The Hindu Business Line : Rurbanisation is solution

It will be more profitable to graft the SEZ to neighbouring villages and generate goodwill. India’s entrepreneurs are yet to appreciate the true implication of Professor Prahalad’s idea of gold at the bottom of the pyramid, says

Recently, there was a new twist in the development of Special Economic Zones (SEZs): One SEZ promoter has offered to donate 100 acres of land, and a bonus of Rs 50 crore on top, to an IIT to set up a campus. A prestigious private management institute has an even better offer from a state minister: 200 acres of land and Rs 200 crore in cash.

These developers are like a carpenter who cuts a branch of a mango tree and makes money by converting it into furniture. He makes much profit but once only. The same tree would have profited him much more and for long years, if he had grafted the tree to produce better fruit.

Likewise, it would have been more profitable to graft the SEZ to neighbouring villages and generate goodwill. India’s entrepreneurs are yet to appreciate the true implication of Professor Prahalad’s idea of gold at the bottom of the pyramid. Truly speaking, the gold at the bottom of the pyramid is not the money the poor have but the goodwill they provide.

Two other related proposals have made news in the past week. In the first case, the Government of Uttar Pradesh has invited developers to build a thousand townships with minimum of 1,500 acres each.

With a minimum of 1,500 acres, each town will be financially viable only when it attracts nearly 1,00,000 people, or around 10 crore population for all thousand townships. Expecting such a large resettlement of people at one go is unrealistic. In particular, converting millions of acres of land will inevitably mean loss of much fertile land.

In the second instance, the Gujarat Chief Minister told the CII annual conference that rurban development will be his new slogan. As I have been advocating rurbanisation for some years now, this high level endorsement reminds me of the famous quotation of Keynes: Practical men . . . are usually distilling their frenzy from some academic scribbler. That the Chief Minister has the same idea as I have had should make me happy but I have some doubts: Most rural experts are hung up on the idea of growth poles; they like to focus on select villages, inevitably sidelining peripheral villages that will inevitably suffer out-migration and serious loss of human capital.

In other words, rurban development will measure up to its name only when villagers can access all urban amenities without moving out of their villages. That does not mean that every village will offer all that cities do.

That is impossible; villages have too small a population to do so. Hence, we need a compromise between a growth pole at one extreme and every village fully loaded with every urban amenity at the other.

PURA – the way out

PURA is one such compromise where every village will have, what may be called, tele-ineffective services — typically, water, electricity, sanitation and bus services. These are the services that are of no use unless they are close at hand. On the other hand, tele-effective services (schools, hospitals, markets, recreation centres) need not be each and every village, provided they can be conveniently shared with other villages.

In this form of rurban development, all villages will have tele-ineffective services but they will share among themselves a wide range of tele-effective services. Further, all services will be of urban quality.

Whichever option is chosen, villages need transport connectivity. That is the Achilles’ Heel of rural development. Planners, administrators, economists, welfare agencies and politicians are all agreed that villages should not have urban quality roads and urban quality transport services. That is a strong statement. Unfortunately, it is true.

The Indian government has extensive schemes for rural roads but limits the budget to about Rs 20 lakh a kilometre.

With such a meagre allocation, no rural road will be able to handle heavy vehicles; even small vehicles will wear it down fast. Not only in the case of roads, in all aspects of infrastructure, separate and unequal is the prevailing policy for rural-urban development.

Infrastructure discrimination

Rurban development will become a catchy slogan but not a reality unless prevailing extreme rural-urban discrimination in infrastructure goes. Hard-nosed economists will argue that villages and cities are not comparable, that cities offer a higher Return-On-Investment than villages do and hence deserve higher investment. That might have been true at one time, but no longer. The eagerness with which governments are promoting SEZs is proof enough that it is worth shifting investment from expensive cities to inexpensive rural areas.

The near impossibility of providing adequate transport, water and sanitation in cities is further proof that the era of large cities is coming to an end.

The government has accepted capital-intensive modern industry inside SEZs. In parallel, it should accept that the rural hinterland surrounding SEZs needs a complimentary uplift: SEZs will not be optimised unless and until the surrounding villages are as modernised as the SEZs are.

Three choices

Housing employees of an SEZ is the basic problem. There are two options: Employees live in cities; pay high rents spending much time and money in commuting. Or they may live at less expense in neighbouring villages with little or no commuting — provided the villages offer urban amenities. The choice is between expanding infrastructure in already congested cites and installing a brand new one in a Greenfield site. That leads to two questions: How much should be the rural-urban disparity in the budget for infrastructure? How much fertile farmland may be allowed to be converted to real-estate?

There are three choices: (a) New towns the way the UP government wants it. Then, we accept loss of large tracts of fertile land; (b) Housing estates distributed among a number of villages wherever land of inferior quality is available. That will avoid loss of fertile land but not that of inferior land; (c) Reconstruct existing villages, convert their huts, mud houses, etc, into modern two-three storey buildings. That will obviate the need to acquire even infertile farmland and yet generate enough space to house both newcomers of SEZs and improve living conditions of existing inhabitants.

On the face of it, the last option of new buildings-for-old is the best. Yet, let us not jump to any conclusion; try out a few pilot projects and decide methodically which option works best and under what conditions. Either the government or an SEZ or a real-estate developer can take the lead to promote a PPP: Government pays for roads and transport links and rest of the cost is met from private investment.

In any case, if the objective is to purchase goodwill for SEZs by integrating them with surrounding villages, the focus should be (a) on including as many surrounding villages as possible and (b) minimising, if not avoiding altogether, consumption of farmland.

Some Viability Gap Funding may be necessary to meet infrastructure costs. I believe that at a modest price, no higher than that of a flyover, the condition of over 50,000 villagers can be raised to enjoy urban quality services. Either a government agency, or an SEZ or a real-estate developer can confirm how far I am right.

(Concluded)

P. V. INDIRESAN. (The author is a former Director, IIT Madras. Response may be sent to: Indiresan@gmail.com)

This is 226th in the Vision 2020 series. The previous article was published on April 28.

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