Showing posts with label CAG. Show all posts
Showing posts with label CAG. Show all posts

Land Acquisition: Let's have a land audit first.



In the days to come the battle over Land takeover is only going to be intensified, both in Parliament as well as on the streets. As various farmer organizations get ready to storm Jantar Mantar on Mar 18, and Anna Hazare planning a padyatra from Mar 30, the government itself is getting ready to face the tough challenge in Rajya Sabha where it lacks the numbers.

While the Lok Sabha passed the LandAcquisition bill with 11 minor amendments, most of these already existing in the 2013 law, the painstaking defense by Rural Development Minister Birender Singh has failed to cut much ice. In the shrieking debates and the deafening noise that preceded and still continues, the real issues behind the need for a law that allows forceful takeover of land have disappeared from public scrutiny. In this article I am trying to analyse some of the main arguments that have been floated to justify land acquisition without the consent of the farmer.

I hear again and again that the availability of land is coming in the way of development. Projects worth Rs 4-lakh crore are held up because of non-availability of land. While the government has failed to provide a list of projects that have been held up, Economic Survey 2015 does not list land as a limiting factor for infrastructure projects to take off. It states that the projects are held up because of unfavourable market conditions, and lack of investor interest. Secondly, if land availability was a factor I don’t see any reason why over 576 Special Economic Zones should have failed to perform.

A CAG report says that out of the 45,635.63 hectares of land notified for the development of SEZs, actual operations took place in only 28,488.49 hectares or 62 per cent of the land acquired. Neither did the SEZs create employment nor did it lead to manufacturing or industrial growth. And remember there was no environment clearance hurdle nor was there any social impact assessment required. Moreover, with all kinds of tax holidays, estimated to be in tune of Rs 1.75 lakh crore, the SEZs failed to perform. In a scathing comment, CAG says “Acquisition of land from the public by the government is proving to be a major transfer of wealth from the rural populace to the corporate world.”

I don’t think the government even knows how much of land already acquired is lying vacant. An investigation by a TV channel found that nearly 45 per cent land acquired in just five States is lying unused. In Orissa, for example, 3799 acres acquired for TISCO steel plant in Gopalpur in 1995 has still not been used. 
In any case, the government is eyeing 17 lakh acres of surplus land lying with public sector undertakings. With so much of land already available, I don’t see any reason why the available surplus land is not first put to proper use.

Further, the argument that the 2013 law needed to be changed since the Chief Ministers wrote against it is simply amusing. Let us not forget that the Chief Ministers of the coal mining States also opposed open auction of the coal blocks. But after a Supreme Court order cancelled 204 coal blocks, the auctions that are underway are likely to bring in revenue of Rs 15-lakh- crore. I wonder why in a market economy, where free enterprise is being promoted, the private sector can’t be asked to bid for land in open auctions taking the prevailing market price as the base price.

A study by IIT Roorkee estimates that in past 50 years some 50 million people have been displaced by ‘development projects’. With the oustees of Bhakra dam and Pong dam still not rehabilitated, land conflicts have erupted primarily because the government forcibly takes over land for the private entities in the name of ‘public purpose’. As several CAG reports have found out that the land acquired has finally gone into the hands of real estate firms who have made fortunes.

In 2013-14, a study by Washington-based Rights and Resources initiative found 252 conflicts over land acquisition. A Newsweek article sometimes back had pointed to 75,000 land conflicts, most of them bloody, in China every year. A recent report states that 28 lakh villagers have committed suicide in China in past 10 years. About 80 per cent of them did so because of forcible land takeover. Lawmakers in India therefore need to be doubly concerned about the resulting socio-economic unrest.

Actually, the commodification of land is part of a global design. Globally, an area equivalent to the cultivable area of China and India has already been acquired by private capital. For India, it was in 1996 that the World Bank had asked to move 40-crore people – twice the combined population of UK, France and Germany – from the rural to the urban areas in next 20 years, by 2015. In 2008, the World Development Report of the World Bank had asked India to hasten the demographic shift by going in for land rentals. It is primarily for this reason that agriculture is deliberately being starved of resources, and farmers’ income is being kept low to force them to abandon farming and migrate.

Pitting agriculture against industrial development is a faulty debate. At a time when jobless growth is the norm anywhere and everywhere, industry cannot absorb even a fraction of the growing workforce. In past 10 years, between 2004 and 2014, only 1.5 crore jobs were created despite a high growth rate. Encouraging entrepreneurship in the rural areas and providing land to the landless is therefore the only sensible way to revitalize the economy. If the drought-prone village of Hibre Bazaar in Maharashtra can now boast of 60 lakhpatis, I see no reason why it can’t be the norm in the rest of the country. #

No shortage of land, no environment clearance, no social impact assessment, massive tax holidays, and still SEZs failed to perform.





I still remember vividly. Several years back, the former Prime Minister Manmohan Singh was presiding over an annual corporate awards function organized by a business newspaper. After Manmohan Singh’s address, the floor was set open for some questions from the audience.

Industrialist Anand Mahindra got up and asked a question which went something like this: “Mr Prime Minister, what should a young graduate from an Indian Institute of Management look up to in today’s not-so-attractive business environment?” To this, Manmohan Singh gave an answer, the gist of which was: “We are determined to set up exclusive export zones providing required incentive and support for the young entrepreneurs. Special Economic Zone (SEZ) is an idea whose time has come.”

The SEZ Act was passed in 2005. There was so much of excitement all around that all farmer protests over land grab were simply brushed aside.

Seven years later, the SEZ turned out to be a misplaced idea. According to an economic newspaper it was an idea long past its expiry date. With more than 50 per cent land allotted remaining unused, and with no significant role in creating employment and boosting exports, most of the SEZs that have been approved have turned into real estate havens. Not meeting the intended objectives of spearheading a manufacturing revolution, these SEZs were effectively used by the IT companies to avail tax incentives by shifting their offices into these zones.

A Parliamentary Standing Committee had in June 2007 estimated a revenue loss of Rs 1.75 lakh crore from tax holidays granted between 2005 and 2010. Reading the performance audit of the SEZs operations, between 2007-2013, by the Controller and Auditor General (CAG) tells us the magnitude of the SEZ scam. Of the 576 SEZ projects approved, 392 were notified and only 170 are operational. While less than 48 per cent of the existing SEZs are engaged in any export activity, only 3.8 per cent exports came from these zones in 2013-14.

“Out of the 45,635.63 hectares of land notified for the development of SEZs, actual operations took place in only 28,488.49 hectares or 62 per cent of the land acquired,” the report states. In a scathing comment, CAG says “Acquisition of land from the public by the government is proving to be a major transfer of wealth from the rural populace to the corporate world.” With 50 per cent land lying idle, many developers had put the land to other industrial uses or used it for building real estate hubs and even mortgaged it to raise finances.

Interestingly, the Commerce Ministry had turned a blind eye to the gross mismanagement and violations of the SEZ Act. It is now considering to allow developers of SEZs to throw open apartments, schools and hospitals to people who live outside these zones. Land has also been used for setting up residential complexes or used for other industrial activity, not permitted under the SEZ Act.

Just to give you an idea as to what all kinds of tax exemptions were accorded, here is a list. The SEZs were given complete exemption from excise duty, custom duty, sales tax, octroi, mandi tax, turnover tax, as well as income tax holiday for ten years. Also spelled out were provisions for 100 per cent foreign direct investment, exemption on income tax on infrastructure capital fund and individual investment, and an assurance of round-the-clock electricity and water supply. The SEZ promoters were also been given a waiver from carrying out an Environment Impact Assessment.

Permitted to indulge in commodity hedging, external commercial borrowings up to US $500 million without any maturity restrictions, freedom to bring in export proceeds without any time limit and make foreign investments from it, exemption from interest rate on import finance, and setting up off-shore banking units with income tax exemption for three years and subsequently 50 per cent tax for another two years are some of the financial enticements. And if these SEZ units were to sub-contract production to local manufacturers outside the princely estates, there would be duty drawbacks, exemption from state levies and income tax benefits.


With these kinds of generous tax exemptions, and with huge tracts of land being made available, I fail to understand why the SEZs did not perform. This assumes significance at a time when a Land Acquisition Ordinance has been brought in simply to overcome the delays in getting land for the industries. If 45, 635 hectares of land and with practically no obligation for paying taxes, the industry has failed miserably to perform, what is the guarantee that more land for the industry will usher in a manufacturing revolution?

It was certainly a badly conceived idea. The undue haste with which the SEZ Act was passed in Parliament, and the swiftness with which the Ministry of Commerce had drafted the rules and implemented the Act remains unprecedented. At a meeting I had with the then Joint Secretary in charge of SEZs, I was told that I was the only one who was questioning the role of SEZs. “Everyone I meet is all praise for this great opportunity for boosting export growth and creating jobs,” I was told.

This only illustrates how the economic policies and frameworks are put into practice. Ministry of Commerce had gone ahead in its wisdom to aggressively promote SEZs without first assessing whether it will work or not. Nor did it care to have widespread consultations or any social and environmental impact assessments. This myopic approach led to a massive scam. Massive land resources were misused, and resulted in huge revenue losses.

To ensure that such a scam is not repeated, I have two suggestions: First, the then Commerce Minister and the concerned officials should be held accountable for the SEZ scandal. Good governance can never be enforced without holding ministers/bureaucrats responsible for their decisions. Secondly, the erring companies must be penalized for the failure to perform and land and other resources recovered from them with penalties. The industry must be made to understand that there are no free lunches. Such a step will send a right kind of signal to the industry. It must perform or perish. #

Orissa Post: Scam-tainted SEZ Feb 4, 2015
http://www.orissapost.com/epaper/040215/p8.htm

DNA Mumbai: Economic Disaster Zones. Feb 20, 2014
   

India Together: Why easy land is no guarantee of Industrial growth, Feb 9, 2015
http://indiatogether.org/sez-failure-implications-for-land-acquisition-and-industry-growth-economy