Everyone's afraid of land acquisition

Cash is just cash, you can run through it, then you're done. It has none of the pride of ownership that is associated with land. Make stakeholders equity holders; it's win-win.

Our thinking around land acquisition is broken. We need a new conversation to break the deadlock between pro-people lobbies and narrow business interests. Right now, it appears as if we are condemned to a strict trade-off between democracy and development, and development apparently must come at the price of some dislocation. The old egg-breaking-to-make-omelets metaphor seems to be our lamentable governing idea.

This is a deeply dangerous way to think about development. How else might we frame this question? Is there a set of win-win solutions here for both democracy and development? Or are we destined to manage this tragic trade-off? There is a way out, and it begins by changing our mindset and thinking about people not as venal victims but as investors with real assets to bring to the table.

Where we have erred is perhaps being governed too much by some mutant combination of sarkari-speak and management-speak. "Project-affected persons" are deemed to be no more than "stakeholders" that have to be managed by some combination of monetary and non-monetary incentives (read: force). We perhaps need to start seeing "project-affected persons" as more than the victims of "development."

Instead of getting the red-carpet treatment for winning the developmental lottery, landowners and operators have been press-ganged into our prevailing narrative frame as the victims of the piece, indeed almost the obstructionist villains. This has led us to our current impasse over "compensation." What does this mean in concrete terms? Instead of giving people closed-ended cash for the asset they now hold, give them asset for asset. Make them equity partners in the project by construing their land as their investment.

Assets are open-ended: they yield value into the future. Cash is just cash, you can run through it, then you're done. Cash has none of the pride of ownership that is associated with land. Make stakeholders equity holders; it's win-win. Think of an industrial project that requires the dislocation of a cluster of villages. Instead of haggling over the amount of compensation to be given to villagers, simply form a special purpose vehicle with the land and the future production enterprise as its assets; its liabilities would be share capital handed out to land owners and landless cultivators according to some formula decided locally.

This equity distribution could be one element in a reconstruction package that includes job training and perhaps even some cash component, but equity-for-land would be the cornerstone. The lack of trust that pervades these projects has its source in the stark but fictitious trade-offs outlined above. In order to build a bridge to the paradigm of equity (in both financial and ethical senses of this useful term), the government would have to stand behind the investment vehicle that is divided up between those bringing land, labour, and capital to the table. Only a solid government guarantee of flows of funds from this vehicle to the land owners and operators will close the circle.

Our business and government elite should see people with land rights as the equity holders that they are, offering them asset-for-asset so that they participate in the upside surpluses permanently. Because the paradigm of equity will unlock more projects, the pool that will be shared only grows.

By:Anush Kapadia