Unreal estate management

Is this really the time to sell government land?

One of the suggestions of the Kelkar Committee on fiscal consolidation is that the government should increase its revenues over the next 24-36 months through the monetisation of its “unutilised and under-utilised” land resources in urban areas. Certainly, this does appear like money for nothing — and, if used to fund the build-up of capital assets by the government, could be a tempting course of action indeed. However, if this is one of the recommendations of the committee report that the government is planning to act on, then great caution is advisable. Indeed, to progress on this recommendation in the current environment in which corruption is widespread and accusations of corruption are even more widespread would be politically foolhardy for the United Progressive Alliance (UPA) government.

There is no doubt that the government is squatting on too much prime land — the Kelkar Committee report mentions land held by Indian Railways, various port trusts, and public sector units in particular. Given the tight real estate market in India’s cities, there is little excuse for persisting with this state of affairs in the long term. This land should be freed up for other uses, and the government should realise the full market value from the sale. However, the systems that will have to be put in place in order to ensure that cronyism does not infect the sale process will be complex. Valuing land, especially for large tracts where the number of deep-pocketed buyers will be minimal, is an extremely difficult proposition. Merely ensuring that Cabinet approval will be required for high-value deals, as some have suggested, will not be enough to insulate the process from cronyism or corruption. After all, there is little doubt that, while India’s politicians might have trouble understanding the nuances of other natural-resource sectors, they certainly do understand land. Land-use changes, which are typically discretionary, have been a source of easy funding for political parties in states for a considerable length of time. Some states, such as Maharashtra and Karnataka, have seen their entire politics warped by the nexus between builders, bureaucrats and politicians. Unless the UPA succeeds in changing this context, or rendering it irrelevant, moving to monetise the Centre’s land assets is fraught with problems.

Certainly, there are institutional mechanisms that can be put in place to minimise such problems. If individual ministries select land under their control that can be dispensed with, which is then handed over to, say, an independent land bank authority which will auction it in a transparent manner, then some of the major pitfalls could technically be avoided. Essentially, individual discretion must be avoided; and the identification of particular pieces of land should be institutionally separate from the process by which it is monetised. However, it is far from clear that the UPA is thinking clearly enough about such safeguards. It must heed the Kelkar Committee’s advice that an experts group should be set up first to evaluate how the available surplus land could be monetised. If the sale of land does indeed take place without instituting safeguards and a transparent mechanism, India’s citizens should prepare themselves for another scam of considerable magnitude — one that the UPA will find even harder to recover from than the others that it has had to endure.