Jan 18, 1999
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KAUTILYA Cry Not for ULCRA After seven years, prospects for the repeal of a bad law brighten. By Jairam Ramesh Never judge a policy by its intent but always assess it by its consequences. Nothing could illustrate this more vividly than the Urban Land (Ceiling & Regulation) Act of 1976. The objectives of ULCRA, as it is usually referred to, were laudable. It was to prevent the concentration of urban land and to promote housing for the poor in cities. But in actual practice ULCRA has reduced the supply of land, inflated land prices, served as a dampener on housing and construction activities and impeded the timely closure of sick companies in places like Mumbai, Calcutta, Ahmedabad and Kanpur in a manner that would protect the interests of labour and generate new economic activity. Clearly, ULCRA is bad law and worse economics. Under the Act, applications amounting to about 10 lakh acres have been received. After "scrutiny" and "disposal", phrases associated with discretionary powers that fuel corruption, the amount of vacant land in excess of ULCRA's ceilings has been whittled down to five lakh acres. The grease-intensity of ULCRA has been further increased by "exempting" about one-fourth of the five lakh acres on various grounds. Less than nine per cent of the 5.5 lakh acres -- about 38,000 acres -- has physically been acquired. Housing schemes have been initiated on 2,000 acres. Theoretically, over 40 million houses could be built on the five lakh acres of excess vacant land. In October 1992 , P.V. Narasimha Rao's cabinet first considered liberalisation of ULCRA. It buried the amendments by referring them to a group of ministers. In July 1995, Rao's cabinet considered the matter once again but this time it went one better in delay tactics and said that the matter must be discussed by all political parties. Then came H.D. Deve Gowda, who as chief minister had actually got the Karnataka Assembly to pass a resolution asking the Centre to repeal ULCRA. But as prime minister, he set up another committee to suggest amendments to ULCRA. The committee submitted its report in April 1997 by which time Deve Gowda had fallen. I.K. Gujral's cabinet considered ULCRA changes in July 1997 and decided to refer it to a group of ministers headed by Murasoli Maran. Maran suggested a large number of amendments which were considered by Gujral's cabinet in October 1997, only to see yet another postponement. A frustrated Kautilya recalls reminding Gujral that he had piloted ULCRA in Parliament in 1976 as minister for works and housing and that he now had a historic opportunity of proving Mark Antony ("The evil that men do lives after them") wrong. Gujral was vastly amused and promised to get it done. His cabinet met once again on November 13, 1997, but for some reason Gujral lost his nerve at the crucial moment. It was left to Maran, P. Chidambaram and S. Jaipal Reddy to push through the repeal. But Gujral's government fell before a repeal bill could be introduced in Parliament. Mercifully, the BJP appointed an iconoclast as its minister for urban development. In June 1998, Ram Jethmalani introduced a bill in the Lok Sabha for ULCRA's repeal. It subsequently went to the Standing Committee on Urban and Rural Development for examination. The 45-member committee submitted its report on December 21, 1998, recommending repeal. There were only two dissenters. One of them, Shabana Azmi, wrote that the committee was right in concluding ULCRA had been a failure but wrong in asking for its repeal. Jethmalani's ordinance to repeal ULCRA has to be converted into a bill and approved by Parliament. Even if Parliament repeals it, some state governments like the one in Mumbai are planning to have their own ULCRAs for "obvious" reasons. Jethmalani has to spearhead a campaign to combat this. He must also canvass for a tax on vacant land to encourage its use. In Parliament itself, the argument will inevitably be made that it would be unfair to do away with ceilings on urban land while keeping ceilings on farm land. This is a shibboleth. Urban land and farm land are fundamentally different. In the language of economics, the supply of farm land is " inelastic", while the supply of urban land is "elastic". Ceilings on farm land have a strong redistributive element. Even though farm-ceiling laws have been circumvented, some 53 lakh acres have been distributed to about 54 lakh rural families. This is not an insignificant achievement. The capacity utilisation of land has not reduced in this process, unlike ULCRA's impact. The supply of farm land is fixed, while that of urban land is flexible in addition to having a vertical dimension. Given the acute pressure on land in rural India and the lack of unambiguous evidence to suggest that productivity in large farms is higher than in small farms, it is more equitable and efficient to create a market in rural land. As a first step, the lease market for farm land should be freed. But this has to be accompanied by a system of up-to-date land records, something in which modern information technology (IT) can be of great value. --The author is secretary of the AICC's
Economic Affairs Department. |
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