The golden cage syndrome

APART from a few celebrated BJP MPs such as ex-chief ministers Madan Lal Khurana and Sahib Singh Verma, and of course the residents of illegal encroachments like Sainik Farms, most citizens of Delhi were disgusted with Prime Minister Vajpayee’s decision to remove Jagmohan as minister for urban affairs. After all, this was the man who was cleaning up the capital of illegal colonies and encroachments on public land. Naturally, Delhi’s citizenry feel that no matter how honourable Jagmohan’s successor Ananth Kumar may be, he’ll go slow on these matters. For if he tries to follow Demolition Man Jagmohan’s footsteps, he too will meet a nasty end.

Khurana and company have reason to be doubly pleased, even though they threw a sulk upon not being given a berth in the Union Cabinet. For, apart from playing a big role in getting rid of Jagmohan, it is K Company that, right from 1997, was responsible for ensuring that the Delhi Rent Act, though passed by the legislature, was never notified into a law. But what’s so important about the Act and Jagmohan, you may well ask.

Okay, so an honest person was removed, and that sends a signal that it would be better for the next man to look the other way — think of the money the traders of Connaught Place and Khari Baoli alone must be willing to pay till, in the absence of a Delhi Rent Control Act, they can continue to pay just a few hundred rupees for shops whose rents are upwards of a few lakh a month. But how relevant is all this beyond that? A lot actually.

The old Delhi Rent Control Act, or legislation like the Urban Land Ceiling and Regulation Act, it must be kept in mind, were framed at a time when the intention was to ensure that ‘rich landlords’ did not terr- orise ‘poor tenants’ by evicting them for a bit more filthy lucre; that the rich weren’t able to accumulate huge tracts of land, far beyond what they needed for their personal use, so that even the less well-off had a chance to buy land.

However, as with most other socialist-style legislation, it had exactly the opposite effect. You see, when tenants refused to vacate property they had taken on rent — moderate-sized Connaught Place shops cost a crore, but rentals are as low as a few hundred rupees a month — people just stopped building anything new. And when it became impossible to buy land — getting ULCRA permission can take years — the level of fresh construction also fell.

Multiply the effect all over India, and what emerges is that India has just 5 square meters of housing space per capita, as compared to 19 in China and Russia. And for those who weren’t lucky, or old, enough to grab houses way back in the 50s or 60s, costs have gone skyhigh. Today, land in Mumbai costs 60 times what it does in Kuala Lumpur and 10 times in Singapore.

The consequences, by the way, don’t stop just here. In most developed countries of the world, one of the biggest drivers of economic growth, and employment, is the construction sector. So, apart from the killing rentals, India’s losing out on a lot of growth and employment opportunities thanks to this as well. A recent analysis by global consultants McKinsey & Company has studied the impact of construction in various economies, and has then extrapolated this experience onto India. It estimates that, at full potential, this sector could create as many as 3.2 million jobs over the next ten years — that’s an addition of around 10 per cent to the normal job creation India will have at the current rates of growth.

Now surely that’s the exact opposite of what the rent control and ULCRA was meant to do. Maybe, just maybe, citizens in Delhi and other parts of the country will realise that the K Company and its various affiliates haven’t really helped their cause, but have substantially worsened it. Needless to say, this kind of polar-opposite impact story doesn’t stop at just construction. It’s actually the story of India’s economic policies — policies designed to achieve something have achieved the exact opposite. Farmers and householders, to cite just one instance, were to be given low-cost electric power, to help them live better. Over a period of time, however, the state electricity boards started making huge losses — these are up from Rs 4,000 crore a decade ago to Rs 28,000 crore today — and as a result there’s also a huge power shortage. So who benefitted from the subsidy policy?

At current costs of setting up new power plants, that means that this year alone, had the losses not taken place, another 7,000 MW of spanking new power capacity could have been set up free. If the losses grow at the same pace, it also means that over the next decade or even less, it will be possible to double India’s existing power production capacity, again for free. With that much capacity, you can imagine just how low electricity rates would be, and how much more of India would have electric power.

And we still have politicians who oppose any changes in old socialist policies on the grounds that they’re doing it for us. And we still go and vote for them.

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