Greedy Corrupt Indian Politician Stalling Infrastructure by Controlling Land
- From: "Mortayee" <mortayee@xxxxxxxxxxxxx>
- Date: 21 Apr 2006 16:08:33 -0700
Now, don't lose the plot
Shekhar GuptaPosted online: Saturday, April 22, 2006 at 0000 hrsA great
week for infrastructure. And a great time to ask:
In a week full of really spectacular news on the infrastructure front
- the resolution of the Narmada fasts, the clearance of the
Bangalore-Mysore expressway, the resurrection of the first dormant unit
of the Dabhol power plant and the Delhi high court's dismissal of the
Anil Ambani-owned Reliance Airport Developers' petition against the
award of the airport modernisation contracts - here is a story. A
story that tells us why almost any project that involves land gets
delayed forever.
One of the things Nawaz Sharif was truly proud of was the world class
eight-lane expressway he built between Rawalpindi and Lahore. He was
aghast when, in January of 1999, I admitted to him I had never seen it.
I was having lunch with him at his Islamabad home, with an interview
(in the course of which he invited Vajpayee to come on the first
Amritsar-Lahore bus) scheduled the next day. ''There will be no
interview tomorrow,'' he said. ''You come to Lahore on my
motorway, we will talk there the day after.'' Sure enough, he sent
me the latest acquisition in his stable of Mercs to check out his
motorway.
The motorway was grand as promised. But it had no traffic on it. It cut
right through green farmland, bypassed big towns, with views of farmers
picking their green pea crops on both sides. I asked the driver why
there was no traffic on this eight-lane marvel. ''Why should
anybody pay toll to ride a highway when it is a hundred kilometres
longer than the G.T. Road that Sher Shah Suri built?'' he asked.
Then he explained why. The moment word spread that a totally new,
greenfield motorway was to be built, powerful politicians and
bureaucrats got into the act, making sure the road passed through their
villages and meanwhile quickly bought as much land along the likely
route as they could. Many fortunes were then made, or fattened, as the
builders came acquiring these lands, obviously at inflated prices fixed
by the same politicians. Pakistan's politicians may not have had that
much experience yet at running an elected government or building -
and respecting - democratic institutions. But they had learnt quickly
the basic fact of politics in the subcontinent: that the politician
lives by the land. His own, and all the state can have anything to do
with.
This is precisely the reason why so many infrastructure projects get
stalled in India. Take the Bangalore-Mysore expressway. If you carried
out a real investigation you'd see why politicians interfered. All
along the route, politicians - cutting across party lines - have
bought, or grabbed, chunks of land that they then wanted the builder to
compensate them for.
This greed was complicated by a second factor. In a reforming economy
where politicians no longer have the privilege of industrialists having
to prostrate themselves at their feet for licences and quotas, the only
thing still left in their control is land. This, in particular, is what
brought former prime minister, H.D. Deve Gowda, into the act. He once
told me - on the record - that if any evidence ever came up linking
him, or any member of his family, to any land deals on this highway, he
was prepared to hang. Even if you take him at his word, his irritation
at his predecessor having parcelled out a project with such real estate
implications was evident. For our politician now, his control over land
is not just a matter of greed, it is also a symbol - one of the last
surviving ones - of state power.
For years now, the political class has wondered how India's IT
industry grew so big without any of these entrepreneurs even having to
curtsy before them. Quite to the contrary, it was the politicians who
vied to be invited to Infosys and Wipro campuses, who basked in the
glory of India's IT entrepreneurs. The Vajpayee government's
appointment of powerful personalities as IT minister was just an
afterthought, and an inconsequential one, because they had so little to
do. There is nothing that our traditional political class hated more
than the idea that somebody could set up a successful business empire
without having to ''seek their help''. This is where the
origins of the Gowda-Narayana Murthy spat lie. Last year, when Infosys
wanted to expand, it had no choice but to go to the government to ask
for more land. So Gowda said, aha, now you come asking for something
only I can give you! Now how can you run a guesthouse on this land? How
many Kannadigas will you employ?
It is precisely for this reason that all infrastructure projects
needing land get so delayed in India. The National Highway project, new
ports, airports, SEZs, have all run into similar problems. On the other
hand, anything that does not involve land acquisition or allotment
grows much faster. Telecom is an example. Watch also how smoothly the
Railways will be able to proceed with their modernisation, including
the construction of hotels in public-private partnership. This is
because they already own all the land they need. Thus, various wings of
the government in Delhi, in contrast, have not been able to auction
even a third of the hotel sites which need to be built before the 2010
Commonwealth Games.
Our politician maintains this control over land, public, as well as
yours and mine or the poor farmer's, through a combination of archaic
laws on land ownership and usage, lousy land records and municipal
regulations. Because it is only the government that has the power to
allow agricultural land to be used for commercial purposes, the farmer
can almost never sell it directly to a builder. The politician uses
draconian laws to acquire it instead and then allot or auction it for
commercial use at much higher prices. In the process the farmer is able
to monetise only a faction of the value of his land. The rest feeds the
government. Besides fattening the politician's personal account.
Is it any surprise then that the politician is loathe to let go of that
hold over land. If there is something friends of farmers in the Left
and elsewhere should be campaigning for, it is the reform and
modernisation of these laws. Politicians can't keep
''acquiring'' their lands and collect massive arbitrage for
themselves and their governments.
It is precisely for this reason that politicians in a supposedly modern
state like Maharashtra have not yet abolished the Urban Land Ceiling
Act in spite of the fact that the reluctance to do so will deny them
even a paisa under the National Urban Renewal Mission. As long as
ceiling remains, builders and developers have to keep going to them.
And who knows better than our politicians how to monetise discretionary
powers. Or the equally lucrative power of just looking the other way
when builders cut corners to get around these restrictions. That is why
so much of our construction happens to fall in the
''unauthorised'' category.
This is also why, say in a city like Mumbai, you are allowed FSI (the
amount you can construct per sq ft of land) of just under 1.5, while in
Hong Kong it is 33 and in Dubai and New York, 25. This is to create an
artificial scarcity, and then monetise the politician's powers to
waive this, relax that, condone or ''compound'' one offence, or
merely to ignore the other.
Licence quota raj is now happily buried in the past. The next big
reform India needs is of its land laws. This will free up even more
entrepreneurship and wealth than the end of industrial licensing and
import controls, besides reducing corruption. The problem is, the
politician understands this very well too. That is why it will be the
toughest reform of all.
sg@xxxxxxxxxxxxxxxx
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