January 26, 2020
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Land For Reforms

Industry will be transformed as factories will soon be data-driven

Land For Reforms

In 25 years of liberalisation of the economy, an issue that got inadequate attention was the unfinished project relating to Central Public Sector Enterpri­ses (CPSEs). The reforms were quick to pick the low- hanging fruits of doing away with industrial licensing and reducing import duties. But CPSEs, facing inc­reasing competition from imports and the priv­ate sector, have lost their market share, ability to set prices, match consumer expectations, and in many cases even survive. The first round of disinvestment in 1991-92 and the subsequent listing of shares of major CPSEs on Indian bourses were intended to be a prelude to their privatisation. So far, ann­ual disinvestment targets have been no more than accounting exercises to meet fiscal deficit targets.

As a part of its zeal to speed up economic growth, the present government is preparing a road map for CPSEs. With tech­no­log­ical advancements, manufacturing will be transformed at par with the services sector. Four kinds of technology drive this cha­nge: the internet of things, rob­otics, 3D printing (also called additive manufacturing) and augmented reality. It is anticipated that in the near future, factories will be data-driven. This will require huge investments in technology and infrastructure. Failure to adopt these could threaten their very survival (unless protected by monopoly access to res­ources or government subsidies). Delays in deciding the future of CPSEs and/or privatisation may put them at serious disadvantage vis-a-vis their rivals.

While the consensus within government regarding large-scale strategic sales gains momentum, an issue gaining attention is the management of the land holding of CPSEs. Land stands alongside caste and religion in determining outcomes of democratic processes in India. It has to be handled deftly.

Most large CPSEs were allotted large tracts to build industrial townships. The government invested not only in establishing plants but educational institutions, housing, leisure facilities and so on. Over time these cities became more cosmopolitan, were hubs of technical education and large sources of technical manpower.

The commonest queries are how much surplus land is available with CPSEs; what is the value of this land and how it can be disposed of or used otherwise and what use can proceeds realised therefrom be put to. The quantum of surplus land with CPSEs is to be viewed in the context of the future of manufacturing, which will be technology-driven and energy-efficient. The econo­mic sustainability of the township model must be tested.

In a country like India, land ranks alongside caste and religion in determining the outcome of democratic processes. It must be handled deftly.

There are reports of around 60 sick CPSEs having 2.5 lakh acres land. If the township model is abandoned, factories can be moved to industrial corridors and if prevalent FARs are ado­pted by CPSEs, up to 1 million acres of urban land may be released for use by communities being dep­rived of facilities.

The quantum of surplus land should be decided before any strategic sales of CPSEs are made as, inv­ariably, the valuation and bids will not adequately capture their economic value.

There are other challenges. While these lands may be in the possession of CPSEs, buyers would mostly find it difficult to monetise the land holdings. The value of any land and its disposal is contingent on three main factors—legality of title, authorised/possible land use and its physical control with no encroachment. Added to this are problems relating to transparency of the sale process, to be examined by CAG, CBI, CVC and so on.

Assessment of surplus land should be a multi stakeholder process, including state governments, municipa­lities, urban planners etc. The land should be used for the community, with priority to education, health, leisure, housing etc. We need to provide skills to millions to realise our demographic dividend; but where are the urban spaces to set up workshops and skill centres?

(Bahri is a former additional secretary and  financial adv­isor to the Union ministry of heavy industry and public enterprises.)

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