not the software billionaires who have made money the hard way’. Instead, he said in a 2010 newspaper interview,2 ‘It is the guys who have access to natural resources or to land or to particular infrastructure permits or licences. In other words, proximity to the government seems to be a big source of wealth. And that is worrisome because it means that those who can access the government and manage it are far more powerful than ordinary businessmen. In the long run, this leads to a decay in the image of businessmen and the whole free enterprise system. It doesn’t show us in good light if we become a country of oligopolies and oligarchs. Eventually, this could even impinge on democratic rights’.3
In his book, Fault Lines: How Hidden Fractures Still Threaten the World Economy,4 Rajan suggested that ‘the licence-permit raj’ of the pre-1991 decades, which had allowed well-connected manufacturing business houses to grab licences and squeeze out competitors, had given way to the ‘raj of the land mafia’. He was pointing out that success now came not to the best real estate developers or the most socially and environmentally conscious mining companies, but to businessmen with contacts in government who could bribe politicians and bureaucrats to hand over access to land for real estate development and exploitation of coal, iron ore and other minerals. ‘Earlier, you had to navigate the government for licences and permits Now you have to navigate the government for land, because in many situations land titles are murky, and acquiring land is difficult,’ he wrote.
These scams were made easy because environmental laws and regulations had been breached on a massive scale, especially through thefirst decade of this century. The ministers of environment who were drawn from the DMK in Tamil Nadu facilitated illegal mining and real estate development across the country. What the minister allowed from his office in Delhi was echoed down through his ministry, agencies and state governments. Added to this, a lack of urban planning meant that there were few laws and regulations to control such activities, and those that did exist were bent or ignored.
Agricultural land in India has often been seized by state governments and their agencies, and by corporate friends and cronies, using legislation that stemmed from land acquisition laws passed in 1894, half a century before India’s independence. These laws, which were only replaced in 2013, permitted compulsory government purchase of land for a ‘public purpose’, a provision that was intended to be used for developments such as highways, government buildings, airports, schools and slum clearance. It came to be used, instead, to acquire land for private sector projects including special economic zones5 and the Tata Nano car factory that was aborted in West Bengal in 2008. It was also used to grab excessive amounts of land for real estate deals around projects such as airports and highways that were built and operated under suspect public-private partnership (PPP) arrangements. Sources have suggested to me that excessive land was also made available for commercial developments like information technology company campuses in order to boost market prices of stocks in which politicians had invested.
Capital Dislocation
In the states of Haryana and Uttar Pradesh that surround Delhi, rural areas and farmland have been bought up, speculated over and developed in the past three decades, and at a rapidly accelerating pace in the past ten years. This has created a vast National Capital Region (NCR) with a population of over 22m, including 16m in Delhi itself, covering nearly 13,000 sqm. It includes Gurgaon in Haryana, which stretches for miles of ribbon development to the south-west along the Jaipur highway, and Noida to the south-east in UP. There are also growing industrial centres at Ghaziabad and Faridabad along a highway that runs to the tourist centre and industrial city of Agra. Shiny blocks of offices, plus less grand factories and call centres have spread across farmland and around old villages, together with both plush and sleazy hotels, massive blocks of flats, shopping malls and golf courses. This has created instant wealth for a few lucky developers and landowners, but a loss of livelihood for the less fortunate landless and labourers.
Prices have rocketed. For example, the price of farmland a few kilometres from a highway in an area that has yet to be urbanized by the Gurgaon sprawl has risen 100 times over the last 16 years from Rs 2 lakh an acre in the late 1990s, when it was considered a remote rural location, to Rs 2 crore now that tower blocks of flats are appearing on the horizon, indicating that it will be part of an urban area in a few years. Another plot in a fashionable development of large houses on two- to five-acre plots, euphemistically called ‘farm houses’, near Delhi airport, has increased a thousand times over a longer period of 30–35 years from Rs 9,000–12,000 an acre to Rs 10 crore.
There is nothing remarkable about the location of either of these two examples.6 Both are on land that, till the 1980s, was owned in small holdings by relatively poor farmers, and both have been swallowed up by rich owners and real estate speculators. Outside Gurgaon, where builders have been buying farmland speculatively at low prices for years, changes to a master plan proposed in 2012 meant that plots bought in 2003 for Rs 25 lakh an acre were worth Rs 6 to 7 crore, and more than twice that figure in some cases. ‘Land dealers, on condition of anonymity, talk discreetly about how the master plan acts as a gold mine for the officials drafting it, the subject of strong lobbying by developers,’ reported the Business Standard in 2012.7
Once land was commandeered, its value usually rose quickly, reaping profits for the public authorities and private sector companies involved, while the previous, usually poor, owners received relatively small amounts for what had been their livelihood for generations. That is often the main grievance, as has been shown in protests in Delhi and the states of West Bengal and Odisha. People’s anger was directed not so much at having to part with their land, but having to do so under an ancient law that fixes compensation prices at current low levels and does not allow those involved to benefit from rapid increases in price once land use has been changed or developments started.
In 2009, using the 1894 law, the Greater Noida Industrial Development Authority in UP compulsorily acquired 5,000 acres of land from farmers in 16 villages at Rs 850 per sqm. A month later, having changed the land use from industrial to residential, it resold to private developers for about 13 times as much – Rs 10,000– 12,000 per sqm (the local high court later cancelled the orders for some of the land transfers after appeals). The development authority tried to stem criticism by saying that the higher price covered the cost of infrastructure work, such as roads, water supply, sewage and electricity, in addition to public facilities such as schools.8 Two years earlier, the Yamuna Expressway Industrial Development Authority had notified 256 villages for development along the Greater Noida– Agra expressway and paid Rs 850 per sqm to the farmers. It sold at Rs 5,500 per sqm to private builders who planned to sell it at Rs 18,000 per sqm. ‘Our problem is not with the sale. What is not acceptable are the exorbitant rates at which the private builders plan to sell our land,’ explained one villager to Tehelka magazine at a time when violent demonstrations were breaking out against the land sales, halting some developments.9
This illustrates the scant regard that the wealth-generating rich and politically powerful – a relatively small minority – have had for the plight of the poor who make up two-thirds of the population. Often politicians and their friends use insider knowledge to buy up land cheaply in areas that they know will soon rise rapidly in value because of some big infrastructure project or because of a change in land use from agricultural to industrial or residential. Projects are sometimes inten
tionally delayed while politicians make profits by floating rumours about one site after another. While it is illegal to profit from insider trading in the stock markets, there is no law against profiting from insider trading in real estate!
Social Wasteland
Such upheaval and dislocation creates a social wasteland of urban sprawl, removing the stability of old rural communities and identities and providing instant wealth for those who sell their land well. ‘When you can suddenly sell what you have for a crore an acre, the meaning of land changes,’ says Ravinder Kaur, citing 2012 prices on a highway north of Delhi, in the state of Punjab. ‘The sense of belonging somewhere goes, and people lose their roots.’10 That leads, she explains, to conflicting reactions of brash arrogance among the suddenly rich and anxiety among those who have not been so lucky.
People rarely know or seem to care about wise investing. All over India there are stories of money lost through extortion, squandered on quick purchases and later consumed in alcoholic despair. The Tehelka article told how One farmer sold his land for Rs 50 lakh and revelled in wealth he could never have dreamed of a few years earlier. He bought a small but smart Alto car, two motorbikes, a 12-room house, and married off his daughter. ‘I am totally broke now. There is not a single paisa left. I was greedy for money at that time,’ he said. ‘Our situation was better when we were farmers. Nowadays, all we think about is survival.’11
The result of this social churn is a confusing melee of ambitions and frustrations with people falling back on violence as a way of expressing either their new sense of power and self-importance or the disenchantment of being left behind. This is especially evident in Haryana and UP where some areas, especially those on the outskirts of Delhi, have always been regarded as a gangland haven of lawlessness. It is here that labour unrest has broken out in new auto industry factories and it is also here that crude displays of new power have occurred.
Sons of regional politicians and others, suddenly rich with wealth from land deals and corruption, have typically shown scant respect for the law. In September 2011, a 22-year-old toll booth operator was shot dead on the Gurgaon highway by the driver of a sport utility vehicle (SUV) – regarded by India’s new rich as a symbol of wealth – who refused to pay the toll of Rs 27. People from nearby villages were exempt from paying tolls if they could prove their identity, and an argument with the booth operator led to the shooting that was caught on closed circuit television.12 In an earlier example of the arrogance of the newly affluent, a politically connected youth, the son of a Congress MP from Haryana, who later became a minister in the state’s cabinet, shot a bar attendant in 1999 at a Delhi nightspot when she refused to serve him a drink. There were some 200 witnesses to what became known as the landmark ‘Jessica Lal case’,13 but many ‘turned hostile’, refusing to give evidence. The youth was acquitted in 2006, but he was re-arrested after a public outcry and sentenced to life imprisonment.
The social dislocation and other problems caused by rapid urban development will continue for decades ahead, albeit maybe more slowly than during the millennial decade of high economic growth. The McKinsey report forecast in 2010 that 590m people would be living in Indian cities by 2030 – up from 340m in 2008 and 290m in 2001. It said there would then be 68 cities of more than a million people including 13 with more than four million and six with 10m. Delhi and Mumbai would be among the world’s five largest cities. ‘We will witness over the next 20 years an urban transformation the scale and speed of which has not happened anywhere in the world except in China,’ said the report.14
Land Legislation
People who lose or voluntarily give up their land for industrial development have rarely been compensated adequately, and the laws and regulations have varied in different states (land is a ‘concurrent’ subject in India’s Constitution, which means that both the central and state governments have powers). Records of landholding are often not available, or cannot be easily verified, which complicates acquisition. This has led companies to prefer that governments acquire land for them using the 1894 legislation’s powers to acquire land compulsorily, often at low prices that do not reflect the real market price. In forest and tribal areas, it has meant that local people have not been properly consulted, as the stories in the next chapter show.
People giving up their land are often offered jobs in the new projects. This has commonly been one job per family, which can work well with unskilled jobs during construction work, but not so well when projects are completed and companies find local people unsuitable for skilled employment – for example, in a car factory. Some are given unspecialized jobs such as that of security guards, but many cannot even do those duties, so feel doubly shut out from their traditional occupations by both the real estate boom that they missed and the industrial boom that they cannot share. The poor also frequently lose out when compensation packages are being handed out. Land acquisition officers typically take a percentage cut to improve compensation amounts. In a relatively minor but illustrative example in Andhra Pradesh,15 the government took over land for a highway project from a woman who had only recently bought it. She successfully won a court case for more compensation than the government had initially allocated, but the local land acquisition officer insisted on receiving a 10 per cent payment for releasing the money.
In its approach paper for India’s 12th five-year plan, India’s Planning Commission, which monitors the economy and proposes policy changes, said that independent estimates suggested only a third of the 60m people who had been displaced by development projects over 60 years had been resettled ‘in a planned manner’.16 Most of them were ‘rural poor without any assets, marginal farmers, poor fisher-folk and quarry workers’. Around 40 per cent of those displaced were tribals and 20 per cent were Dalits. ‘Given that 90 per cent of our coal, more than 50 per cent of most minerals and most prospective dam sites are in Adivasi regions, there is likely to be continuing contention over issues of land acquisition in these areas, inhabited by some of our most deprived people.’
The way forward, said the Planning Commission, was to ‘move away from the colonial perspective of treating people as “subjects”‘, and instead treat them as citizens with rights guaranteed under the Constitution. That required a ‘fair land acquisition law which resorts to compulsory acquisition only where it is unavoidable and provides fair competition’. The law should also mandate resettlement and rehabilitation provisions that were ‘not reduced to what they have become, conditionalities without consequences’. Also required was an ‘unequivocal commitment to imaginatively exploring ways of rebuilding the livelihoods of those adversely affected by development projects’.
This view underpinned government plans for new land legislation to replace the old 1894-based laws. Parliamentary Bills were first prepared in 2007, but lapsed because they were not passed by the time of the 2009 general election. A new Bill was tabled in 2011,17 but it became the subject of controversy and amendments for over two years. It eventually became law in September 2013,18 after being steered through parliament by Jairam Ramesh when he became minister for rural development.
The legislation provided for substantial land acquisition, rehabilitation and resettlement arrangements designed primarily to protect the poor who had previously lost out. Owners were to receive four times the market value of their land in rural areas, and twice the value in urban areas, so that they shared in future land values. Not less than 70 to 80 per cent of the owners would have to give their consent for sales to go ahead during complex consultation arrangements. Land that had not been developed after ten years would be returned to them. These provisions horrified industrialists who said that land costs would rise, and that there would be long project delays and cancellations because of resistance from communities. It also seemed likely that companies would not go for developments that covered large areas because of the problems involved in obtaining approval from numerous owners, and that they might look for sites in rural areas in order to cut costs.
The arguments were polarized around the Indian economy’s basic dilemma – how to encourage industrial and other projects that are needed for growth while at the same time caring for the environment and for those whose lives are being uprooted. It is an argument that will continue, but it is important that the caring side of the argument is not lost in the clamour for growth.
Notes
1. ‘Land row murders trigger concern’, The Telegraph, 27 April 2012, http://www.telegraphindia.com/1120428/jsp/bihar/story_15425698.jsp#.UVbYlhcSaSo
2. ‘Licence raj has been replaced by land mafia raj’, DNA, 30 October 2010, http://www.dnaindia.com/opinion/interview_licence-raj-has-been-replaced-by-land-mafia-raj_1459666; interview with Raghuram Rajan when he was professor of finance at the University of Chicago’s Booth School of Business and a part-time economic advisor to Manmohan Singh. A former chief economist at the IMF he became the chief economic adviser at India’s Ministry of Finance in December 2012. His Fault Lines: How Hidden Fractures Still Threaten the World Economy, was named the FT-Goldman Business Book of the Year for 2010
3. Rajan based these remarks on an article written in 2008 for Outlook magazine by Jayant Sinha of the Omidyar Foundation, formerly a hedge fund manager and McKinsey partner. See also ‘Has India’s Gilded Age Lost Its Luster?’, CNBC.com 5 November, 2012, http://mobile.cnbc.com/special_reports/5/content/49306639
4. Raghura Rajan, Fault Lines: How Hidden Fractures Still Threaten the World Economy, Princeton University Press 2010, http://press. princeton.edu/titles/9111.html
5. http://ridingtheelephant.wordpress.com/2007/05/01/special-economic-zones-are-about-people-not-just-development/
6. Information given to JE privately by owners.
7. ‘Gurgaon master plan a gold mine for realtors’, Business Standard, 5 November 2012, http://www.business-standard.com/article/companies/gurgaon-master-plan-a-gold-mine-for-realtors-112110500076_1.html
