Friday, July 29, 2011

Move on Anna Hazare. There are many other important things to be done.....

An attempt is again being made by Anna and his team to hijack the agenda of the country and focus only on corruption. Already, the Lokpal issue has taken up too much time. It should be put to bed now. By changing its priorities and moving the Lokpal issue up, the government has already done enough. In a fast developing and fast growing country, there is limited bandwidth for any one issue. The farmers, the aam aadmi, the rural poor, the landless and the land owners are all waiting for the Lokpal logjam to end and their issues to be taken up. The new Land Acquisition policy announced by the government yesterday is one such.

India’s ancient Land Acquisition Act (1894) is about to be changed. After many land battles over the past few years, it’s become clear that the old act is simply not good enough to balance industry’s and government’s need for land with the needs of the poor. There have been violent protests all over India as the government and private players have tried to acquire land. At least one government (WB) has been toppled with at least part of the reason for its loss being attributable to its poor handling of the Singur and Nandigram land issues. There have been recent land acquisition problems in UP – the most important political battleground in India, with Mayawati’s government being accused of corruption and looting the poor. There was trouble yesterday in Punjab also on a similar matter. Clearly, the poor of the people are upset and angry at the way their land is being “grabbed” by the government under the present act. The compensation isn’t enough; the care for the displaced even less. Now all of that is set for a change.

The new policy tries to reward land owners in a huge huge way. It recognizes that for farmers, land doesn’t have just commercial value (the so called market value). It has high emotional value as well since land is usually inherited from previous generations. It also has high security value.....after all, the only security the poor can give to their next generation is the security provided by land. And then there is the very special ability-to-feed value attached to land – even in the most adverse of circumstances. Land for the acquirer is just land. Land for the giver is much more. Taking congisance of this reality, the new proposal recommends six times of the market value to be paid as compensation. Further, the land-owner would be provided an annuity of Rs 2000 per month for twenty years. It remains to be seen if this annuity is inflation linked or not. It should be. Additionally, with the objective of keeping the rural poor gainfully employed, mandatory employment has been prescribed for those who have been displaced. If employment cannot be given, then additional compensation of Rs 2 lacs has been prescribed. It remains to be seen if this compensation is dependent on the size of the land acquired. It should be. There is also a serious effort at making the displaced a beneficiary in the future success of the project for which the land was acquired.....if the land is being developed for urbanization, then as much as 20% of the developed land has to be shared with those whose land has been acquired. Further, there is a provision for paying 25% of the compensation in the form of shares, whose value (hopefully) would appreciate over time. There is also the concept of resettlement allowance for those who lose their livelihood. It appears that the whole idea is that the land deal should not be a one-time transaction of buying and selling, but should tie the land seller and the land buyer for a much longer period of partnership. Scheduled Tribes are set to get additional sops.

The impact of the new Land Acquisition Act is so profound that the country must stop all other activities (including agitating endlessly on the Lokpal Bill) and take note of this bold initiative. We must have debates on it. Discuss its strengths and weaknesses. By making the policy pro-people, the government is trying to make it more attrative to those who have owned land for centuries. By bringing in clarity, the government is trying to make it easier for industries to acquire land. By balancing the needs of the land owners with those of industry, the government is trying to remove the biggest bottleneck in the path to rapid industrialization. By engaging with the government on this policy, civil society can make it even stronger. If the draft Bill is passed by Parliament, it should help grow industry while protecting the rural poor. Why should the country’s industrial and rural policies be in conflict with each other? The center has been careful not to allow acquisition of multi-cropping land – keeping an eye on the food production requirements of the future.

What’s the downside of this policy? It’s obvious. Every single policy that empowers the poor has an opposite impact on the better-off groups in the country – including most readers of this blog. As a result of higher land acquisition prices, there will be an upward pressure on the prices of manufactured goods. As prices rise, many urbanites who don’t adequately understand economics or choose to mix politics into it will shout and scream at the government (many years later) for the high inflation in manufactured goods. Most will blame the Congress for it (as they are doing now), not realizing that the same factors that cause inflation for us urban folks also help the rural folks improve their lives. There is a re-balancing of wealth happening and many of us dont like it. So we blame the politicians. Inflation will become the subject of many discussions on many TV channels – with opposition politicians masking the real issues and taking the ruling party to task for the wrong reasons.

Want another example of a government policy leading to inflation? Take the current food inflation. Many of this blog’s readers have commented in an earlier post of mine that there was lesser inflation during the NDA rule than during the Congress rule. Let’s look at some facts. During the 5 years of NDA rule between 1999 and 2004, the Minimum Support Price (MSP) paid by the government to the farmers of the country moved up at a snail’s pace. In these five years, farmers managed to get only 25% more prices for rice and just 15% more for wheat. Now imagine this. If you were a salaried worker, and in five years, your salary went up by a total of just 15-25%, would you keep working in the company or quit it?! That’s why the farmers quit the BJP in 2004 and went to others who could take better care of them. The BJP has always focused on the city folks – their core constituency – telling them that they had kept inflation for them down. But they never explained that they kept inflation down by squeezing the rural poor. In contrast, in the last 7 years of UPA rule, the price of rice has gone up by 96% and that of wheat by 78%. Who’s paying the higher prices? Urban folks like you and me. Who’s benefitting? The poor farmers of this country. Can’t we, the better-offs, afford to pay a little more if we know that that our money is going to help the poor in the country? Apparently not. Everyone complains about inflation. Many complain that it is the hoarders and agents in-between who take away most of the money we urban folks pay for our food items. That’s indeed true. They do. And this needs to be cleaned up too, but let’s not mix issues here. The extent of hoarding hasn’t suddenly increased during the UPA rule. It’s always been a problem in India. It’s more to do with our traditional distribution systems. Those need to be modernized. Besides, let’s remember.....the MSP is the price that is delivered in the hands of the farmer. It’s a real increment for him.

That brings me back to Anna. Anna should know that while he has started a good movement, he must know when to stop it. In economics, there is the Law of Diminishing Marginal Returns. The Lokpal debate is suffering from that now. I see the opinion turning now. So many media outlets that were blindly supporting Anna’s movement in April are now nuancing their commentary. Anna is suffering from not having a good team with him. A good team would advise him when to stop. A good team would agree to move ahead one step at a time but never give up. By hogging all the country’s time now, Anna’s team is being selfish and greedy. The Lokpal Bill can be improved in the future again if required. My feeling is that most people agree with Anna but want him to stop his movement now. Enough has been achieved. Hair-splitting will only help marginally, but it will take away too much time from the other pressing issues.

The real truth is that there are many many issues that face the country. All of them need to be solved and all of them press the government for its time and attention. That’s why we need to know when to close issues and move on. It’s time to move on from the Lokpal issue. Anna should take up other problems that the poor face. Like he did in his early days. He should scale up Ralegaon Siddhi and cover the entire state of Maharashtra. Then take it national. That’s where his help is required. Anna understands the problems of the poor......and wants to help solve them. But what about his team members???? Unfortunately, they only want to become media celebrities.....

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