Friday, 26 February 2016

Putting Cart before the Horse ?

An article in Hindustan Times ( 24 Feb 2016 ) reports :

" ...the government has now asked Industrial Corridors to award infrastructure and manufacturing projects only after the bidding companies show they have acquired the land needed "

I presume that , at this stage , based on the bid amount ( and other qualifying criteria ) , one bidder has been selected from among those who submitted bids , for a specific project to be located on a given piece of land , close to the Industrial Corridor

But the order ( award ) will not be placed till such time he produces " proof " of having acquired the land , which could , well belong to a dozen farmers !

Obviously , no industrialist will buy a specific piece of land in advance , from a dozen farmers , not knowing whether his bid will succeed or not !

But now that he has won the bid , he must approach those 12 farmers for the purchase of the land and enter into serious negotiations

Since the farmers " know " that an industrialist will approach them , ONLY if he has won the bid , they are in a much better bargaining position !

They can bargain collectively and quote a very high price - may be a price far in excess of what the winning industrialist had budgeted for , in his bid !

The negotiations can take weeks or months to conclude an agreement or may even fail , forcing the industrialist to back out of his commitment

That may require selecting the next ( highest ? ) bidder and repeat the process all over !

The whole idea of awarding only AFTER acquisition of required land was to speed up the project implementation

But in this idea, I see a danger of endless going in circles !


 Consider following excerpt from my email to Shri Nitin Gadkariji , on 23 March  2015  :

[  I think there is a simple solution to the concerns expressed by the farmers . Please consider the following :

*     Each project will be tied to a specific SPV , created for that purpose only

*    In the first instance , affected farmers will create a " Cooperative Society " 

*   Co-operative Society will issue shares to each land-donor farmer , in proportion to the QUANTITY / VALUE of the land donated by him

*   In turn , Co-operative Society will receive shares in the SPV , equal to the value of the land + a cash compensation equal to 4 times the value of the land

*  Farmer's shares of Cooperative Society cannot be sold in open market before 5 years but can be gifted to wife / Children

*  Shares of Cooperative Society in the SPV itself cannot be sold for next 10 years

*  The " Cash-Value Compensation " received by the Co-operative Society ( ie 4 times the land value ),  will be deployed as follows :

   *  To be immediately paid in cash to the farmers............ 2 times

   *  To be deposited in the Jan-Dhan Account of each farmer as FIXED DEPOSIT ( with 10 @ interest )....2 times  ]

Since each State is in serious - and healthy - competition with other States to attract investments , those which offer an equitable and just solution to the farmers as well as to the industrialists , will succeed

And there will be no need to pass any Land Acquisition Bill in Rajya Sabha  !

----------------------------------------------------------------------------------------- / blogs

27  Feb  2016


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