Boostrapping : EAS.07 - Equal Allowace System over Agricultural Land
Proposed administrative procedure - EAS.07
Equal   Allowance   System   over   Agricultural   Land
Purpose : To reduce nexusproness in the administrative procedures dealing with allocation of state-owned agricultural land AND to ensure that citizens get equitable royalty (rent) over state-owned agricultural land.
Pre-requiste readings :
EAS.01 -- Equal Allowance System over Underground Water
EAS.06 -- Equal Allowance System over Residential Land
- Overview of EAS.07
- Some details of EAS.07
- An eample of EAS.07
- Protection of a lease holder
- How EAS.07 provides houses for poor
- Length of land lease
- EAS.07 vs. Existing Way of Land Reforms
- Advantages of EAS.07
- Draft of the act to create procedure EAS.07
The purpose is to reduce poverty, without taxing the rich. How? By ensuring that every citizen gets equitable share in the "rent" or "deemed rent" of natural resource. How? I have proposed several laws to enable that. EAS.07 is one of these proposed laws.
Overview of EAS.07
[Note : EAS.07 is very much like EAS.06. So to save repeatations, I have skipped several details. I request reader to carefully go thru EAS.06 before reading this web-page]
There is one problem with argriculture not in residential use of land --- farmers need protection against under production and over production. To address this issue, procedure EAS.07 has one additional complexiety (namely a company owned WHOLLY by Allowance givers) which IMO was NOT necessary for EAS.06. And this is my reason to deal with Agricultural land and Residential land SEPERATELY.
Following is an overview of EAS.07 :
- Procedure for plotting the land : The District Mayor will appoint a Land Plotting Officer, who will make plots on the district-owned land marked for agricultural use and decide lease duration of the plots.
- The Registrar will issue 1 Land Allowance every month for each citizen resident in the district. A citizen can allocate his Land Allowance to any company/individual of his choice, using RLPP. If a citizen gives his Allowance to a company which has registered itself as a company WHOLLY owned by Allowance-givers, the citizen gets a voting right in that company.
- Procedure for allocating the land : The Land Plotting Officer will conduct auction for each plot. The bids will be in terms of Land Allowances, not money. Those who want land will need to obtain Land Allowances from the citizens.
- Procedure for Re-allocating the land at the end of the lease : One year before the lease period expires, there will be another auction where the highest bidder will get the land, with a difference : the existing land leaser will only need to bid half as much the highest bidder. If the existing leaser looses the auction, he may sell the plants or construction (as as irrigation pipes) to the new leaser or remove it.
Some details of EAS.07
- [same as EAS.06] As per EAS.07, the District Panchayat will be prohibited from selling its land. It can only LEASE the land for atmost upto 30 years.
- [same as EAS.06] The Mayor will appoint following Senior Officers : Registrar, Land Guard and Land Plotting Officer. The citizens can remove these senior officers using RLPP or Jury Trials. The citizens can also remove any officer using Jury Trial.
- [same as EAS.06] Plotting of district-owned land :
- The Plotting Officer will divide the Land owned by the district into several plots and release the plot maps 3 months before the auction. The Plotting Officer will also mention the length of the lease, purpose (such crops can be grown on the land) and other terms associated with each of the plot.
- After releasing the maps, if citizens suspects that the Plotting Officer has deliberately made plots in such way that it benefits a few individuals at the cost of citizenry, citizens may remove him using RLPP. If the Plotting Officer gets expelled and the new Plotting Officer comes, the auction plan and plotting will stand cancelled till the new Plotting Officer releases the new plan.
- [same as EAS.06] Timing of auctions of district-owned plots : The Plotting Officer will auction about 1% - 2% of the available land every year. This way, every year, significant amount of land will be available of auction.
- Land Allowances :
- The Registrar will issue 1 Land Allowance, dividied into 100 Sub-allowances, to the citizens residing in the district.
- Using RLPP, the citizen can give his Sub-allowance to any company/individual registered as Allowance-buyer.
- The issued Sub-allowance will be valid for six months after issue. After 6 months, the Allowance’s count will decrease by 10% every month.
- [Important difference between EAS.06 and EAS.07] If a citizen gives Sub-allowances to a company which is registsred as "company owned WHOLLY by Allowance-givers", then the citizen gets voting rights in the company. The weight of his vote is equal to number of Sub-allowances he has allocated. The owners of the company will elect the Chairman, and can anyday replace him using RLPP.
- Such company may set a price that the Allowance-giver will have to pay to become member. If such a a price is set, the citizen MUST pay that amount at the time of giving Allowance.
- [same as EAS.06] Auction procedures
- The plots will be allocated using auctions. In the auction, ONLY Land Allowances can be used, not money or anything else.
- The Plotting Officer will ensure that there is exactly one auction every month. The auction schedule will be released at least 6 months in advance along with location and maps of the plots. The Plotting Officer will try to ensure that each month, approximately same amount of land (amount measured by approximate market value) is auctioned.
- In the auction, the land-user which bids highest number of Allowances will get the plot.
- After the auction, the company which won the bid will decide which plot will be auctioned next. The auction will go on till all plots or Allowance are exhausted.
- [same as EAS.06] Renewal of lease :
- When the lease expires, the land will be auctioned again for a new lease. This auction will be held when 1 year of the lease time is left. The only difference is that the existing land-user will need only half as many as the highest bidder’s Allowances to win the bid
- If the current lease holder looses the auction then the current land-owner’s lease will expire on the due date, and the Land Guard will allocate the land to the new lease-holder. During the remaining time (time between auction and the expiration of lease), the current lease-holder may sell the constructions to the new land-user or relocate the constructions or destroy the constructions.
- if the current lease holder looses the auction, then 3 months after the auction was held, the Registrar will issue Allowances equal to 25% of the highest bid to the current-lease-holder.
Unlike water and ores, EAS over Agricultural Land is a bit complex as land is not relocatable and divisible into very small units. I will clarify some of the complexities by examples.
- Say in a district there are 10,00,000 citizens. Say each citizen has 1 Land Allowance, divided into 100 Sub-allowances. So there 10,00,000 Land Allowances are given out each month.
- Say the EAS starts in the month of March of a perticular year. Then the Registrar will issue 10,00,000 Allowances in March, which can be used for the lease auctions in the month of April onwards. The Allowances will be added to the accounts of registered Allowance buyers, depending on how many citizens have selected (using RLPP) that land leasor and how many Sub-allowances the citizen gave him.
- So some of the Allowances will get used in the month of April itself. But say some Allowance-buyers could not use the Allowances in April. Then they can use these Allowances in June, July or upto auctions in September. Now at the end of September auction, all the Allowances issued before March will loose their value by 10%.
- Say there is 20,000,000 sq. meters of land with the district. The Plotting Officer may divide them into say 2000 plots of average size being 5000 sq. meters, and keep remaining area for roads etc. He may divide the 2000 plots into 100 groups, with each group having 10-30 plots, so that each group has approximately same market value. Say he decides to auction most plots for 10 year lease while some for 20 years and some for 30 year lease thereby average lease time be 10-20 years. This way, every month, about 10-30 plots will be on auction.
- Say some 100 individuals/companies register themselves as Allowance buyers. The citizens can Allocate their Sub-allowances to the buyers of their choice and buyers may buy sell the Allowance amongst themselves.
- Now suppose 1000 citizens have 1 Allowance each and they have allocated their Allowances to a buyer in the month of January. So in the auctions which will be held in the February, the buyer will have 1000 Allowances. But if 100 citizens re-allocate their Allowances to some other buyer, this buyer will get only 900 new Allowances in the month of March.
- Now suppose 100-200 plots are for auction. Then the Plotting Officer will disclose the first plot to be auctioned 3 months before the auction using random selection. In the auction, each company will bid NOT in terms of money but in terms of Allowances they have got from citizens. For example, say for a plot five land-users bid 100, 120, 150, 160 and 125 Allowances respectively, then the bidder who has offered 160 will get the lease for the stated duration.
- Now lets say that the lease was 8 years. Now after 3/4th of the time expires, i.e. after 6, the land will be for auction once again. Say the highest bidder bids 200 Allowances. Then the current-lease-holder must bid over half the highest bidder i.e. 101 Allowance. But if the current lease-holder bids less than 101 Allowance, he will loose in the auction.
- If he looses the auction, then in next 3 months, he can offer 125% of the bid (i.e. 250 Allowances) to the Registrar. If the current lease-holder gives 250 Allowances to the Registrar, then the current lease-holder’s lease will get extended and the Registrar will give 250 of Allowances to the highest bidder.
- Now if the current lease-holder cannot give 250 Allowances in next 3 months after the auction, the Registrar will issue him the Allowances equal to 50% the highest bid, i.e. 100 Allowances and his lease will expire on the expiry date.
- Now the current lease-holder can sell the construction to the new lease holder or relocate it or destroy it. This will be a private deal. The two parties will decide the price.
How a lease-holder is protected in EAS.07
The value of agricultural land is value of empty plot at that location plus value of equipment (like pipes etc) on that plot, plus perinial (which give seeds/fruits etc for several years) plants on that land.
Now say current market value of 20-year lease of an empty plot is Rs 10,00,000. And the cost of plants, pipes etc on this land is less than Rs 5,00,000. Then the EAS.07 fully protects the current lease-holder when this plot is re-auctioned. Even if the current lease-holder looses in the auction, and the new lease holder does not see any value in the pipes/plants on that land, the current lease-holder will at least get Rs 500,000 for the contruction.
The problem will be when the cost of plants/pipes is much above the market value of empty plot. Say market value of empty plot is Rs 10,00,000. And the cost of plants/pipes etc is Rs 50,00,000. Now is the market value of plot Rs 60,00,000? Not necessarily. The potential buyers may not see any value in the pipes/plants on that land.
Now say when the re-auction of that plot is announced, the value of Allowance is Rs. 100 per Allowance. The buyers who are only interested in the land, but see no value in the plants/pipes will only bid upto Rs 10,00,000 ( = 10000 Allowances). Now the current lease-owner only needs to bid 50% of the highest bid. So one way current lease-owner can retain the plot is by bidding Rs 500,000 ( = 5000 Allowances). Now when the current owner places a bid of Rs 500,000, everyone who is interested only in land but not in the plants/pipes on that land will go out of bidding. But if a buyer values land, with or without pipes/plants at Rs 40,00,000 ( = 40000 Allowances), the current lease holder will have to bid Rs. 20,00,000 ( = 20000 Allowances) to beat his bid. Now if potential buyer values the land at Rs 60,00,000 ( = 60000 Allowances), then the current lease-holder will have to bid upto Rs 30,00,000 (= 30000 Allowances).
What it means, is that in order to retain the land, the current lease-holder MUST CONTRIBUTE TO citizens in some or other way. But in any case, the lease-holder will not go bankrupt as he will get 50% of the Allowance if the highest bidder.
How EAS.07 provides food etc to poor
Since Allowances are issued ONLY to resident-citizens, the companies which want to acquire district-owned agricultural land will have to buy Allowances from the resident-citizens and in turn will have to provide cash or may be food.
So if all the agricultural land in a district was allocated using EAS.07, even the poorest would be able to sufficient food. But some of the land is private. Then can EAS.07 give food to all the poor?
EAS.07 can assist poor, ONLY if substancial part of land is district-owned, and is leased out using EAS.07. Say if 100% of the land is private, then obviously, EAS.07 cannot do anything for the poor.
But in such case, the district can impose a say property tax (say 1% of market value of land per year) on those who have more land than per capita land in the region. The money collected from this can be used buy the land from the market. The land bought by the district can be added to EAS.07 and thus the food situation can be improved.
Besides, the Governments have given significant land to charitable institutes. What can be better charity than providing food to the poor? IMO, the charitable institutes would be enthusiastic about giving back the land, that they got from the government, back to the citizens. Likewise, many educational charity institutes have unused land which can be assimilated in the EAS.07 AFTER the trustees accept. And Universities and colleges owned by Government can be also asked to give back their unused land to EAS.07.
Here I am drifting from a basic promise ---- I stated that EASs can solve porverty problem WITHOUT any tax. But here, I am proposing a tax to buy land into EAS.07. Well, this tax is to undo a stupid step taken by policy-makers of the past ---- they should have ONLY leased the land not sold it. Once this wrong is gradually undone, by buying the land at price decided by the owner, the tax can be removed.
Length of land’s lease
The longer length of the lease, more will the value of the Allowance in the first round. But longer the length, lesser will be the land available for the auctions of the future. And landlessness may give rise to foodlessness i.e. reduction in ability to buy food. So "more cash now and foodlessness later" or "less cash now and food forever", is the main question citizens have to decide in EAS.07.
Can short leases reduce the agricultural activity? NO. Agricultural activities depend more on SHARED infrastructure like canals etc which are anyway state-owned. The investment on the private agricultural land is less in most cases. A lease of 5 years is sufficient to recover cost of investments plus profits.
Evacuation of the land is NOT different from evacuation of a tenant from a rented house. If the land lease contract clearly specifies the lease-length, the lease holder was told well in advance about the eviction. Thus there is no moral/economic reason for allowing him to possess the land forever.
EAS.07 vs. Existing Way of Land Reforms
The existing way of carrying out land reforms is mundane and fatal. The idea of taking land away from large landholders is good. But re-privatizing it is a bad idea. And in small plots of 5-10 acres to small farmers is a worse idea. When land is re-distributed this way, the fraction of landless farmers goes down from 99% to 5% - 10% but not 0%. So 90% - 95% landless get no benefit from the land reforms. And often, when re-distribution occurs, landless individuals of lower and middle castes seldom get any land. Sooner or later, the 5%- 20% landowners start colluding and the economic condition of landless starts worsening. Further, technologically, if the farm size is below certain acreage, the productivity falls.
The EAS.07 DOES NOT have these 2 problems. No one is landless as EACH and EVERY citizen has Allowance to lease a land. And the farm size need not go small, as one individual/company, if it shows better performance, may get more and more Allowance from citizens, which will increase the size of the plots.
So EAS.07 is superior than existing way of land reforms.
Advantages of EAS.07
- EAS.05 reduces poverty. How? The companies/individuals which want farms over district-owned land will have to pay casg/food or whatever for the Allowance. This will reduce commons' poverty.
- It reduces nexusproneness in the process of allocation of district-owned agricultural land.
- EAS.07 reduces encroachment over GoI-owned land. How? Suppose district-owned land is encroached. Then this would result into lesser money for citizens' Allowance. IOW, if the Land Allowance is fetching Rs. 1000 per month, stopping land encroachment would increase the value to say Rs 1200. Given the monetary benefit, most citizens will start investigating the issue. And most citizens would Approve someone else for the position of the Land Guard using RLPP. In fact, the fear of prmot replacement alone would ensure Land Guard’s integrity, and thus less encroachment.
Draft of the act to create procedure EAS.07
One laws needed to be passed for to enact EAS.07 in district councils. To see the draft of the law, please click here.
Now citizens can ask Panchayat Members to pass this Act. But IMO, it will be wiser for citizens to first enact procedure LM.01, and then use LM.01 to pass this EAS.07 draftd WITHOUT any help from Panchayat Members.
To know about procedure LM.01, please click here.
Next - EAS.08 : Equal Allowance System over Mineral Ores