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.
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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.
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