Congress Party

How the Congress party got corporates addicted to govts buying land for them


One of the main questions that has been asked in the current controversy surrounding the issue of land acquisition is—why does the government need to buy land? Jairam Ramesh and Muhammad Ali Khan try and answer this question in their new book Legislating for Justice—The Making of the 2013 Land Acquisition Law. 

As they write: “Acquisition of property is founded upon the universally recognized principle of ‘Eminent Domain’.” And what is Eminent Domain? “[It] is the power of the Government…to take over resources for the greater national good. At its most basic Eminent Domain refers to the inherent authority of the Government to acquire private property on the payment of fair compensation for a use that benefits public at large,” explain the authors.

Further, a lot of public infrastructure gets built because of Eminent Domain. As Ramesh and Khan write: “Without the power of Eminent Domain, the Government could not establish the infrastructure that we rely on—roads, hospitals, airports, public schools, common facilities such as warehouses for farmers, playgrounds for children all are made possible through the use of Eminent Domain.”

So far so good. But why does the government have to acquire land for private companies? Before I get to answering this question, it is important to realize that the land acquisitions carried out by the government in India can essentially be divided into two eras—those carried out before 1991, the year of the economic reforms, and those carried out after.

As Michael Levien of the Johns Hopkins University writes in a recent research paper titled From Primitive Accumulation to Regimes of Dispossession: Six Theses on India’s Land Question: “Since 1991, India has passed from a regime that dispossessed land for state-led industrial and infrastructural expansion to one that dispossesses land for private—and increasingly financial—capital. Between 1947 and 1991, the Indian state largely dispossessed land for public-sector projects to expand the industrial and agricultural productivity of the country. The main forms of this dispossession were public sector dams, steel towns, industrial areas, and mining.”

But that changed after the economic reforms of 1991, when the private sector began to play a more active and larger role in the Indian economy. The economic reforms unleashed the Indian IT and BPO industry. These sectors had an unending appetite for land and the government helped them by acquiring land for them.

Gradually, public-private partnerships became the preferred method for building physical infrastructure. And this led to the government acquiring more land for private firms. In fact, as Levien points out: “Crucially, compensating private infrastructure investors with excess land and/or development rights became an increasingly popular method of cost recovery in these arrangements—whether for roads, airports, or affordable housing (Ahluwalia 1998; IDFC 2008, 2009). Infrastructure investment thus became a vehicle for private real estate accumulation, culminating with Special Economic Zones in the mid-2000s.”

Hence, land became a sort of a currency for the government. Also, given that the government could acquire land for private firms, it is obvious that a lot of politicians must have made a lot of money as well.

Nevertheless, the question is how did the government get around to acquiring land for the private sector? Before the 2013 land acquisition law was passed, land acquisition in India was governed by the Land Acquisition Act 1894—a law from the time when the British ruled India.

In fact, an amendment made in 1984 to the 1894 Act expanded the government’s ability to “acquire lands for a public purpose ‘or for a private company’”. This amendment allowed the government to acquire land for private companies. And it is worth reminding the readers, those were the days when the Congress party ruled the country.
It was this amendment which was abused by the various state governments around the country to acquire land for private companies. This amendment allowed the government to acquire land from farmers at cheap rates and then sell it on to private companies at a significantly higher price.

The ‘Yamuna Expressway’ is a very good example of this, where the land was acquired by the Uttar Pradesh from farmers and then sold on to private parties at multiple times the price the farmers had been paid for it.

As Ramesh and Khan point out: “In 2009, the Uttar Pradesh Government had indeed acquired land as part of a concession agreement and then resold it to Jaypee associates group as part of a bundling project for the construction of the Yamuna Expressway. There was no legal bar on doing so under the old law [i.e. the 1894 Act].” Further, the purpose for which the land was acquired could be changed as well.

The corporates preferred the government acquiring land for them and then selling it to them at a higher price because of several reasons. Land records in India are poorly maintained and purchase of land can easily be challenged in court at a later date.

As Nitin Desai writes in a recent column in Business Standard: “Many companies want the government to acquire land for them…as to have the assurance that their right of ownership cannot be challenged by some new claimant.”

Further, as Ramesh and Khan point out: “After the initial round of consultations in July-August 2011, it was also acknowledged that land values are, on an average, a sixth of their represented or book value as drawn out in the circle rate. As one moved away from urban centres the disparity became more striking with land records not having been updated for decades in some parts of the country.”

As per the 1894 Land Acquisition Act the government had to compensate the owner of the land at market value. But given that the government land records were infrequently updated, the government on many occasions got away with paying a pittance in comparison to the ‘real’ market value.

Even if the government were to then sell on the land to a corporate firm at a higher price, the firm would still get a good deal because of the huge differential between the price as per the government land record and the real market price.

Another reason corporates liked to outsource the land acquisition process to the government lay in the fact that the 1894 Act had an ‘urgency’ clause. As Ramesh and Khan write: “Section 17 of the Land Acquisition Act, 1894 was used to forcibly disposes people of their land in a frequent and brutal fashion by suspending the requirement for due process…Section 5A…allowed for a hearing of objections to be made but put no responsibility on the Collector to take those claims into consideration.”

So people could complain, but it was up to the Collector whether he wanted to listen to them or not. Further, the definition of urgency was also left “to the authority carrying out the acquisition.”  This clause allowed the collector to “take possession of the land within fifteen days of giving notice”. He could take possession of a building within 48 hours of giving notice. No private company could hope to acquire land at such a quick pace.

The irony is that the 1894 Land Acquisition Act was allowed to run for almost 66 years after independence. The Congress party ruled the country in each of the decade after independence and chose to do nothing about it. Under the 1894 Act the government could acquire land in a jiffy, without adequately compensating the land-holder. When the Act was finally replaced, what came in its place has made it next to impossible to acquire land.

In fact, Ramesh and Khan,rather ironically admit to that in their book, when they write: “The law was drafted with the intention to discourage land acquisition. It was drafted so that land acquisition would become a route of last resort.”

To conclude, as far as the land acquisition process is concerned, it is safe to say that we have jumped from the frying pan into fire.

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)

The column originally appeared on Firstpost on May 28,2015 

Why Jairam Ramesh’s new book on land acquisition is a must read for Rahul Gandhi

Jairam_ramesh

Jairam Ramesh was the minister of rural development between July 2011 and May 2014. He was instrumental in getting the new land acquisition law drafted and passed in 2013. And now he has written a book documenting this experience.
The book is titled Legislating for Justice—The Making of the 2013 Land Acquisition Law. Ramesh has co-authored this book along with Muhammad Ali Khan, who worked with Ramesh as an officer on special duty in the rural development ministry.
The book goes into great detail on why India needed a new land acquisition law. And given this, it is a must read for Rahul Gandhi, the vice-president of the Congress party, who has recently been ranting against the changes that the Narendra Modi government is trying to bring to the land acquisition law passed in 2013.
Before the 2013 land acquisition law was passed, land acquisition in India was governed by the Land Acquisition Act 1894—a law from the time when the British ruled India. And rather surprisingly it survived for close to 66 years after India achieved independence from the British in 1947.
The 1894 Act was loaded totally in favour of the government and made it very easy for the government to acquire land as and when it wanted to. This wasn’t surprising given that it was drafted in 1894, when the British ruled India and the rights of Indians were not really top of the British agenda. As Ramesh and Khan write: “The 1894 Act was a comparatively short legislation that left much to the discretion of the acquiring authorities.”
Take the case of the phrase “public purpose,” which is the basic reason why any government acquires (or at least should acquire) land from its citizens. It is very important to define the term properly. Nevertheless, as Ramesh and Khan write: “’Public Purpose’ which was the raison d’etre for any acquisition initiated was drafted in such wide terms that essentially any activity could be constituted as public purpose, as long as the Collector [of the district where the land was being acquired] felt it did…’Public Purpose’ became what ever the Government or acquiring authority defined it to include.”
In fact, in a 1984 amendment expanded the government’s ability to “acquire lands for a public purpose ‘or for a private company’”. Yes, you read that right. And which party was in power in 1984? The Congress party. This amendment allowed the government to acquire land from farmers at cheap rates and then sell it on to private companies at a significantly higher price.
The ‘Yamuna Expressway’ is a very good example of this, where the land was acquired by the Uttar Pradesh from farmers and then sold on to private parties at multiple times the price the farmers had been paid for it.
The 1894 Act also had an ‘urgency’ clause. As Ramesh and Khan write: “Section 17 of the Land Acquisition Act, 1894 was used to forcibly disposes people of their land in a frequent and brutal fashion by suspending the requirement for due process…Section 5A…allowed for a hearing of objections to be made but put no responsibility on the Collector to take those claims into consideration.”
So people could complain, but it was up to the Collector whether he wanted to listen to them or not. Further, like was the case with the definition of public purpose, the definition of urgency was also left “to the authority carrying out the acquisition.”
This clause allowed the collector to “take possession of the land within fifteen days of giving notice”. He could take possession of a building within 48 hours of giving notice. “The Outer Ring Road Project of Hyderabad and the Expressway in Uttar Pradesh are both striking(and recent) examples of acquisitions where large tracts fell pray to the urgency clause,” write Ramesh and Khan.
Further, land acquisition displaced many people over the decades and most of them were not resettled and left to fend for themselves. “While there is no comprehensive record of how many individuals have actually been displaced by land acquisition post-independence, estimates put forth by credible studies find that close to 60 million individuals have been displaced since independence. Worse still, only about a third of these have actually seen some measure of resettlement and rehabilitation,” write Ramesh and Khan. Further, the studies that Ramesh and Khan refer to are more than a decade old. Hence, the number of displaced is likely to be higher than 60 million.
The question is who is to be blamed for this? The Congress party, which ruled the country in every decade after independence. Why did it take them more than 60 years to wake up to this and do something about it. The only possible explanation is that the Congress politicians ‘privately’ gained from the law as it was.
And given this, Rahul Gandhi’s recent holier than thou attitude on “land acquisition,” doesn’t cut any ice. The Congress party is responsible for the land acquisition mess that prevails in this country as of today.
Getting back to the land acquisition law of 2013, it is only fair to say that India needed a proper land acquisition law which wasn’t loaded totally in favour of the government. The trouble is now we have a law which makes land acquisition extremely complicated and next to impossible. A reading of Ramesh and Khan’s book makes that extremely clear.
In fact, the authors even write: “The law was drafted with the intention to discourage land acquisition. It was drafted so that land acquisition would become a route of last resort.”
For a country which has nearly 13 million people entering the workforce every year and which has aspirations of “making things,” a law which discourages acquisition of land really cannot hold. No country has gone from being developing to being developed without the expansion and success of its manufacturing sector.
As Cambridge University economist Ha-Joon Chang writes in Bad Samaritans—The Guilty Secrets of Rich Nations & the Threat to Global Prosperity: “History has repeatedly shown that the single most important thing that distinguishes rich countries from poor ones is basically their higher capabilities in manufacturing, where productivity is generally higher, and more importantly, where productivity tends to grow faster than agriculture and services.”
And in the long run the ease of land acquisition remains an important input for the manufacturing sector to take off. It also remains a very important area if the physical infrastructure in this country needs to improve. Having said that, it does not mean that land should be taken over on a platter.
In fact, as the Economic Survey points out “land acquisition” was a top reason for 161 stalled government projects. The Survey also pointed out: “India’s recent PPP[public-private partnership] experience has demonstrated that given weak institutions, the private sector taking on project implementation risks involves costs (delays in land acquisition, environmental clearances, and variability of input supplies, etc.).”
Hence, we need to take a middle path on land acquisition.

(The column appeared originally on Firstpost on May 26, 2015)

It’s the politics, stupid. Why onion prices will continue to cross Rs 100 per kg

Onion_on_WhiteVivek Kaul 

A recent report in The Economic Times said that onion prices may touch Rs 100 per kg by October 2014. The report pointed out that “hailstorms and unseasonal rain in the past, along with the weak start of the monsoon season has created scarcity and strong inflationary pressures.” For the week between June 12-18, 2014, the rainfall had been 45% below the normal.
If this trend continues, chances are that vegetable prices in general and onion prices in particular may rise in the months to come because a lack of sufficient rainfall will lead to a fall in production. Nevertheless, vegetable prices have risen over the last few years, despite a steady increase in production.
A standard explanation for the inflation in vegetable prices over the last few years has been that the demand for vegetables has far exceeded their supply. Data provided by the National Horticultural Board tells us that India produced 129.07 million tonnes of vegetables in 2008-2009. This number had gone up to 170.2 million tonnes in 2013-2014.
This meant an absolute increase in production of around 32% over a period of five years or an increase at the rate of 4.67% per year. This is a reasonable rate of increase though not a fantastic one. During the same period the vegetable prices more than doubled. Given this, there might be some truth in the argument that demand for vegetables might have outstripped their supply.
But this is clearly not true at least in the case of onions. The onion production in the country has gone up at a rapid rate over the last few years. In 2007-2008, it stood at 9.14 million tonnes. This more than doubled to 19.3 million tonnes in 2013-2014.
Hence, Indian farmers are clearly producing enough onions. Also, it is safe to assume that demand for onions couldn’t have suddenly doubled over a period of five years. So, what explains the fact that onion prices have crossed Rs 100 per kg several times over the last few years and in the months to come the same scenario might play out again? The simple answer is hoarding. While most vegetables cannot be hoarded given that they rot quickly, onions last easily up to six months. This leads to their hoarding by traders in Nashik, Navi Mumbai and the Azadpur (in New Delhi) mandis.
As the report titled Competitive Assessment of Onion Markets in Indiawhich was commissioned by the Competition Commission of India points out “A few big traders having well connected networks with market intermediaries in other markets seem to play a major role in hoarding for expected high prices.”
These traders typically start hoarding onion in the post harvest season. By doing this they manage to tighten supply in the lean season. “The lean season also happens to coincide with start of major festivals and ceremonies like marriages in India. This clearly manifests itself during months of September to January, in which the supply from onion producing regions is minimal and festivals like Dasera, Dipawali, Eid, Chrismas and marriages and other ceremonies put higher pressure on the demand of onion,” the report points out.
It is not difficult for the government of the day to identify who these traders are. But most of these traders are close to political parties. Take the case of the traders operating at out Nasik and Navi Mumbai. These traders are known to be close to Sharad Pawar’s Nationalist Congress Party. Given this, it was not surprising that when Pawar was the agriculture minister he regularly made statements that drove up onion prices. (You can sample a couple of statements here and here)
Economist Devinder Sharma in a blog written in December 2013 points out “The Azadpur mandi traders association in Delhi is aligned to the ruling Congress party. In Punjab, on the other hand the traders associations predominantly back the ruling SAD-BJP combine.”
This explains to a large extent why politicians tend to look the other way when onion prices are rising, and they even go ahead and make insensitive statements. Take the case of Kapil Sibal, who when asked about the rise in onion price in September, 2013 had said “Ask the traders this? The government does not sell onions.”
Given this, it is not difficult for the government to control the price of onion, if it wants to. All it needs is a few basic steps. As the report commissioned by the Competition Commission of India points out “For these, measures such as cancelling license for a temporary period; putting fines and penalties, and monitoring closely the behaviours of traders for any intentional hoarding, could be taken.” Of these measures, monitoring the behaviour of traders for any intentional hoarding is the most important.
Having said that, the onion production may have seasonal variations and that may drive up the price of onion. But that still does not explain the astonishing rise to Rs 100 per kg several times over the last few years. As Shreekant Sambrani writes in the Business Standard “ A five per cent reduction in its supply supposedly causes a 50 per cent increase in its price. While its per capita availability trebled in the last decade (faster than the per capita income, which doubled), its price rose fourfold in the same period.” Hoarding is the only possible explanation.
Potato, is another vegetable, which like onions, doesn’t rot immediately, and hence can be hoarded. Potato production has grown at the rate of 6.2% per year between 2008-2009 to 2013-2014 to 46.4 million tonnes. Between 2012-2013 and 2013-2014, the production grew by only 2.3% but the prices over the last one year have shot up by more than 30%. Hoarding is a major reason for the same.
Given this, the government needs to ensure that the prices of onion and potato are decided on true market demand and supply, and not because of hoarding. The inflation that the people faced during the second term of the Congress led UPA government was a major reason why the Narendra Modi led BJP was elected to power.
Hence, it is important for Modi and his government to do all that they can do on the inflation front. If they don’t, there will be trouble ahead. As Sambrani puts it “Inflation is a two-edged sword. Hurt in the pocketbook, the aam aurat could start venting her wrath on the new government. Onions don’t respect ideology while bringing tears.”
The article originally appeared on www.firstbiz.com on June 26, 2014.

(Vivek Kaul is a writer. He tweets @kaul_vivek) 

Cong needs to study 1936 US Election before seeking ban on opinion poll

digvijay-singh-313-devilsVivek Kaul  
A few days back the Congress party wrote to the Election Commission that lotuses in full bloom in various regions of Madhya Pradesh should be hidden, so that voters aren’t drawn towards the Bhartiya Janata Party (BJP). The state goes to the polls later this month. Lotus is the electoral symbol of the BJP.
If one were to extend the argument a little further, other parties could demand that Indians hide their hands when in public, before elections are due to happen. Hand is the electoral symbol of the Congress party.
Also, when elections are due, elephants should be hidden, given that they are the electoral symbol of the Bahujan Samaj Party and Asom Gana Parishad. People should not be allowed to move around in cycles because they are the electoral symbol of Samajwadi Party. Large parts of India where electricity is non existent should not be using the lantern because it is the electoral symbol of the Rashtriya Janata Dal. People should stop looking at their clocks because it is the electoral symbol of the Nationalst Congress Party. And this list can go on.
The Election Commission rejected the unreasonable demand of the Madhya Pradesh unit of the Congress party to hide lotuses. It termed the demand “absurd” and “an insult to the intelligence of the voter”.
After this, the Congress party has made another such absurd demand. It wants opinion polls to be banned. The position of the party is well summarised in a statement made by the party general secretary Digvijay Singh. As he put it “These have become a farce. They should be banned altogether. The kind of complaints, information that I have got, show that anybody can pay and get a survey as desired…Wondering how a few thousand people could predict election trends for a country of 1.2 billion people…It has become a racket. So many groups have sprung up.”
This statement needs to be examined threadbare.
A straightforward reason for the Congress party wanting opinion polls to be banned is the fact that all the opinion polls expect the party to perform badly in the forthcoming state assembly elections, as well as the Lok Sabha elections, due next year. Other parties like BSP and JD(U), which are similarly on a weak wicket, want the opinion polls to be banned as well.
A part of Singh’s statement was that “ The kind of complaints, information that I have got, show that anybody can pay and get a survey as desired.” This is a very serious charge. If Singh has any such information he should bring it to the attention of the nation, instead of just making vague statements. If there is any truth to the accusations, the Election Commission can investigate it and then make a reasonable decision.
Singh further wondered how “how a few thousand people could predict election trends for a country of 1.2 billion people.” Even the most sophisticated opinion polls do not have a sample size more than a few thousand people.
Take the case of opinion polls which happen in the United States before a Presidential election to predict to who is likely to be the next President. The sample size of most such surveys is less than 1500. This can be clearly seen from the following link.
Also, there is a great story from the 1936 US Presidential elections which is very relevant in the context what Singh said. The election had the incumbent President Franklin D Roosevelt, belonging to the Democratic Party, facing Alfred Landon of the Republican Party, who was also the governor of the state of Kansas.
Literary Digest one of the most well respected magazines of that era predicted that Landon would get 57% of the vote whereas Roosevelt would get 43%. Roosevelt got 62% of the vote whereas Landon got only 38%. The survey was way off the mark. Roosevelt got 19% more vote than the survey had predicted. This is believed to the largest ever sampling error in a major opinion poll.
The Literary Digest poll had a sample size of around 2.4 million people. At the same point of time George Gallup predicted a victory for Roosevelt using a much smaller sample size of 50,000 people.
There were problems with the way Literary Digest had chosen its sample. The sample was not a representation of the population. As a University of Pennsylvania Case Study on the issue points out “The first major problem with the poll was in the selection process for the names on the mailing list, which were taken from telephone directories, club membership lists, lists of magazine subscibers, etc. Such a list is guaranteed to be slanted toward middle- and upper-class voters, and by default to exclude lower-income voters. One must remember that in 1936, telephones were much more of a luxury than they are today. Furthermore, at a time when there were still 9 million people unemployed, the names of a significant segment of the population would not show up on lists of club memberships and magazine subscribers.”
Hence, the sample was skewed towards Republicans. In the United States, the upper class typically tends to support the Republican Party, whereas the poor largely go with the Democratic Party. Given this, it predicted a victory for the Republican candidate Landon.
Thus, it is important to ensure that the chosen sample is a good representation of the population as a whole. Small samples can be very effective as long as they are not riddled with sampling errors. “A badly chosen big sample is much worse than a well-chosen small sample,” concludes the University of Pennsylvania cited earlier.
Another article on the website of Constitution Rights Foundation makes a similar point “It is important to point out that large, national polling organizations have small national samples of under 2,000 that predict quite accurately for the entire electorate.” As statistical techniques have evolved samples much smaller than the sample of 50,000 people used by Gallup, to predict the 1936 elections, can give good results. The moral of the story is that bigger is not necessarily better. Something that Digivijay Singh needs to understand.
Opinion polls are also a very important part of the democratic process. People have a right to know what a state, a region or the nation as a whole is thinking on a particular issue, at a given point of time.
But Congress and democracy do not go together. In 1959, the then Congress prime minister Jawahar Lal Nehru dismissed the government of Kerala led by the communist chief minister EMS Namboodiripad, by invoking the controversial article 356. Namboodiripad’s government was the first democratically elected Communist government anywhere in the world.
This set the precedence for Nehru’s daughter Indira Gandhi and she turned dismissing democratically elected non Congress governments into an art form. Estimates suggest that she dismissed nearly 59 state governments during her several tenures as the Prime Minister of the nation.
She, egged by her younger son, Sanjay, declared a state of internal emergency on June 26, 1975. It stayed till March 21, 1977. During this period the leaders of opposition parties were put into jail and the fundamental rights of the citizens of this country remained suspended. The newspapers were heavily censored. Democracy came to a standstill during the period of nearly 19 months the country was in a state of emergency.
The senior most posts in the Congress party have been perpetually reserved for the Gandhi family and there have been no elections for the same. Given this, it is hardly surprising that the leaders of the Congress party are making demands for opinion polls to be suspended. They go against the party’s idea of democracy.
The article originally appeared on www.firstpost.com on November 5, 2013
(Vivek Kaul is a writer. He tweets @kaul_vivek)