Proper Compensation

By Ramesh Akkineni
from an article on Business Standard by Surjit S Bhalla

What is “proper compensation”? The search for this (market) grail leads to an interview with the Mittal brothers (Rakesh and Sunil, of Airtel fame) published in Business Standard, October 7/8, 2006. The Mittal brothers (MBs) are changing the face of agriculture in Punjab, via their involvement in the “FieldFresh” venture. It is a safe prediction that this private sponsored venture will spawn other such ventures and transform agriculture into a major industry over the next decade or so. Such projects will get the agricultural growth rate to 3 per cent plus, much faster than all the starry-eyed assumptions that pass for agricultural policy today. Let us assume that agriculture should grow at 4 per cent, because it “must”. (Parenthetically, an unsolicited suggestion: change the procurement policies for wheat and rice, and then watch agricultural growth speed up, even without the help of MB initiatives.)

But what about a fair price of land? According to the MBs, a Punjabi farmer earns somewhere between Rs 20,000 and Rs 25,000 an acre. This stream of income, when capitalised into an asset, translates into an asset value of Rs 2 lakh per acre if the interest rate is assumed to be 10 per cent and Rs 5 lakh if the interest rate is assumed to be 5 per cent. So a fair price for 1 acre of the best agricultural land in India is about Rs 3.5 lakh. Yes, I understand that buys only a few square feet on Prithviraj Road but in the case of SEZs, we are mostly talking about the outskirts of farm land in Orissa or Haryana or even Punjab. (Note that to be economical and profitable, an SEZ cannot be set up in prime rural land, let alone prime urban land that the “land grab” glitterati is so seized with.)

What about giving farmers a stake in the land? Let us say a firm offered a farmer a package of Rs 3 lakh and a share valued at Rs 50,000 or a plain cash grant of Rs 4 lakh. What if the farmer chooses the latter? One can’t fool mother nature—you cannot get away from a fair, market-determined price of land.

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