The Hindu Business Line : The question of land

Whether or not the LDF Government can make the distinction between land needed for productive enterprise and land needed for speculation will be keenly watched by industry.

For very long in Kerala's modern-day history, successive State Governments have had to struggle with the issue of finding land for setting up industries and businesses. Even the Smart City information technology (IT) park proposed for Kochi city has kept stumbling over the issue of land.

The Smart City was proposed to be developed by the Dubai Internet City (DIC) at an investment of Rs 1,500 crore as a self-sufficient facility, spread over a 1,000-acre zone, for IT and business process outsourcing (BPO) companies from around the world.

The previous United Democratic Front (UDF) Government had planned to hand over 62.27 hectares of the government-owned Infopark at Kakkanad in Kochi, along with the buildings inside the area, to DIC for a consideration of Rs 109 crore.

That attracted serious criticism from several quarters, notably from V.S. Achuthanandan, the present Chief Minister. Now the deal is reportedly being reworked and only time will tell if the new deal will let the government retain more of its land.

But one thing is certain - the issue of land for business will continue to dog Kerala's political and industry leaders. Thus it was refreshing to find that the LDF Government has sought to address the issue in its recent Draft Approach Paper for Kerala's Eleventh Five-year Plan. In a section on industry, IT and land use, it states: "Our approach in the sphere of industry is that while the State may have to engage directly in certain industrial projects, it has to make room for private investment through the creation of adequate infrastructure and an appropriate investment climate."

The route to that now almost universal aspiration could, however, vary, depending on political and social conditions. In the case of the LDF Government, there seems to be clear recognition of the potential pitfalls.

"An important issue in the context of industrialisation, and also in the context of the setting up of Special Economic Zones, of the development of infrastructure and of the construction and real estate business, is the issue of land acquisition," says the Draft Approach Paper.

"This is emerging today as the central issue before development policy, not just in India but all over the Third world; and it is of particular importance in Kerala where the land-man ratio is the lowest among all Indian States and no unused land exists," it stresses.

The Paper seeks to draw a "firm conceptual distinction" between land needed for productive enterprise and land demanded for property speculation. "This is a distinction often difficult to draw in practice, not just because the motives of the investors are not clear, but because the motives are themselves mixed," it admits.

"Those setting up productive enterprises also in practice wish to acquire some additional land close to their enterprises for future capital gains. The Special Economic Zones currently being set up all over the country for promoting entrepreneurship in the sphere of production are also seen by the same entrepreneurs as providing lucrative opportunities for land speculation. Not only are labour laws and trade union rights held in abeyance in such Zones, and not only are massive tax exemptions handed out to these `entrepreneurs', but they are given opportunities for substantial capital gains on land. In fact, the attractiveness of SEZs for them arises because of this combination of opportunities," the Paper claims.

"But precisely because the distinction between land needed for productive enterprise and land needed for speculation is difficult to draw, it becomes all the more necessary to draw it. The basic rule must be: while land acquisition is admissible for the former, it is not for the latter," the Paper concludes.

But can the LDF Government ensure that this distinction is fairly applied? This is what industry will be keenly watching.

The writer can be contacted at kgkumar@gmail.com