Sunday, September 07, 2008
Adequate Compensation for Agricultural Land
There has been a great deal of furor in India over the acquisition of agricultural land for industrial development. All agree that it needs to be done and insist that farmers must be adequately compensated, none specify what that means. The state of West Bengal purchased 1,000 acres from over 13,000 farmers in 2006 at over Rs 1,000,000 per acre for the Tata car project. There have been numerous reports suggesting that this compensation is inadequate. The table below should allow readers to judge for themselves. The data here are about five years old. Since then the prices of agricultural products and inputs have increased dramatically. Doubling the annual cash flow shown below may reflect current conditions more accurately. The annual interest on a long-term deposit of Rs 1,000,000 is Rs 95,000 at current rates. Further, Tata has offered to employ the ‘dispossessed’ farmers. Wages from day-labour constitute a substantial part of the income of most Indian farmers (equal to income from farming in WB). This income is not shown below, since it will be a small fraction of what Tata is likely to pay, excluding benefits.
When the total return from owning and operating an asset is less than that from merely providing an equivalent amount of labour, the economic value of the asset becomes negative. This is the tragedy of agriculture in India, caused to a large extent by the inexorable shrinking of farm sizes.
Farming Household Income: Operational Holding Class - 0.4 to 1.0 Hectares | |||||
| (Rupees per annum) | India | Punjab | UP | WB | TN |
| | | | | | |
| Average Size: All Rural Holdings | 0.718 | 0.918 | 0.643 | 0.302 | 0.313 |
| Average Size: Within Holding Class1 | 0.734 | 0.703 | 0.722 | 0.715 | 0.744 |
| Cultivation: | | | | | |
| Value of Output | | | | | |
| Main Products | 12,563 | 29,715 | 15,543 | 19,184 | 11,110 |
| Byproducts | 1,096 | 1,880 | 1,553 | 1,215 | 680 |
| Total Value2 | 13,659 | 31,595 | 17,096 | 20,399 | 11,790 |
| Expenses | | | | | |
| Seeds | 924 | 851 | 1,419 | 1,245 | 1,155 |
| Pesticides, etc. | 350 | 1,324 | 247 | 681 | 495 |
| Fertilizer & Manure | 1,414 | 2,156 | 2,080 | 2,263 | 1,420 |
| Irrigation | 741 | 1,406 | 1,614 | 1,306 | 483 |
| Hired Labour | 1,315 | 1,812 | 1,002 | 3,539 | 2,075 |
| Other | 1,177 | 3,132 | 1,806 | 1,461 | 1,163 |
| Total Expenses2 | 5,921 | 10,681 | 8,168 | 10,495 | 6,791 |
| Income from Cultivation | 7,738 | 20,914 | 8,928 | 9,904 | 4,999 |
| Expenditure on Farming Assets | 1,920 | 7,308 | 1,944 | 792 | 2,484 |
| Annual Cash Flow from Cultivation | 5,818 | 13,606 | 6,984 | 9,112 | 2,515 |
Farm Animals: | | | | | |
| Receipts2 | 7,116 | 26,604 | 8,244 | 3,708 | 5,808 |
| Expenses2 | 6,012 | 23,772 | 7,608 | 2,784 | 4,476 |
| Income from Farm Animals | 1,104 | 2,832 | 636 | 924 | 1,332 |
| | | | | | |
| Annual Cash Flow from Cultivation and Farm Animals | 6,922 | 16,438 | 7,620 | 10,036 | 3,847 |
| Implied Annual Cash Flow per Acre | 3,819 | 9,463 | 4,274 | 5,684 | 2,093 |
| 1. Holding class for average size is 0.5 - 1.0 hectares. Hectare = 2.471 acres. Average size for all rural holdings reflects households with zero holding. UP = Uttar Pradesh, WB = West Bengal, TN = Tamil Nadu (no glacier-fed rivers). | |||||
| 2. Value includes imputed value of output consumed by the household. So do farming expenses. | |||||
| Source: NSSO reports 492 (Jan-Dec 2003) & 497 (July 2002 – June 2003), available online. | |||||
Labels: Agricultural land, Indian Agriculture, Singur
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