Let us sell, please

My MINT column (up online already) that appears in print on Tuesdays was motivated not only by my reading the book, ‘The evolutionary psychology behind politics’ but also by the incredibly deluded speech that Rahul Gandhi, the Congress Vice-President, is supposed to have made in the Parliament. They may not be the ruling party now but if this is the best bench-strength that India has in the ranks of the Opposition parties, the future is bleak, indeed. Very few dared to challenge him. Business Standard was the first to do so. It felt that Rahul Gandhi needed some elementary lessons in Congress history and in economics. Few days later,  MINT raised uncomfortable questions as to the implications for India to have the leader of a so-called centrist party hold views such as he does.

Sanjoy Chakravorty’s piece in ‘Outlook’ is a MUST-READ for all. Some key excerpts:

More than 90 per cent of the land converted after independence was used for state projects. Those who lost land and livelihood subsidised India’s development, or more accurately, its winners—that is, the populations that got water, power, roads, factories and jobs. This deeply regressive redistribution system lasted well into the 2000s. The Congress was at the helm of this. No major political party was against it. This was considered “normal”.

Almost nowhere in the country is it possible to find farmland at less than Rs 5 lakh per acre today. To see this in context, consider the price of farmland in the US state of Kansas: it’s less than $2,000 (Rs 1.2 lakh) per acre. This is what highly productive land should cost if the price were based only on productivity. Therefore, we must conclude that the price of farmland in India is five to 100 times more than can be justified by agricultural productivity. This has serious implications.

If the same Singur acquisition is attempted now, the landowners will be paid in excess of Rs 50 lakh per acre. The additional costs for landless workers and resettlement and rehabilitation will total another Rs 35 lakh per acre. Added to this Rs 85 lakh per acre (70 times the price in Kansas) will be the cost of waiting 4-5 years to complete the acquisition process. Will Singur’s landowners reject this windfall? It seems irrational and unlikely, but what if they do? What will a promoter do when a project fails to get land after 4-5 years?

Can any private project survive these prices, the waiting  and the uncertainty? Probably not. So who will gain if Singur farmers reject the project? Sanand again? Maybe, maybe not.  It could be Kuala Lumpur, or Jakarta, or Shenzhen. The competition for private capital is real and fierce, and in this period of globalisation, it is not limited to India. This is not a zero-sum game. Singur’s loss had real costs for Calcutta and Bengal, and Sanand’s gain created real benefits for Ahmedabad and Gujarat. And if in the future, both lose because of land acquisition, there will be real costs for the country. This is the truth. But who will tell our politicians?

The Wikipedia entry on farmers’ suicides has a paragraph on how it is a global phenomenon:

Farmers suicide is a global phenomenon. Outside India, studies in Sri Lanka, USA, Canada, England and Australia have identified farming as a high stress profession that is associated with a higher suicide rate than the general population. This is particularly true among small scale farmers and after periods of economic distress.[32] Fraser et al., similarly, after a review of 52 scholarly publications, conclude that farming populations in the United Kingdom, Europe, Australia, Canada and the United States have the highest rates of suicide of any industry and there is growing evidence that those involved in farming are at higher risk of developing mental health problems. Their review claims a wide range of reasons behind farmers suicide globally including mental health issues, physical environment, family problems, economic stress and uncertainties.[95] Significantly higher suicide rate among farmers than general population have been reported in developed countries such as the UK and the US.[96][97][98] [Link]

Farming is tough. Period. With fickle water and power supply, small and marginal landholdings, restricted market access, exploitation and illiteracy, it is considerably tougher for the Indian farmer.

Ashok Gulati, former Chairman of the Commission for Agricultural Costs and Prices (CACP) and now with ICRIER suggests cash transfer for food and fertiliser subsidies, to farmers. Unfortunately, a substantial chunk of the farmers surveyed by the Centre for the Study of Developing Societies (CSDS) did not have a view on it. About 40% did not have a view on DBT. Of course, those who preferred it were 34% of those surveyed. Only 19% preferred to stick to the status quo (Figure 5.4, p.33 of the report). The survey was published in March 2014. CSDS had conducted the survey between December 2013 and January 2014. About 5350 farmer households were interviewed in their local language and small and landless farmers constituted 74% of the survey respondents.

That report has many other interesting and useful information. One hoped that policy-makers saw it. Clearly, Rahul Gandhi has not seen it. This is what the farmers surveyed about the Land Acquisition Law:

Only 27 per cent of the farmers have heard about the Land Acquisition law. Among those who had heard about this law, only 21 per cent said that farmers stand to benefit from the law, and 57 per cent of the respondents said that farmers stands to lose from this law. [p. 34]

On suicides, only one in seven had heard of farmers committing suicides in the area. Large chunk (41%) of respondents reported that domestic problems were the most important reason for suicides followed by credit/loans (35%). However, repayment of loan did not show up as a major ‘life worry’ at all.

On electricity, the response of the farmers is disappointing and once again highlights how difficult it is to run public policy when basic understanding of the fundamental laws of supply and demand is conspicuously absent or, it could be that they simply do not trust the government to deliver them 24-hour power. Perhaps, they want to see uninterrupted power supply before committing to pay for it:

When asked if in order to receive uninterrupted power supply they were ready to pay more for it than what they pay today, 46 per cent of farmers rejected the idea, while 31 per cent said that they are willing to pay more for uninterrupted electricity supply.

On the important issue of the Land Acquisition Bill, essentially, the survey clearly showed that landless and small farmers welcome FDI in agriculture and would prefer to migrate to cities for better jobs for themselves and for their children in future. Given that the bulk of the farm holdings are small and marginal, a generous compensation coupled with easier exchange of their land holdings for cash might be what they would prefer, rather than having to continue to toil for meagre returns in their farms. Rahul Gandhi should go through this brief 36-page report.

The Land Acquisition Bill, in its present form, is a huge millstone around the neck of India and a big stumbling block (no land has been acquired since 2013) to encouraging capital formation, employment generation and domestic manufacturing. The Indian revival story will be dead on arrival without this millstone around the neck of the Indian economy removed. Well, now we can understand why amendments to the Bill are resisted.

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