from land reform to land acquisition in west …...from land reform to land acquisition in west...
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From Land Reform to Land Acquisition inWest Bengal:
State Policy and Agrarian Challenges
Dilip MookherjeeBoston University
IGC Bihar Conference, PatnaJuly 21, 2013
D. Mookherjee
Land Reform and Acquisition in WB
Introduction
Key questions: what are the major determinants ofagricultural output and productivity growth in India?Determinants of changes in land inequality andlandlessness?What role has been played by state policies in this respectin the past?What kinds of new policy approaches are needed for thefuture?
D. Mookherjee
Land Reform and Acquisition in WB
Major Policy Instruments
In the first two decades since Independence, land reformwas considered one of the main policy instruments foreconomic development in IndiaYet very little has been achieved, and it has all butdisappeared from the policy agenda nowadaysExcept for the recent focus on land acquisition policyHow do we understand the transition from (missing) landreform to (messed up) land acquisition?Role of agricultural credit and marketing policiesFocus of my talk: what can we learn from experience ofWest Bengal (drawing on a number of different studies)?
D. Mookherjee
Land Reform and Acquisition in WB
Introduction, contd.
With regard to land, West Bengal is different from otherIndian states in many ways:
extent of land reformstate politicsrecent land acquisition fiascos
Nevertheless may be relevant to other states: what didthey miss by failing to implement similar land reforms?Land acquisition policies: what can be learned from theSingur experience?Related policy issues that affect farmers: access to credit,and marketing channels
D. Mookherjee
Land Reform and Acquisition in WB
Presentation Outline
1. Land Reform experience2. Land Acquisition experience: lessons from Singur3. Access to credit: lessons from household surveys and policyexperiment4. Marketing constraints faced by small farmers: lessons fromhousehold surveys and policy experiment
D. Mookherjee
Land Reform and Acquisition in WB
1. Land Reform: The Questions
What political factors determine implementation of landreforms?What were the effects of land reform on agriculturalproductivity growth?On reducing rural inequality or poverty?Other implications for local governance?
D. Mookherjee
Land Reform and Acquisition in WB
Research Strategy (Bardhan-Mookherjee)
Household and farm surveys in a random sample of 89villages distributed through all agricultural districts of WestBengalCovering the period from late 1960s until 2003-4Household surveys include details of landholding and theirchanges over timeFarm cost of cultivation surveys from early 1980s to 1995,period of WB Green RevolutionDetailed data concerning gram panchayats (GP) andagricultural development programs implemented since late1970sLongitudinal analysis at the household/farm level
D. Mookherjee
Land Reform and Acquisition in WB
How Much Land Reforms in West Bengal?
Large in comparison with other Indian statesBy early 1990s, 6.7% of land area distributed as land titlesfor the poor, compared with less than 1% for most otherstatesOnly state to seriously implement sharecropper registrationprogram (Operation Barga):
minimum share of tenantprotection from eviction
Mostly happened during the 1980s
D. Mookherjee
Land Reform and Acquisition in WB
TABLE 1: LAND REFORMS IMPLEMENTED IN WEST BENGAL 1978-981978 Average 1998 Average
% land area appropriated 16.4* 15.3% land area, titles distributed 1.4 5.4% households receiving titles 4.9 14.9% land area, tenancy registration 2.4 6.1% households registered 3.1 4.4% tenants registered 43.4 51.2Average across sample villages, weighted by operational land areasSource: Block Land Records Offices for land reforms implementedIndirect household survey, for distribution of operational land and tenancy)*Only available for 34 villages
D. Mookherjee
Land Reform and Acquisition in WB
Political Determinants of Implementation(Bardhan-Mookherjee 2010)
Surprising lack of evidence concerning greater intensity ofimplementation by Left Front vis-a-vis the Congress at thelocal level:Villages with Left-front dominated GPs did not implementmore land reform than those with GPs dominated byCongress/TMCSome evidence that political competition at the local (GPelection) level increased implementation by either party(inverse-U shape relation between Left Front GP share andland reform implementation)Consistent with view that electoral competition (rather thanparty ideology) drove both parties to implement landreforms in a similar manner
D. Mookherjee
Land Reform and Acquisition in WB
Effects of Land Reforms on Agricultural Productivity
Traditional view amongst economists that redistributiontends to lower efficiency/productivityHowever, context of land reform is different (owing tocombination of imperfect credit markets, agency problemsin land and rural labor markets)Theoretically, thus, land reforms have the potential to raiseproductivity, esp in rice-growing areas where agencyproblems are important and economies of scale areinsignificantSo empirical evidence is needed: where the West Bengalexperience is usefulFirst describe findings concerning effects of LR onproductivity, thereafter on land inequality
D. Mookherjee
Land Reform and Acquisition in WB
Effects of LR on Agricultural Productivity in W Bengal(Banerjee-Gertler-Ghatak 2002, Bardhan-Mookherjee2011)
Distribution of land titles had no significant effects (owingto small, infertile plots distributed)Operation Barga, on the other hand, had significantpositive effect on productivity at the farm, village anddistrict levelsDistrict level (BGG): 1% rise in registration rate associatedwith 0.4% rise in rice yields; Farm level (BM): 1% rise inland area distributed associated with .2-.4% rise in VA/acreHowever, over 2/3 of observed productivity growth owed todelivery of minikits by local governments; contribution ofOperation Barga was comparatively small
D. Mookherjee
Land Reform and Acquisition in WB
Effects of LR on Land Inequality and Landlessness inWest Bengal (Bardhan-Mookherjee-Luca-Pino 2011)
To what extent did the land reforms lower inequality andpoverty?Assess using measures of inequality in ownership ofagricultural landConstructed from household survey of landholdingsFind massive changes in the land distribution over1967-2004
D. Mookherjee
Land Reform and Acquisition in WB
Agricultural land per household 1967-2004.35
.35
.35.4
.4
.4.45
.45
.45.5
.5
.5.55
.55
.55share of landless households
shar
e of
land
less
hou
seho
lds
share of landless households0
0
01
1
12
2
23
3
34
4
4agricultural land in acres
agric
ultu
ral l
and
in a
cres
agricultural land in acres1970
1970
19701975
1975
19751980
1980
19801985
1985
19851990
1990
19901995
1995
19952000
2000
2000year
year
yearAverage
Average
Average50th percentile
50th percentile
50th percentile75th percentile
75th percentile
75th percentile% of landless
% of landless
% of landlessfull sample
full sample
full sample.35
.35
.35.4
.4
.4.45
.45
.45.5
.5
.5.55
.55
.55share of landless households
shar
e of
land
less
hou
seho
lds
share of landless households0
0
01
1
12
2
23
3
34
4
4agricultural land in acres
agric
ultu
ral l
and
in a
cres
agricultural land in acres1970
1970
19701975
1975
19751980
1980
19801985
1985
19851990
1990
19901995
1995
19952000
2000
2000year
year
yearAverage
Average
Average50th percentile
50th percentile
50th percentile75th percentile
75th percentile
75th percentile% of landless
% of landless
% of landlessrestricted sample
restricted sample
restricted sampleNote: The 25th percentile is not shown since it is equal to zero for the whole period analyzed.
Note: The 25th percentile is not shown since it is equal to zero for the whole period analyzed.
Note: The 25th percentile is not shown since it is equal to zero for the whole period analyzed.
D. Mookherjee
Land Reform and Acquisition in WB
Average within-village land inequality 1967-20041.4
1.4
1.41.5
1.5
1.51.6
1.6
1.61.7
1.7
1.71.8
1.8
1.8coefficient of variation
coef
ficie
nt o
f va
riatio
n
coefficient of variation.56
.56
.56.58
.58
.58.6
.6
.6.62
.62
.62.64
.64
.64.66
.66
.66gini coefficient
gini
coe
ffic
ient
gini coefficient1970
1970
19701975
1975
19751980
1980
19801985
1985
19851990
1990
19901995
1995
19952000
2000
2000year
year
yearGini coefficient
Gini coefficient
Gini coefficientCoefficient of variation
Coefficient of variation
Coefficient of variationfull sample
full sample
full sample1.4
1.4
1.41.5
1.5
1.51.6
1.6
1.61.7
1.7
1.71.8
1.8
1.8coefficient of variation
coef
ficie
nt o
f va
riatio
n
coefficient of variation.56
.56
.56.58
.58
.58.6
.6
.6.62
.62
.62.64
.64
.64.66
.66
.66gini coefficient
gini
coe
ffic
ient
gini coefficient1970
1970
19701975
1975
19751980
1980
19801985
1985
19851990
1990
19901995
1995
19952000
2000
2000year
year
yearGini coefficient
Gini coefficient
Gini coefficientCoefficient of variation
Coefficient of variation
Coefficient of variationrestricted sample
restricted sample
restricted sample
D. Mookherjee
Land Reform and Acquisition in WB
Proportion of landless households 1967-2004.2
5.3
.35
.4.4
5.5
% o
f la
nd
less h
ou
se
ho
lds
1970 1975 1980 1985 1990 1995 2000
year
full sample
.25
.3.3
5.4
.45
.5%
of
lan
dle
ss h
ou
se
ho
lds
1970 1975 1980 1985 1990 1995 2000
year
restricted sample
D. Mookherjee
Land Reform and Acquisition in WB
Table: Determinants of decrease in land holdings: cumulativechanges at the household level, only natives (1967-2004)
Sample: full restrictedLand in 1967 2.862 2.143Land change -1.370 -0.926Lost due to land division -1.108 -0.785Lost through sales -0.557 -0.475Gained through purchases 0.467 0.373Lost due to reform -0.097 -0.018Gained due to reform 0.034 0.028Lost as a gift -0.116 -0.097Gained as a gift 0.030 0.032Lost for other reasons -0.060 -0.024Gained for other reasons 0.011 0.012
D. Mookherjee
Land Reform and Acquisition in WB
Rising within-village land inequality (CV), contributionof channels 1967-2004
-.1
-.1
-.10
0
0.1
.1
.1.2
.2
.2contribution of each channel
cont
ribut
ion
of e
ach
chan
nel
contribution of each channel1970
1970
19701980
1980
19801990
1990
19902000
2000
2000year
year
yearDivision/exit contribution
Division/exit contribution
Division/exit contributionMarket contribution
Market contribution
Market contributionReform contribution
Reform contribution
Reform contributionfull sample
full sample
full sample-.1
-.1
-.10
0
0.1
.1
.1.2
.2
.2contribution of each channel
cont
ribut
ion
of e
ach
chan
nel
contribution of each channel1970
1970
19701980
1980
19801990
1990
19902000
2000
2000year
year
yearDivision/exit contribution
Division/exit contribution
Division/exit contributionMarket contribution
Market contribution
Market contributionReform contribution
Reform contribution
Reform contributionrestricted sample
restricted sample
restricted sampleNote: Each line represents the contribution of each channel to the change in the coefficient of variation.
Note: Each line represents the contribution of each channel to the change in the coefficient of variation.
Note: Each line represents the contribution of each channel to the change in the coefficient of variation.The restricted sample corresponds to Sample (2) in Table 3, i.e. only land history correct.
The restricted sample corresponds to Sample (2) in Table 3, i.e. only land history correct.
The restricted sample corresponds to Sample (2) in Table 3, i.e. only land history correct.(Includes landless and immigrants)(Includes landless and immigrants)
(Includes landless and immigrants)
D. Mookherjee
Land Reform and Acquisition in WB
How Much Did LR Contribute to Changes in LandInequality?
The previous results indicate that the direct effects of theland reforms were to reduce inequality in landownershipBut their effects were overshadowed by changes inhousehold division, followed by land markets andimmigrationPossible indirect effects of land reform on householddivision, land markets and immigration: estimated inBardhan, Mookherjee, Luca and Pino (2011)Assessing these indirect effects, we estimate a significanttotal effect of the land title program in lowering landinequality (mainly by reducing landlessness), but no effectof Operation Barga
D. Mookherjee
Land Reform and Acquisition in WB
Summary of Effects of Land Reform on Growth andInequality
The land title distribution program reduced landlessnessand inequality, but had no significant effect on agriculturalproductivity at the village levelThe tenancy protection program raised agriculturalproductivity, but had no significant effect on inequalityThe effects of these land reforms were dwarfed by otherfactors:
agricultural development programs, for productivitydemographic changes (fertility, immigration), for inequality
Conceivable that land reforms were essential forreasonably good local governance, but this is difficult totest econometrically
D. Mookherjee
Land Reform and Acquisition in WB
2. From Land Reform to Land Acquisition: Why?
Agricultural productivity plateaued since the mid-90sCombined with considerable fall in land per household andper capitaMost rural households cannot rely on agriculture any morefor their livelihoodsDecline in proportion of household heads declaringagricultural cultivation as their primary occupation (lessthan 50% by 2003)Corresponding rise in landlessness (almost 50% in 2003)And in education and aspirations of the young, who seeknon-agricultural occupations
D. Mookherjee
Land Reform and Acquisition in WB
2. From Land Reform to Land Acquisition
From the early 2000s, the Left Front realized the need toexpand non-agricultural employmentSo it bent over backwards to invite private industryTried to lure Tata away from tax concessions offered in HPand UttaranchalTata picked a site in Singur, 90 km from Kolkata, located onthe Durgapur ExpresswayWB state government used its powers of eminent domainusing the 1894 Land Acquisition Act, acquired 997 acres of(mostly) prime agricultural land
D. Mookherjee
Land Reform and Acquisition in WB
The Fiasco
Local community in Singur was not consulted at the outset(learnt of the acquisition from newspaper reports)Owners of one-third of the land protested, backed by theTrinamul party which controlled SingurProtests escalated, confrontation between protesters andpolice...Tata stopped building its factory in 2008, withdrew toGujaratIn May 2011, Left Front lost its majority in the statelegislature for the first time in 35 years
D. Mookherjee
Land Reform and Acquisition in WB
Understanding the Singur Fiasco (Ghatak, Mitra,Mookherjee, Nath 2013)
Use a household survey to ascertain facts concerning landcompensation offered to farmers whose land was acquiredWe compare actual compensations offered with marketvalues of acquired plots, and evaluate the extent to whichthe offered amounts were inadequateWhat were the impacts of the land acquisition on differentsocio-economic groups in the affected villages?
D. Mookherjee
Land Reform and Acquisition in WB
Survey Details
In 2010-11 we conducted a survey of a random sample of1 in 6 households, in the 5 affected villages stratifiedaccording to landholding, occupation of head, and whetherdirectly affected or notCompared them with households in 5 neighboringnon-affected villages located on both sides of the DurgapurExpresswayFound no significant differences between affected andunaffected households within acquired villages, butsignificant differences across villagesSo we focus on within-village differences in acquiredvillages between affected and unaffected households
D. Mookherjee
Land Reform and Acquisition in WB
Main Findings
Majority of affected owners were marginal landownersengaged in cultivation, over half of whose land owned wasacquiredGovernments compensation offers were approximatelyequal to reported market values of acquired plots onaverageBut the inability of the official land records to distinguishbetween plots of heterogeneous quality meant that asubstantial fraction of farmers were under-compensatedrelative to market valuesThose under-compensated were significantly more likely torefuse the compensation offers, as were those whoselivelihoods were more dependent on agriculture
D. Mookherjee
Land Reform and Acquisition in WB
Main Findings, contd.
Incomes and durable consumption of affected owners andtenants grew slower between 2005-2010 compared withunaffected owners and tenantsEarnings of affected agricultural workers fell faster thanunaffected (agricultural and non-agricultural) workers;former comprised 25-30% of populationAdd to this: adverse impact on tenants (15% of thepopulation), and significant proportion (one-third) oflandowners whose lands were acquired owing tounder-compensation: majority of the local population wereadversely impactedThe process was also a major source of dissatisfaction: atop-down process, with no efforts (at least initially) toconsult or negotiate with the local community
D. Mookherjee
Land Reform and Acquisition in WB
Implications for Future Land Acquisition Policy
Sound economic arguments for over-compensation offarmers and tenants on grounds of efficiency, equity andpolitical sustainability of industrialization programme(Ghatak-Mookherjee 2012)Local community should welcome the acquisitionWhat makes compensation tricky: (i) poor quality of landrecords; (ii) heterogeneity of plots; (iii) heterogeneity ofpersonal valuations placed by different owners on land asan asset
D. Mookherjee
Land Reform and Acquisition in WB
Implications for Future Land Acquisition Policy, contd.
Clear that appropriate compensations should exceed themarket value of the landTwo problems with this:
Problems of ascertaining market values of acquired plots(mis-classification, incorporation of other relevantcharacteristics)How much higher should the compensation be?
LARR Bill in Parliament sets compensation at an arbitrarymultiple (quadruple) of market value in rural areas
D. Mookherjee
Land Reform and Acquisition in WB
Implications for Future Land Acquisition Policy, contd.
This may be too high, and retard industrialization(Chakravorty 2011)Key tradeoff: set compensation high enough to satisfyfarmers, but not too high that it retards industrializationexcessivelyEconomists’ solution (extension of Ghatak and Ghosh2011): elicit households willingness to give up land byconducting auctionsCould be extended to include multi-stage auctions: at thecommunity level and then within communities at thehousehold level
D. Mookherjee
Land Reform and Acquisition in WB
Multi-Stage Auction
Stage 1: industrialist seeks land of x acres with specifiedcharacteristics, states maximum price it is willing to payStage 2: different panchayats are asked to conduct a(conditional) procurement auction within their jurisdictionswhere they seek to procure x acres and find out whatlandowners are willing to accept for their land, upto anaggregate of x acres of contiguous landStage 3: based on outcome of stage 2, each panchayatsubmits a bid for the project: the lowest bid wins subject tomeeting the factory reserve price
D. Mookherjee
Land Reform and Acquisition in WB
Implications for Land Acquisition Policy, contd.
We need to consider such policy options, what problemsthey may give rise toMany advantages: it is a bottom-up procedure,incorporates heterogeneity of land, and is based onvoluntary participation of those whose lands are acquiredAdditional consideration needs to be devoted to effect ofacquisition on tenants and agricultural workersAnd offer a choice to owners of different modes ofcompensation: land elsewhere, pensions, shares in theindustry, shop on factory premises, training and factoryemployment opportunities
D. Mookherjee
Land Reform and Acquisition in WB
3. Credit for Small Farmers (Maitra, Mitra,Mookherjee, Motta and Visaria 2013)
Survey of households in 72 villages in two potato-growingdistricts (Hugli, W Medinipur)Small farmers have very little access to loans from banksor cooperative societies (less than 2%), despite largeexpansions in credit directed to rural sectorSubstantial growth of microfinance, but it does not financefarming operationsFarmers rely on credit from local traders and lenders,average interest rate 20-30%Not much higher than cost of credit to local tradersthemselves (about 20-24%)
D. Mookherjee
Land Reform and Acquisition in WB
3. Credit (contd.): Scope for Innovative Credit Policies
We have designed a new form of microfinance product,introduced in a policy experimentAgent-intermediated lending (similar to RBI BankingCorrespondent/Facilitator model): agents are local tradersor panchayat-appointedOffer 4 month loans to clients recommended by agents at18% interest, repayments affect both loan extension andagent commissionsVery promising results: those owning 0.5-1.5 acres earnedrate of return exceeding 50%, with loan repayment ratesabout 98%Scope for scaling up (USAID/Bandhan), issues concerningrates at which MFIs lend from state banks
D. Mookherjee
Land Reform and Acquisition in WB
4. Marketing
This is where the most important problems lie for smallfarmersFocus on potato: the most remunerative cash crop in WBengalNo major problems with regard to storage or transportKey problem: lack of direct access of small farmers tomandis
D. Mookherjee
Land Reform and Acquisition in WB
4. Lack of Access to Markets: Middleman Margins(Mitra, Mookherjee, Torero and Visaria 2013)
More than 90% of harvested potatoes are sold to villagephorias, who resell them to wholesalers at the mandiSize of phoria margins: in 2008 average (per kg) price atwhich phoria sold to wholesaler was Rs 4.77, and boughtfrom farmer at Rs 2.14Transport/storage costs were Rs 0.20/kg; hence phoriaprofit margin exceeded 100%Low pass-through: Increase in retail price by Rs 1 resultedin increase in farmer price by less than Rs 0.20
D. Mookherjee
Land Reform and Acquisition in WB
Why are Middlemen Margins so Large?
Could it be because farmers lack information aboutprevailing prices in mandis and retail markets?Conducted experiment where farmers in selectedtreatment villages were provided price information on adaily basis in 2007-08 (also extended 2010-13) viacellphones or local noticeboardsFindings: zero average impact on farmgate price,increased volatility of farmer earnings
D. Mookherjee
Land Reform and Acquisition in WB
The Critical Problem: Lack of Effective Competition forFarmers Produce
Information treatments had no effect owing to lack ofeffective competition among middlemen: vertical relationsin the supply chain; possible collusion among local phoriasKey underlying problem: inability of farmer to sell directly towholesalers or retailersWest Bengal does not have APMCsHowever even in other states with APMCs, they are notreally effective, owing to control of APMCs by traders, andcollusion of government officials with buyers
D. Mookherjee
Land Reform and Acquisition in WB
Policy Implications
Encourage competition for farmers produce (entry bydomestic or foreign corporates; contract farming) (effect ofITC e-choupals in MP)Improve mandi infrastructure and functioning (APMCregulations; esp. systems for verifying weight and quality ofproduce)Encourage panchayats to develop alternative (cooperative)marketing channels (e.g., remarkable success in China indeveloping potato cluster in Gansu province) and serve asintermediaries in contract farming
D. Mookherjee
Land Reform and Acquisition in WB
Summary and Conclusion
Land reforms contributed modestly to rise in agriculturalproductivity and slowing down rise of landlessness in WBduring late 70s and 80sThey were possibly a necessary complement to LeftFront’s Panchayat Raj reforms, in creating functioning localgovernments that helped deliver seeds, fertilizers andcredit to small farmersBut further scope for land reforms may be limited, owing tohigh proportion of owner-cultivated small farmsSupply of credit and marketing assistance are now morecriticalNeed to devise innovative policies of directing institutionalcredit to small farmers, and enlarge their access towholesale and retail markets
D. Mookherjee
Land Reform and Acquisition in WB