Ironically, after LARR, industry needs more govt help
Congress vice-president Rahul Gandhi may or may not have succeeded in scoring political points when he alleged BJP prime ministerial candidate Narendra Modi sold land to a private firm at around R1 per square metre, or roughly the price of a toffee. What he has done, though, is to further the distrust of corporate India, and lessened the chances that people in government will want to go out of the way to help industry. That is unfortunate since, while there are blatant cases of corporate India seeking and getting favours, it is largely red tape that drives India Inc to the government. In the ongoing case of gas price hikes, the petroleum ministry has made such a mess of things, when the government does hike prices as it must in order to have more exploration activities, it will look like a favour to a big industrialist—never mind that the biggest beneficiaries of the hike will be the government of India and its PSU ONGC. If a KM Birla had to approach the prime minister to help get a coal block allocated to him, it was because there was no other way—no auctions, nothing—for him to get coal required to operate his industries; the best blocks were reserved, then as now, for public sector firms, never mind how inefficient they are. Given how, the report on National Investment and Manufacturing Zones points out, every firm engaged in manufacturing has to comply with 70 laws which require 100 forms to be filled each year—this takes up over a fifth of management time for small firms—India Inc has no option but to approach the government for help.
While there can be no excuse for forcing farmers to sell their land cheap to industry—and there have been several such cases where the Supreme Court has struck down the acquisition—ironically, the Land Acquisition, Rehabilitation and Resettlement Act (LARR) pushed by Rahul Gandhi’s party will result in industry approaching the government even more for help. LARR sought to deal with precisely the kind of toffee economics charge Gandhi made. Since governments typically give permission for land-use conversion only after it has been acquired, farmers rarely get full value for their land. So, LARR hiked the compensation to twice the highest value of sale in the area; it then doubled this. What has been added to 4-times the value of land is a job for land-losers, alternate housing, resettlement allowances ... and for even private land acquisition above a threshold, a social impact assessment (SIA) will have to be done. All of which will drive industry back in politicians’ hands, to raise the bar at which SIAs are mandatory, to clear R&R activities, etc—though industry has to pay for R&R, it can’t proceed if the government delays R&R. If the government mandates it will be the sole supplier of toffee, can you blame industry for going to it to buy toffee?