What does India's jump to 100th spot in World Bank's doing business index (DBI 2018) really mean?

What does DBI 2018 measure? It measures ‘regulatory environment’ as it applies to domestic small and medium companies. Regulatory environment is important because it is much more effective in shaping the incentives of economic agents in ways that promote growth and development when they are reasonably efficient in design, are transparent, accessible and can be implemented at a reasonable cost. DBI 2018 captured 10 areas – starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. It did not capture demonitisation and GST which have caused widespread distress in the economy.

What DBI did not capture? World Bank, which measures DBI, says it did not capture macroeconomic stability, development of financial system, market size, incidence of bribery and corruption and quality of labour force. So, to begin with, DBI is only one indicator of economic perspective.

India has been seeking to improve DBI ranking to attract FDI. Research have shown that a better business regulation is associated with higher FDI inflow. Interestingly, India has seen a dramatic rise in FDI inflow since 2014. In 2016, it was among the top three countries in attracting FDI, according to DIPP. India attracted $45.15 billion in 2014-15, $55.56 billion in 2015-16 and $60.08 billion in 2016-17 –  62% increase since the launch of ‘Make in India’.

The critical question is: Has a higher FDI inflow led to higher GDP growth, higher investment growth or higher industrial output? The answer is no and thereby hangs a tale. GDP has fallen for six consecutive quarters – from 9.2% in Jan-Mar 2016 to 5.7% in Apr-Jun 2017. Gross capital formation (GCF) has gone down from 30.3% in 2014-15 to 26.6% in 2016-17. In fact, in 2016-17, real GCF entered negative growth zone. Index of industrial production (IIP) remains considerably low since 2010-11 and the industrial sector’s capacity utilisation remains low.

One is tempted to ask why is FDI going up then and what is it doing to the economy?

World Bank cautions that though there is a significant correlation between DBI ranking and FDI inflow, this correlation (a) does not imply ‘causation’ and (b) there is no evidence of this association for ‘developing economies’. A 2016 IIM Bangalore working paper by Vivek Moorthy and A Arul Jason says, DBI ranking is a de jure measure that does not capture the de facto practices that are used to get around the law to get business done: personal connections, jugaad solutions. Besides, there is a distinction between the ease of doing business and the cost of doing business. In large unorganised economies, the cost of doing business is low (since much activity escapes the tax net) even if starting a business is difficult and the DBI rank is low.

This disconnect is captured in Ruchir Sharma’s book The Rise and Fall of Nations: Then Rules of Change in the Post-Crisis World. It talks of Putin improving Russia’s ranking from 120 to 51 between 2012 and 2015 – more than 30 places ahead of China and 60 places ahead of Brazil and India. Yet, nobody was doing any business with Moscow. Why? He explained: “Moscow in 2015 is increasingly hostile to and isolated from international business, far more so than China, Brazil or India. To the extent possible, I try to avoid relying on numbers that are vulnerable to political manipulation and marketing”. That was in 2016.

In India, it is a matter of study as to why higher FDI has not led to higher growth indicators. R Nagaraj of Indira Gandhi Institute of Development Research, Mumbai, has one explanation. He writes in an article that this is because currently FDI does not come from global producers of goods and services, but from shadow banking entities such as PE funds. He points out that in 2014-15, PE funds accounted for 60% of total FDI and top recipients (Flipkart, Paytm and Snapdeal) were retail trade of mostly imported consumer goods. PE firms do not commit to fresh capital formation or invest in technology as expected, he writes.

Amitabh Kant, CEO of Niti Aayog, is right when he says that India’s next goal is to improve domestic investment, which has completely dried up. India is facing a twin balance sheet (TBS) challenge, as CEA Arvind Subramanian keeps reminding – over indebtedness in the corporate sector depressing demand for investment and growing NPAs reducing supply of credit. Burdened with TBS, credit growth plunged to 60-year low to 5.08% in 2016-17.

CMIE’s October 2017 report reflects the grim investment scenario. It says projects worth only Rs 845 billion were ‘proposed’ during the quarter ending September 2017 – the lowest level of intention to invest during the entire Modi regime, even lower than June 2014 quarter “when investments had come to a halt for all practical purposes in the face of political uncertainty”.

Therefore, it requires a lot more than just bank recapitalisation to revive investment. In any case, recapitalisation by Rs 2.1 lakh crore is grossly inadequate when, as per Credit Suisse data, bank stressed assets hit Rs 14.5 lakh crore in the last quarter of 2016-17.

Now, it would make much more sense to replace the euphoria over DBI ranking with some serious rethink on strategies to revive the investment environment. For a change, such strategies should be extensively debated, including their modalities of implementation, before being put to work. How about starting with GST?

Land grab in the name of development

(My opinion piece appeared in Hindu Business Line on April 12, 2015: http://www.thehindubusinessline.com/opinion/land­grab­in­the­name­of­development/article7095569.ece 2/2)
Prasanna Mohanty
Land holders deserve a just, dignified deal. 2013 came close to that; now, we are turning the clock back

It isn’t really surprising that the public debate over the land acquisition law has been reduced to a simplistic narrative of whether farmers have become the stumbling blocks to India’s growth story by refusing to part with their land. In the past, debates over big dams and nuclear plants followed a similar pattern. Without making any effort to see them as stakeholders in the development process, tribals and now farmers are being branded as ‘anti­-development’. This is missing the point altogether.

We have already forgotten why the 2013 land acquisition law, which is being amended now, was brought in. The old law of 1894 was designed to serve the colonial masters and gave blanket powers to acquire land.

In 1984 it was amended in a way that distinguished the difference between acquisition for state purpose, which was the case earlier, and acquisition for private enterprise, which “opened the floodgates to acquisition of land by the state for companies” and “unleashed the tribal and rural backlash”, as a parliamentary panel headed by current Speaker of the Lok Sabha, Sumitra Mahajan, described it.

The liberalisation fallout
The panel admitted there was no official record of how many people had been displaced thus and what befell them, but quoted sociologist Walter Fernandes’ study to peg the figure at 60 million between 1947 and 2004, of which 40 per cent were tribals and only a third had been resettled.

The current narrative has left out the tribals, even though a 2009 report of the rural development ministry, State Agrarian Relation and Unfinished Task of Land Reforms, described land alienation of tribals as “the biggest grab of tribal lands after Columbus” in which the state was complicit. The report said landlessness had increased phenomenally from 40 per cent in 1991 to 52 per cent in 2004­5 in rural areas, to which the liberalisation processes “have certainly contributed”.

The 2013 land law tried to address two major problems. One, millions of poor had lost their primary source of livelihood but got inadequate compensation and resettlement benefits in return, leading to their impoverishment and worse. Two, there was a backlash holding up many big ticket industrial and infrastructural projects, reviving Maoist insurgency in the tribal heartland of central India which quickly spread to more than 200 districts.

The new land law sought to make the affected people “partners in development” and introduced three elements. It sought to restore and re-­establish their legal rights to property by introducing a “consent” clause which gave them a say in the acquisition process. It provided for compensation for livelihood loss through social impact assessment (SIA), and also added rehabilitation and resettlement provisions. The NDA government is out to destroy that framework.

Not against development
Land acquisition isn’t a problem because farmers and tribals are against development. They are reluctant to part with their land because that is their only source of livelihood and social security. The alternative on offer proposes to take that away with little in return.

The previous government recognised that “historic injustices” had been done and sought to undo that. It had plans to make the tribals partners in development in other ways. One was by drafting a comprehensive Mines and Minerals (Development and Regulation) Bill in 2010 (to replace the 1957 one) which proposed 26 per cent shareholding to the tribals in mining companies.

The new dispensation has quietly dumped it and has proposed to set aside one­third of the royalty for their benefits instead. An amendment to the effect has been passed in the Lok Sabha and is pending with the Rajya Sabha.

Next on the NDA government’s agenda is to dilute the Forest Rights Act (FRA) of 2006 which gives scheduled tribes and other forest dwellers rights over forest land, minor forest produce that include bamboo and tendu, and gives primacy to their claims over land acquisition. FRA has the potential to dramatically alter their living conditions.

A Planning Commission estimate of 2011 said the rights over minor forest produce alone would provide a direct income of Rs 50,000 crore every year. This was no empty boast as the first village to get rights over bamboo, Mendha­Lekha in Gadchiroli district of Maharashtra, earned Rs 1 crore by selling bamboo in the next year. A year later when tendu rights were given, 18 gram panchayats spread over Gadchiroli and Amravati districts earned Rs 1.3 crore.

Ask the right questions
All these measures were parts of the “inclusive growth” architecture zealously followed by the architect of India’s 1991 liberalisation who had come to realise that the growth had left out and impoverished many. Notice how such programmes have been undermined.

Notice also how no questions are being asked about why, for example, the state needs to acquire land for private enterprise, a thorny issue in the land debate. The Sumitra Mahajan panel expressed deep anguish and asked “…why should the state at all be involved in acquiring land…for private enterprises, PPP enterprises or even public enterprises” when no developed countries followed such
“anomalous practice”.

Nor is there accountability over land already acquired but not used. The 2013 law wanted such
lands to be returned to the owners if unused for five years, which too is sought to be withdrawn.
The land issue is not really about land for development. It is about denial of rights and systemic bias against the vulnerable that creates asymmetry in the transaction. It is about a one-­size-­fits-­all approach to development that ignores India’s rich diversity and gives no stake to those who stand to lose in the bargain.

The writer is with Thought Arbitrage Research Institute, a not-­for-­profit research think tank in areas of governance, sustainability and public policy

A mini revolution in the making?

April 1-15, 2013
In a first-of-its-kind move, Andhra Pradesh makes a law to bridge the gap in socio-economic development of SCs/STs from the rest


AndhraLaw.pdf

A dummy's guide to environmental clearances

Written in June, 2014 when Javadekar was making big noises about green clearances 

It is alright to have 60-day, e-window green clearances for industrial and infrastructure projects, as the new environment and forests minister Prakash Javadekar has promised, but these are mere cosmetic changes that would do little to take projects off the ground. And that is because the real problem is not the delay but irregular clearances and flawed policies that govern the process of green clearances. The moment such clearances are challenged in the court, the cookie crumbles and the projects get stuck.

Look at some of the better known and big-ticket projects which are still stuck and have hit the headlines repeatedly in the recent years because of illegal and irregular green clearances – Posco’s steel plant and Vedanta’s bauxite mining in Odisha and Polavaram multi-purpose project on river Godavari in Andhra Pradesh – and have become victims of their own excesses. 

The 2013 supreme court-mandated referendum has rendered mining of the Niyamgiri hills impossible for Vedanta’s Lanjigarh alumina plant. Posco’s clearances are stuck with the National Green Tribunal (NGT). And the green clearances to the Polavaram project are pending in the Supreme Court. It is difficult to imagine that these projects will clear the legal infirmities.

First the Niyamgiri saga. When Vedanta came up with its project to make metallurgical grade alumina in early 2000, it sought and received separate green clearances (environment and forest) for three components – smelting plant in Jharsuguda, refinery in Lanjigrh and mining of the Niyamgiri hills – all on the basis of flawed EIA (environment impact assessment) reports – by 2009. The smelting plant and refinery became ‘fait accompli’ because while the legal battle was on these became operational. The bauxite mining got stuck because suddenly, in 2010, Jairam Ramesh, the then environment and forests minister, discovered an opportunity to make Rahul Gandhi a “sipahi” of the tribals and withdrew ‘final’ forest clearance that his ministry had granted in 2009. The Odish government challenged this and the apex court asked for a referendum, which PESA mandated but had been bypassed. The referendum said the obvious – a big ‘no’ – and now Vedanta is stuck.

It is a separate issue that the alumina and smelting plants were set up and become operational, or allowed to be, without any source of bauxite and without which refinery and smelting plants make no sense. The purpose, of course, was to make mining of Niyamgiri a ‘fait accompli’ too, but the court intervened.

In the case of Posco, again, all green clearances (both forest and environment clearances) had been granted by 2009. Again, these clearances were illegal and based on half-truths and untruths. When people’s protests and legal hurdles came in the way, MoEF issued a ‘stop work’ order in 2010. That order was reversed earlier this year. But the clearance has now been challenged in NGT. Given the flawed EIA, non-settlement of Forest Rights, non-adherence to PESA (adverse resolutions of the gram sabhas ignored) – all of which call for cancellation of the green clearances - NGT is unlikely to give it a go-ahead. What about supply of iron ore which would be needed for making steel? Well, after a legal tangle, the proposal is pending with MoEF now. This iron ore mining, like in the case of Vedanta’s bauxite, wasn’t part of the green clearances!

The Polavaram’s case is equally bizarre. The green clearances of 2010 were based on flawed EIA and violated both PESA and FRA. Odisha and Chhattisgarh challenged it in the apex court because though a part of their territory will be affected their concurrences had not been taken. Nor the mandatory approval of gram sabhas. Notwithstanding ‘national project’ status to it, and pressures from the newly constituted government of Chandrababu Naidu, the Polavaram can’t clear the legal hurdle easily.

The moot point is that the legal hurdles these projects face today are the creation of flawed processes and policies of giving the green clearances. Unless that is understood and fixed everything else is meaningless.

What are these flaws? First, the processes.

(i) Green clearances on the basis of ‘partial’, ‘rapid’ and ‘draft’ EIAs – which was the case with all the three projects cited.

(ii) Separate clearances to different components integral to one project. Also, stop giving separate clearance for environment and forest – again, common to all the three cases cited.

(iii) ‘Conditional’ clearances, pending compliance with PESA, FRA and other ‘mandatory’ or ‘binding’ guidelines, which is quite a routine affair with MoEF – again, common to all three cases cited.

(iv) Multiplicity of expert bodies and agencies working under MoEF to clear various aspects of a single project and bring transparency and accountability into their decision-making process - again, common to all three cases cited.

(v) Clearances on the basis of ‘assurances’ by the state government or the project proponent – again, common to all three cases cited.

(vi) MoUs that project proponents sign with the state government are not part of the clearance process and so, all the components of a project are not fully known and evaluated. 

(vii) Clearances knowing that gross and criminal irregularities have been committed – as in the cases of Posco and Vedanta – and making projects ‘fait accompli’ and

(viii) No public consultations, as required under EIA Notification of 2006.

Now, the flawed policies.

1.EIA, on the basis of which environment and forest clearances are given, are a self-certifying exercise.

This means, the promoter is asked to prepare an EIA report. This EIA is then taken at a face value and cleared, without an independent agency verifying the promoter’s claims. Claims in EIAs of all the three cases have been found to carry half-truths and untruths. For example, Vedanta’s refinery in Lanjigarh claimed no forest land was involved and hence, no forest clearance was sought. Later, this was found to be wrong.

Secondly, ‘partial’, ‘rapid’ and ‘partial’ EIAs are allowed, directly or indirectly, in the EIA Notification of 2006. Posco took advantage, presented a single-season environment impact study for 4 MT plants, while it is actually a 12 MT plant, and a 400 MW power plant, side-stepping a township, a port, a water pipeline project and road and rail linkages. It claimed only 471 families will be affected, which is grossly under-estimated. It presented a separate EIA for the port.

Therefore, EIAs should be ‘comprehensive’, prepared by a registered body, which should then be evaluated and cleared by a national authority.

2.  EIA Notification of 2006 should be amended to make it meaningful for discovering an alternative to the ones being proposed. The EIA application form has two columns that seek alternative ‘site’ and ‘technology’, which are meaningless. By the time a project is presented for clearance, the site is already chosen or is in the process of being acquired. Resistance to the Posco plant could have been avoided by shifting the site by a few km south, but that never figured. And why should a project proponent give an alternative technology option? These are mere formalities that don’t count.

3. MoUs of projects requiring public or private land and national resources like mines, water etc should be made mandatory part of the policies governing the clearance process. Land acquisition is de-linked unless forest land is involved. And when forest land is involved, a separate clearance process is initiated, which is handled by a separate department. Both environment and forest clearances should be integrated and take into consideration allocations of national resources like mines, which need green clearances too. What is the point of having an alumina refinery operating at a fraction of its installed capacity in absence of bauxite mining clearance? Or Posco having to fight a constant battle for land and waiting indefinitely for clearance for an iron ore mine?

4. The EIA Notification of 2006 should be further amended to remove the option “to skip” public consultation on flimsy ground – if, “it isn’t possible to conduct the public hearing in a manner which will enable the views of the local persons to be freely expressed”. The 73rd and 74th constitutional amendments and PESA and FRA give wide-ranging powers to the local bodies and tribals to plan and approve development projects. PESA and FRA override all other legal provisions and are mandatory. But these are not part of the policy governing the green clearances. Which must be the case. It is because these were not taken into consideration that now Vedanta finds itself without a mine (as the apex court-mandated referendum negated the green clearances to mine the Niyamgiri hills, for which it had obtained green clearances way back in 2009.

5. Transparency in the decision making should be made mandatory. The decisions and proceedings of the Central Water Commission (CWC) that clears irrigation projects like Polavaram are not subject to public scrutiny. The project underwent a drastic change mid-way through the clearance process – adding construction of 30-km-long, 10- m- high embankments on either side of two rivers, Sileru and Sabri, to avoid submergence of villages in Odisha and Chhattisgarh. These embankments would cost Rs 600 crore, as against a rehabilitation cost estimated to be Rs 60 crore.  This was added to overcome the problem of getting approval of gram sabhas in the tribal areas, as mandated by PESA. Absurdity apart, the Andhra Pradesh government forgot, even embankments would need approval of the very same gram sabhas.

The proposed changes are meant only for general infrastructure and industrial projects. Projects like river dams, hydropower plants, mines and thermal plants require separate set of changes and calls for another article.

Land conundrum and the hunger games

Financial Express, Sept 23, 2014

Prasanna Mohanty & Kaushik Dutta

A mechanism is needed to compensate farmers for not exercising their right to sell productive land but continue to grow foodgrains

India finds itself in a piquant situation. While its population, and with it the number of poor, is growing, its cultivable land is not only shrinking, more worryingly, the economic returns of the agricultural use are diminishing vis-a-vis non-agricultural use. The situation may not be alarming right now, but if it continues, India will soon face a threat to its food security.

This threat emanates from two developments. One, India may already have run out of non-cultivable land to meet its needs for industrialisation and urbanisation. This has provoked a section of the government, social activists, farmers and other stakeholders to argue that industry be shifted to wastelands or deserts to save agricultural land. Industry, like agriculture, needs inputs such as water and labour, which come at a huge cost in barren or wasteland. Are we willing to pay higher costs for our manufactured products? Probably not, because this creates a threat from cheaper imports and brings about a slow death of our manufacturing.

Two, the land pricing mechanism has developed in a way that it makes more economic sense for farmers to sell it than use it for farming. A study has shown that factors such as location and level of industrialisation have become more important determinants of the price of land than its productivity, indicating that farmers stand to gain more by selling their fertile land with locational advantages for industrial or urbanisation purposes. If this trend continues, chances are India would rapidly lose agricultural land, threatening its future food security.

The key to India’s food security, it appears, lies in re-framing the agriculture policy in a way that it incentivises farming to make it more lucrative and competitive. It may sound absurd but one way of doing that could be to actually subsidise it. Before this proposition is laughed out, here are the harsh ground realities.

The fact that India may have run out of allocable land for developmental purposes is acknowledged in the National Land Utilisation Policy of 2013 (NLUP). It says: “Between 1950-51 and 2007-08, land utilisation in India underwent significant changes. While the lands under net sown area, forests and non-agricultural uses have increased, the lands under ‘other areas’ uses have almost halved from 40.7% to 22.6%, meaning that for future land demands, the forest lands and agricultural lands may have to be used.”

NLUP recognises the threat to India’s food security and seeks “reasonable restrictions on acquisition and conversion (of) at least certain types of agricultural land.” The new land law (LARR Act, 2013) goes a step further and says that “irrigated, multi-cropped land” can be acquired only “as a demonstrable last resort”. But given the current mood to fast-track GDP, revive manufacturing and urbanise by creating 100 Smart Cities, that may be easier said than done.
More so, since farming is losing its shine and farm land is shrinking. The Economic Survey of 2013-14 says about 36 million workforce moved out of agriculture and allied activities between 2004-05 and 2011-12. Official data show that cultivable land reduced from 183 million hectares in 2000-01 to 181 million hectares in 2011-12.

Compounding the problem is the declining economic value attributable to fertility of land with regard to transactions that are not for farming. This may seem logical in an expanding economy, but a recent study carried out in collaboration with the ministry of rural development and German development agency GIZ proves it with data. It shows that geographical location like proximity to rail, highways, commercial developments, etc, and the level of industrialisation outweigh fertility in determining the value of land, and the influence of fertility has been progressively declining. This implies that the farmers stand to gain more by selling land with locational advantages than by growing foodgrains.
The current land valuation method, known as ‘circle rates’ in most states, is based on prior transactions in the area and is normally for sale of agricultural land, hinges mainly on fertility, access to irrigation and other factors which are fundamental to agriculture. This grossly undervalues the land price if such land is acquired for industry, housing or commercial purposes.

The new land law may have enhanced the compensation package by introducing a multiplier to the circle rate and adding a solatium, but it retains the circle rate method of pricing the land. So long as the circle rate remains, the incentive to swap farmland for non-farm use will continue. And so will the potential threat to India’s food security that the loss of farmland would entail. Increasing productivity may have compensated for the loss of farmland and migration of the agricultural workforce, but beyond a point, productivity alone wouldn’t be sufficient. The debate over modified seeds would continue for years and no short-term solutions to increase productivity are likely to emerge, given the low outlay of agricultural research in India. India would need to protect its farmlands and that would create a discomforting choice between the apparent profits available to farmers by way of selling their productive land or plying a trade that has lower economic returns and significant risks of failure.

Farm subsidies, be they in the form of crop insurance or MSP, are meant to ensure that agricultural activities flourish and remain economically viable so that there is adequate supply of foodgrains. In the current context, India would need to find a mechanism to compensate farmers for not exercising their right to sell productive land but continue to grow foodgrains; a mechanism that is fair and equitable and transfers the entitlements from the consumers to the producer. Call it subsidy or by any other name, this would only be an innovative addition in order to protect the farmland and the farmers and would be worth the effort given the bigger threat looming ahead.

Prasanna Mohanty and Kaushik Dutta work for the Thought Arbitrage Research Institute, a not-for-profit research think tank
http://www.financialexpress.com/news/land-conundrum-and-the-hunger-games/1291757/0

Buying land for India’s smart cities

Mint Opinion Page article with Mr Kaushik Dutta
Sept 20, 2014

The govt and its agencies will need huge tracks of land for housing and office complexes, civic and social infrastructure, manufacturing and other economic activities 

Prasanna Mohanty |  Kaushik Dutta

India is very rapidly urbanising and the pressure on its physical and social infrastructure is palpable. Urban population has increased from 285 million in 2001 to 377.1 million in 2011, forming 31.16% of the total. According to a 2014 UN report, the number may go up to 814 million by 2050, contributing the maximum to the world’s urban population, surpassing even China. When that happens, half of India’s population will be living in urban areas. 

Most Indian cities haven’t had the structural changes to accommodate such a large influx in decades, giving rise to conflicts and strife. How will they handle the additional pressure? Or will most of India’s urban space simply turn into slums? There is a real scare. Even a cursory look at the 2011 Census data presents a grim picture. Some of the top cities have a large population living in slums—41.3% in Mumbai, 29.6% in Kolkata, 28.5% in Chennai and 8.5% in Bangalore. The civic facilities have crumbled; power cuts, water shortages, flooding, traffic congestion etc. have become regular features of these cities. 

Realising this, the union government did announce a plan to develop 100 “Smart Cities” as satellites of the existing ones. The plans are at a formative stage now, but when the process gathers pace the first challenge that the government will face will be acquisition of land. The government and its agencies will need huge tracks of land for housing and office complexes, civic and social infrastructure, manufacturing and other economic activities. The present land acquisition scenario does not seem promising at all. Jharkhand is unable to secure or acquire land afresh to set up Indian Institute of Technology and Indian Institute of Management campuses. Chhattisgarh is battling for one-and-half decades to build its new capital, Naya Raipur. There are many such cases that show that land is holding up much of urban expansion and renewal. 

One of the root causes of land acquisition can be traced to the land pricing methodology. The archaic Land Acquisition Act of 1894, which caused widespread social conflicts in the past decades, may have been replaced with a new one—The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act of 2013 (LARR Act)—but the basic pricing mechanism remains the same. That is, the “circle rate”. 

A circle rate is the minimum rate below which a land or a house can’t be transacted. District administrations fix the rates on the basis of the average value obtained from the sale deeds. The outliers are disregarded; the average value represents the normal distribution and has been the basis of developing the circle rates. It is common knowledge that the sale deeds don’t reflect the market value as sellers often quote a lower price to save tax. The LARR Act recognises this and uses a multiplier—1 in urban areas and a number between 1 and 2 in rural areas—to the circle rates. It then adds a solatium of equal amount to work out the final acquisition price but doesn’t address the flaws inherent to the circle rates. 

In a recent study, Delhi-based think tank Thought Arbitrage Research Institute (TARI), in collaboration with the rural development ministry and German development agency GIZ, demonstrated what these flaws are. The study showed that the circle rates don’t reflect the true economic value of land. In fact, they grossly undervalue the land. The rates are revised from time to time and yet haven’t kept pace with inflation. Revisions do not follow any clear rationale nor are uniform across the states. Worse, the rates don’t take into account several economic and locational factors, such as size and productivity of land, level of industrialisation and connectivity of the area, and also the post-acquisition change in land use, which influence the value of land. 

Many developed countries have designed their pricing mechanism taking such factors into account. That we don’t hear about social conflicts there is a testimony to their success. Urban land has some unique characteristics. Several additional factors come into play, like land regulations—urban ceiling, rent control, land conversion and recycling, floor space area etc.—taxation & infrastructure investment, and impact the supply of and demand for land. When designed well and tuned in to the market, these factors make more space available and vice versa, thus, influencing the price of land. 

What is, therefore, needed is a complete rethink on the valuation of land in urban areas. Its unique characteristics, multiplicity of land use and an opportunity to generate far better returns on investments make urban land or land meant for urbanisation very distinct. Not only do we need a scientific and data-driven methodology, we need to factor in all these aspects in the valuation so that the fair price of the land to be acquired is discovered and the expectations of the land owners are met. 

Once that happens, social conflicts will end and there will be little to stop India’s march towards urbanisation. Prasanna Mohanty and Kaushik Dutta work for Thought Arbitrage Research Institute, a not for profit research think tank in areas of governance, sustainability and public policy.

Read more at: http://www.livemint.com/Opinion/Lmt8urcLq5bfBXuf75GbhL/Buying-land-for-Indias-smart-cities.html?utm_source=copy

Fight against the Maoists: Are we doing it right?

2013

The May 25 Maoist attack on the Congress convoy in Chhattisgarh’s Sukma district, that killed 28 and injured another 30, brought the focus back on the raging insurgency in the tribal heartland of India. It jolted the political establishments, both at the centre and state, to renew their resolve to fight it with greater intensity. But this was not happening for the first time. It has become a routine after every major Maoist strike, and yet, there is not even a hint of a rethink on the strategies. Nobody seems to ask some of the obvious questions: Are we doing it right? Can we do it differently or attempt different things for better result? After all, the Maoists are mounting much more devastating attacks and inflicting a higher number of casualties now. And in spite of the isolated instances of success, like in Saranda or Jangalmahal for example, there is little to think that we are succeeding in our objective of either winning away the tribal from the Maoists or denting the capacity of the Maoists to strike big in any significant way.

The festering insurgency is extracting a very high cost. The union home ministry data shows, the Maoists have killed 5,772 civilians and 2,065 security personnel between 2001 and 2012; destroyed hundreds of schools, aanganwadi centres and mobile towers.  Add to that the killings of civilians in questionable encounters (in Bijapur’s Sarakiguda in June 2012 and Edasmeta on May 17 this year), and destruction of properties (in revenge attack on three villages in Dantewada following the 2010 massacre of 76 CRPF personnel, and during the security forces’ first foray into the Abujhmad area in March 2012). Also, add thousands of crore of rupees being pumped in, in the name of development of the tribal belt by the centre (for example, this year Chhattisgarh has been given Rs 2,400 crore for MGNREGS work alone, and Rs 1,600 crore for PMGSY in last two years, according to rural development minister Jairam Ramesh) and the states (annual allocation for a Bastar district is to the tune of Rs 735 crore).

Not to forget the plight of hundreds of thousands of people, a large number of whom are tribals, trapped in the conflict zone (spanning nearly 200 districts), their future prospects and potential to rise above their miserable living conditions held hostage to the conflict between the Maoists and the state.

In such a situation, it is time to ask some tough questions and explore the possibility of doing it differently. But before that a quick glance at what is happening now.

Current approach: What happened immediately after the May 25 will illustrate how the response has become mechanical.

Two days after the incident, the centre rushed two battalions of central paramilitary forces to Chhattisgarh, to reinforce the 28 already deployed there and declared that joint operations would be launched in Chhattisgarh. It also advised the insurgency-hit states to develop their own Greyhound forces, on the line of Andhra Pradesh. In Raipur, chief minister Raman Singh promised to intensify the fight and ruled out any possibility of peace talks.

There were all-party meets too, at the centre and in the state. There was even a chief ministers’ conference on internal security in New Delhi where the issue was discussed at some length. Addressing the chief ministers on June 5, the Prime minister repeated his government’s counter-insurgency strategy: “I must point out here that the challenge of Naxalism has received our serious attention for quite some time now. We have adopted a two-pronged strategy to deal with the challenge: conducting proactive and sustained operations against Maoist extremists; and, addressing development and governance issues in Left Wing Extremism affected areas.”

Talking about the future course, he said: “I must also emphasize here that the two-pronged strategy that we have followed so far needs to be strengthened and pursued with rigour.”

The Prime minister repeated himself at the all-party meet that followed (June 10). The all-party meet endorsed his formulation in its resolution and said: “We also urge the State Governments to draw upon their own resources as well as the resources provided by the Central Government to re-establish the rule of law and accelerate development activities in the affected States.”

Clearly, the approach is: More of the same – hot-pursuit of the Maoists and aggressive development – very much in the same old-fashioned way even though it hasn’t proved very effective.

Developmental approach: First, the development part. Three examples will demonstrate what is wrong with our current approach and how it can be redesigned for better results: Saranda in Jharkhand, Mendha-Lekha in Maharashtra and Abujhmad in Chhattisgarh – all Maoist-hit areas.

After the security forces secured the Saranda forests in late-2011, rural development minister Jairam Ramesh stepped in and launched a Saranda Development Plan (SDP) with much fanfare. The plan was to rapidly develop the area with a view to bring it back to the mainstream. He released about Rs 250 crore meant for various welfare programmes of his ministry, like MGNREGS, PMGSY, Indira Awas Yojana, electrification (solar lanterns) etc, at one go, for 56 villages of Manoharpur block in West Singhbhum district. My former colleague Sarthak Ray of Governance Now lived in the area for six months in 2012 to track the progress of SDP. His verdict: “It has failed because the locals are questioning the very purpose of the development. They are asking why there is so much concentration on building roads. They think the roads are being built to allow private mining companies to operate in the area.”

They are not wrong. In spite of protest from Ramesh, the centre and the Jharkhand government have recently allowed the Jindal and Rungta groups to mine iron ore there. Earlier, only SAIL was working in the area and had been given additional block for mining after the Saranda forest was cleared off the Maoists.

Under SDP, there was a plan to build 10 integrated development centres (IDCs) to provide various government services. Until June 2013, only one IDC building had come up (in Digha), without any sign of services being provided at any time soon. Similarly, only the first installment for the Indira Awas Yojana houses has been given so far, not the rest.

Contrast this with the example of Mendha-Lekha, a tribal village in Gadchiroli district of Maharashtra. This village of about 400 people was the first one in the country to get ownership over bamboo (by way of transit pass that allowed them to trade) in April 2011 under the Forest Rights Act. Until then, bamboo was the property of the forest department even though PESA had granted ownership rights over the minor forest produce (MFP) to the gram sabha of the scheduled (v) area way back in mid 1990s.

In 2012, the villagers harvested and auctioned their bamboo for the first time, earning Rs 1 crore in the process. After paying generously for the labour, the village saved Rs 50 lakh and put it in a fixed deposit account. It is now planning to use a part of this saving for better management of their 1800-hectare community forest (Rs 25 lakh) and on health and education (Rs 12.5 lakh each). This year, they are going for e-tendering in October and expect to earn more than Rs 1 crore.

In 2011, the planning commission had estimated that ownership of MFP (bamboo, tendu, apta etc) alone would bring Rs 50,000 crore of direct income for the tribals. In spite of the Mendha-Lekha example, how many tribal villages in the country have actually got the ownership rights to trade in MFPs? Maharashtra is the only one to have allowed about a dozen villages to trade in bamboo and another one-and-half dozen in tendu. No such report has come from the rest of 8 states having scheduled V areas. The SDP has no component dealing with FRA or ownership of MFPs.

The implementation of the Forest Rights Act is poor too. All claims should have been settled by December 2010, as per the central government’s directive. Here are a few examples about the status of its implementation. Jharkhand has received only 42,003 claims and granted 15,296 rights (the state has provided no details of the individual and community right claims or settlement). Maharashtra has given 101,356 individual rights (out of 340, 927 claims) and 1,869 community rights (out of 5,048 claims). Odisha has given 314,420 individual (out of 518,075 claims) and 1,046 community rights (out of 4,605 claims). (All figures valid as on May 31, 2013 and sourced from the union tribal welfare ministry website.)

Chhattisgarh declared a 100% claim settlement in early 2010. Later in the year, a joint committee was set up by the tribal welfare and environment and forests ministries (headed by retired bureaucrat NC Saxena). The committed submitted a report saying that there was large scale “wrongful rejections” and “blatant irregularities”.  It also said that in large parts of the Maoist-hit Bastar region the process of settlement had not even begun. The tribal welfare ministry data shows, as on May 2013, Chhattisgarh has granted 214,668 individual (of 487,332 claims) and 775 (of 4,736 claims) forest rights.

A noticeable feature of the FRA implementation is a re3latively smaller number community right claims and settlements. My own visits to the tribal areas of Ganjam district (Maoist-hit) in Odisha in October 2012 showed why. One the one hand the villagers didn’t know about this right and on the other, the administration had not even initiated a drive to collect and grant such claims. Same was the case in Rayagada district (where Vedanta is trying to mine the Niyamgiri hills for bauxite) two years earlier.

Imagine, how dramatically the lives of tribals will transform if they get their forest rights and ownership over MFPs.

Now, Abujhmad. This region, spreading over Bijapur and Narayanpur district of Chhattisgarh and Gadchiroli of Maharashtra (nearly 4,000 sq km in area), has long been held to be the Maoists’ main base, where its military headquarters is located and from where they run their “Jantana sarkar”. But when the security forces entered the Chhattisgarh part of the region in March 2012 for the first time, they were shocked at what they found. Tusha Mittal of Tehelka magazine, who entered the region two months later, described her experience in these words:

“It is a measure of both the complexity and the pathos of the Maoist-tribal crisis in India – and the inadequate narrative that has built up around it – that when Operation Hakka actually got off the ground, and the troops entered the great unknown, what they found in Abujhmad was not the military HQ of a deadly and well-organised insurgency but scraggly villages and forlorn clusters of leaf and bamboo huts. Their biggest recovery seems to have been an inkjet printer….” (Tehelka, May 2012)

It is a sad comment indeed on the state of governance that Abujhmad has had no land or revenue survey, no policing and little presence of government for more than six decades after independence. In fact, it was opened to the outsiders only in mid-2009, having been shut for nearly 30 years and required a special permission of the collector to enter the area.

A planning commission report of 2000 identified 5 major problems of tribal belt –(a) land alienation, (b) indebtedness, (c) relation with forests, government monopoly over MFPs, and non-implementation of the Forest Rights Act, 2006, (d)  ineffective implementation of Panchayats (Extension to the Scheduled Areas) Act of 1996 (PESA, 1996) for Schedule V areas and (e) involuntary displacement due to development projects and lack of proper rehabilitation. These issues continue to be grossly neglected even today.

None of these issues have been addressed meaningfully.

Security approach: As far as the security aspect goes, the May 25 incident is evidence enough of an ad hoc approach, complacency and a clear disconnect among various forces battling the Maoists. It was a huge security failure – the basic drill of avoiding movement in a large convoy in a conflict zone, with so many high-value individuals, taking the same route twice; sanitization the route by checking for mines and making physical deployment of force, police escorts etc were all violated – as well as an intelligence failure (a significant Maoists movement, consisting of about 200, went unnoticed and unchallenged). There are police stations about 10 km apart on either side of the ambush site, along with a company of CRPF each (at Tongpal and Darbha) and yet, the security forces reached the site only the next day. Though the exact number of personal security guards travelling with the convoy is not known, their number is reported to be close to 30 (Mahendra Karma, one of the Congress leaders killed in the incident, had Z-category security). These security men were no match even in terms of arms and ammunitions. Though the ambush continued for two hours, no help came their way.

The CRPF has now submitted its own inquiry report to the union home ministry (National Investigation Agency is conducting a full-fledged inquiry, whose report is awaited), giving itself a clean chit even while admitting that a good 12 km between Tongpal and Darbha (a 23 km stretch) had not been sanitized at all. The ambush site falls in this stretch. The report says only 5 km each from Tongpal and Darbha was sanitized by the road opening parties. It passed the blame on to the state police saying that it does only what it is asked to by the police. (Indian Express, June 28, 2013) Surely, the CRPF is not supposed to act dumb.

In the given scenario, pumping more paramilitary forces in, who are ill-trained (CRPF started training in jungle warfare only after losing 76 personnel in 2010 Maoist ambush) and ill-equipped, both physically and mentally, is no answer. There may be comfort in number, but that hardly pays. This is reflected in the way the forces are getting killed by the Maoists and also, in the way the security forces are killing innocent villagers (CRPF killed villagers for two successive years in Bijapur, in 2012, 2013, during the ‘beej’ festival) and burning their huts (in Dantewada and Abujhmad) in the name of anti-Maoist operations.

More than 100,000 central forces are now deployed in anti-Maoist operations (CRPF alone has sent 85 battalions, that is 85,000 personnel) in the central India, supported by UAVs, helicopters and the states’ security paraphernalia. But they have no intelligence wing worth talking about or a good coordination with the local police force. Often the security forces got into trouble by launching operations with vague intelligence inputs. The condition of policing is appalling. Soon after May 25 incident, Chhattisgarh chief minister told an English news channel that the difference between two police stations in Bastar was 100 km. Needless to say, inducting more force and adopting a hot-pursuit policy is plain foolishness in such circumstances. The ground needs to be prepared first, with better policing and credible intelligence. Also needed is training for the paramilitary forces in the nature of their engagement with the civilians. They need to know that they are essentially “protectors” of people, not an assaulting army.

Ajai Sahni, executive director of Institute of Conflict Management, has this to say about the over-all security approach: “Prime Minister Manmohan Singh has been repeating, incessantly and vacuously, since the early months of his first tenure commencing May 2004, that the Maoists constitute the greatest internal security challenge to the country. And yet, nearly a decade later, there is no evidence of any coherence of assessment, let alone strategy, within the national and state security establishments; no recognition of the most fundamental reality that, unless the intelligence and policing apparatus throughout the country is enormously strengthened, professionalised, modernized, and made autonomous of the corrupt and perverse control of political parties and personalities, no crime – leave alone a significant and widespread insurgency – can be brought under control. As has been emphasised again and again, unless the crisis of capacities and capabilities is addressed, Darbha will only be a momentary link in a long and interminable chain of insurgent excesses. (South Asia Intelligence Review, May 27)

There is little to argue against this. But shockingly, very little attention has been paid towards these matters. After the 2012 Sarakiguda fake encounter, the union home ministry attempted to rewrite the standard operating procedure (SoP) for the security forces but it had no component on educating and sensitizing the security forces towards their primary duty as protectors of the people.