Do you want to get a usable estimate of black money in the economy? For each state, subtract the circle value of land from the market rate for each district in the country. Multiply the figure for the land sold in the district in that year and add it up for all the districts, and you have a fine figure.

The circle rate is thus the biggest joke in the Indian real estate markets. For the National Advisory Council (NAC) to then use the circle rate and then some more as the price farmers should get for selling their land to industry, just shows why possibly Mamata Banerjee is right on this argument and NAC is wrong.

The government has no business to get involved in setting any rate for the land market in the country.

There are, therefore, two fundamental flaws in the NAC argument. The first is the assumption that the government, just as it sets the minimum support price for several crops, should also decide on the price of the land, on which those crops grow. The second is the mistake that assumes intervention in land disputes increases social welfare. Despite fragmentation, the total number of farmers who own land in this country is about 128 million (dept of agriculture figures). Since the percentage of our working population that depends on the rural sector is about 403 million, on a population base of 1.2 billion, this means 275 million of them are without any land.

In other words, the sale of land in rural India is an issue for the richer farmers. By deciding to apparently stand with them, NAC is actually hurting the interests of the agricultural labourers. The chances of those labourers to earn more from agriculture is limited, when the sector can hardly ever grow at more than 4% a year.

The one major chance for them to improve their opportunities is to remove them from agriculture and into work that comes when industry is set up in a rural area. The other alternative is to condemn them to migrate to faraway cities.

But, just as states are keen to hike up the MSP to protect the interests of the landowning farmers at the expense of the other poor who have to buy those grains, the intervention by political groups in land issues shows who they feel closer to. By any yardstick, it is a very sub-optimal solution for the government to get involved as it is doing in this instance by offering to support developers they can always do without.

The government is taking upon itself the hassle of negotiations with the farmers. It is also offering industry the carrot of having to pay a lower price than what the markets can bear.

The farmers, from now on, if they want to extract a better price for their land, will have to depend on the mercy of the concerned state government. This will also give the political parties an opportunity to play favourites, promising to jack up circle rates in areas whose farmers support them.

For industry, this is, of course, a very attractive option as it saves them the bother of having to negotiate with each land holder the price of their land. Right from the time the large-scale SEZ projects began, sections within industry have turned to the government for this job. Is it a surprise that farmers? unrest has typically flared in areas where the government got involved, but has been quite peaceful where they have had a say in the pricing.

The problem of negotiating with the farmers is actually one that can largely be resolved if industrialists are honest enough to disclose the anticipated cost of their project. It would also be more optimal as a market price based negotiation will cut down the projected size of the land for the factory or the township. The regular over-estimation made by the companies of the amount of land they need will be clipped once they face the long line of farmers. It is something industry should get used to.

Senior government officers say that for a power project of, say, 1,320 MW, the land requirement is within 1,100 acres. The cost of the project, assuming about R5.50 per MW, works out to R7,260 crore. Going by the circle rate in Andhra Pradesh (the site of numerous power projects) that will be about R5 lakh per acre and the compensation just R55 crore. In a recent documented case of land acquisition in Andhra Pradesh, the state government handed out its own land to a power developer at R55,000 per acre, which became the effective circle rate. The developer used that as the basis to offer a R2.5 lakh per acre compensation to the farmers (five times the circle rate).

Incidentally, the current Land Acquisition Act of 1984 has a clause even now that allows for a negotiated settlement of the price of land between the buyers and sellers. The difference between the forcible acquisition of land and this clause is on the rights of the land seller. The former signs away the right of the seller to approach a court to re-open the sale, the latter doesn?t.

The current trend of discussion also makes obvious that two critical changes in the Land Acquisition Act will not come through. If the government has to acquire land for all and sundry there is ghost of a chance it will make the definition of public purpose more strict to preclude investor-led acquisition, but which was the demand all through.

The second is the redefinition of the pricing formula in favour of the seller of the land. If the government has to pay six times the circle rate, it will imply the basis for arriving at the circle rate will be rather conservative.

The villagers of Bhatta-Parsaul, who had protested the Uttar Pradesh government?s 30-year annuity plan and its promise of returning a 7.5% part of the land as a developed property, must be kicking themselves now for having barked up the wrong tree.

subhomoy.bhattacharjee@expressindia.com