The Hindu Business Line : `Development cannot be pulled out of thin air'

The broader issue is one of development versus displacement of which Singur is a representative example. For the development process to take off, land is needed. This means displacing people. So the success of a development strategy would depend on how the displaced people are rehabilitated. — DR ABHIRUP SARKAR, PROFESSOR OF ECONOMICS, INDIAN STATISTICAL INSTITUTE, KOLKATA

Meet Dr Abhirup Sarkar, Professor of Economics, Indian Statistical Institute, Kolkata, whose studies include one on the problems of small potato farmers in West Bengal. On the ongoing tussle in Singur, here are his answers to a few questions from Business Line:

To understand the Singur problem, we need to first know about the agriculture scene in West Bengal. How has it changed in recent times?

Agriculture in the Left Front-ruled West Bengal changed dramatically in the 1980s. It began with reforms to transfer land to the landless who got permanent cultivation rights and the right to a fixed share of output. This, together with the introduction of high yielding boro cultivation, led to growth and improvement in rural living standards till the end of the 1980s. By then boro cultivation reached its peak as it needed a lot of water..

Distribution of land and cultivation rights also slowed, as there was less land left for redistribution and fewer potential beneficiaries. The slower reforms moved in step with sharp increase of input prices (such as fertilisers and electricity) on the one hand and falling paddy prices on the other. All these made farming unprofitable. Nearly 15 per cent of reform beneficiaries either sold their land or surrendered their cultivation rights, shifting to non-farming livelihood by the beginning of this century.

Another factor affecting rural prosperity was an adverse land-man ratio. Pressure on West Bengal land was thrice the all-India average — a result partly of the refugee influx after Partition and the continuing inflow from neighbouring States and countries. So living standards in farms remained modest — around the all-India average — and West Bengal remained an economically mediocre State despite the reforms.

Taking cultivable land for industry. How is this justified? Also, what is the likely impact on food supply?

West Bengal seems to have reached the carrying capacity of the farming sector. So, the obvious choice to improve the living standard is to develop the industrial and services sectors, something neglected for over 20 years. But new ventures mean land for factories, roads, bridges, new townships, airports and seaports. As very little land is idle, some has to come from the cultivable pool. This could mean sacrificing some farm output but would make economic sense.

There is concern about food security in the State but in the first place the land required will affect the overall output only marginally. Secondly, given the free trade option with the rest of the country, self-sufficiency in food is neither necessary nor desirable if higher returns direct resources to other sectors. Thirdly, the present farm problem is not one of excess demand but of low prices from poor marketing channels and low purchasing power. If job scope outside the farm sector opens up, prices should improve, as there would be a boost in demand, improving the condition of farmers.

How does one acquire land for the newly emerging sectors? Does one depend on the free market or do we need the government to intervene?

If transactions can be completed through the free market it would be ideal because the transactions would be voluntary. It is important to recognise that the new expansions are based on the philosophy of a free market, and on the premise that they are fair and just. What happens when farmers are unwilling to sell their land?

In West Bengal the Government is intervening to make sure that unwilling sellers do not impede quick land acquisition. This is important to attract investors and to send the right signals to potential investors. But the trouble is this intervention — acquiring land by special power, by force if you will — violates property rights.

Ronald Coase (Nobel laureate with the University of Chicago) stated in his theorem that the initial distribution of property rights did not matter provided property owners could freely transact with one another. Through free market transactions they would reach the social optimum where the person who has the greatest use for a property would pay a suitable price and acquire it. In the present context, the Coase theorem would imply that if the unwilling farmer were offered a high enough price, he would sell his land voluntarily.

What then is the need for government role if applying the Coase Theorem could smoothen all kinks and help reach a social optimum?

In the present context the Coase theorem may not hold. If left to the market forces land acquisition would be slow and falter. There would be speculators who would expect their bargaining power to go up if most others, barring them, had already sold their land. This would get them a higher price from the buyer. But if many sellers do this, the project would be delayed and in the extreme case the investor might be forced to pack up and go to some other State. Thus it is necessary for the Government to intervene, in long-term interest.

That the land in Singur is fertile or that it produces two or three crops a year is of little macroeconomic significance because the land is miniscule compared to the State's total cultivated area. Its appropriation by the Tatas cannot affect aggregate food output. The real problem is microeconomic — those who are losing their land and their livelihood; the tillers and others whose existence depends on the appropriated land; owner-cultivators, sharecroppers, landless farmers and local traders whose economic existence has depended on those tiny plots in Singur.

How are these displaced people being compensated?

Compensation is important, not only because the Government is grabbing land in the name of public interest and has a moral responsibility to compensate the loser, but also because the loser is least likely to get a job in the Tata unit. The compensation scheme has to be made public. We have a right to know how land is being evaluated, compensations derived and distributed between owners and sharecroppers. We have a right to know whether landless farmers and others whose livelihood depended on the soil but who do not have any legal right over land, are being compensated at all. If the whole package is made public and if we can convince ourselves that compensations are fair, we can accept the Government's claim that most people have voluntarily handed over their plots and we can believe the official story that most agitators in Singur are outsiders with political ambitions and axes to grind.

Some information is available.

We know how much income a plot of land might fetch in Singur, we know the rates of interest and can predict the rate of inflation. From all this we can estimate, if given full information about the compensation package, whether the settlement is enough to maintain the living standard of the loser for a reasonable number of years. The trouble is that the Government has been opaque on compensation packages and other financial matters. We need a White Paper on the compensation calculation, indicating how much is expected from the Tatas as land price and how the difference, if any, between the payment from the Tatas and the money given as compensation is proposed to be financed.

The issue cannot be a Government secret, as some ministers are claiming, for land transactions are being enforced in public interest. If the Government continues to be evasive, there would be reasons to believe something vital is hidden. The Left Front must realise that the authoritarian Chinese model of development cannot be applied here. They should understand that a minimum consensus between the citizens is needed before a path to industrialisation is taken, because however faulty, we are a democratic country.

What is the bigger issue with Singur as the peg?

The broader issue is one of development versus displacement of which Singur is a representative example. One comes across such instances in other parts of India, and in less developed world. Development cannot be pulled out of thin air. For development process to take off, land is needed. This means displacing people from their soil and livelihood. So the success of a development strategy would depend on how these people are rehabilitated. This is the most important question not only in West Bengal, but elsewhere too.

What do you expect to be the final outcome in the long run?

I strongly believe that in the long run market forces will ensure industrialisation. Transition is costly. The question is one of choosing a path where transition costs are minimum. Transparency of policy is also important. It is necessary to take a path that people approve.

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