Managing Publicly Held Land as an Asset and for Public Interest

India’s public land holdings are vast and valuable. One of the government’s most significant tangible assets, whether in the hands of central ministries, state governments, or local bodies, they occupy substantial acreage in high value urban areas and around major ports. A pilot inventory of public lands in the Ahmedabad Municipal Corporation2 indicates that 32 per cent of all developed and developable land — excluding road network, water bodies, and railway lines — is public land with the Corporation. Indeed, the Union Government departments and organizations are the largest landowners in the country.3 There is no definitive publicly available inventory of central land holdings, but a study of published sources indicates that these holdings are very large and potentially underutilized.4 The 13 Major Port Trusts hold around 100,000 hectares of land in all. The Airports Authority of India controls 20,400 hectares of high-value land surrounding major airports. Indian Railways has identified 43,000 hectares of its massive landholdings as unnecessary for railway service, and estimated the value of this excess land at some US$40 billion. The Ministry of Defence is India’s largest landowner. Its holdings amount to over 700,000 acres, of which about 0.7 lakh acres are in cantonments — many of them in prime urban areas. In 2006 and 2007, the Metropolitan Mumbai Regional Development Authority (MMRDA) leased out 13 hectares of land in the Bandra Kurla complex in Mumbai for about Rs. 5000 crores, or roughly ten times the MMRDA annual infrastructure budget and five times the Mumbai Municipal Corporation budget!

Public lands in urban areas are highly valuable public resources that deserve open and efficient management following good international practice. The monetary value locked up in government held, but unused land cries out for efficient and effective land management. A commonly held view in India is that land is a scarce, highly valuable and a finite resource. Continued acquisition of private lands for public purpose has become a contentious and socially divisive issue. But any government seeking to expropriate large tracts of new land for public purpose should manage its existing land holdings in a way that not only brings in direct government revenue but also helps indirectly to sustain economic activity in and around these areas.

India is a rapidly modernizing and urbanizing society, a society that is experiencing pressures from many different directions to invest in public services, human capital and general welfare. Effective management of public land represents an opportunity to respond to these urgent needs. This should be part of a strategy for managing the government’s balance sheet in public interest. Disposing of surplus lands could free up fiscal resources for investments in other much needed public assets, such as long lived infrastructure networks that can bring benefits to society for years to come.

Some of the necessary steps towards this goal are outlined below. The relevant question here is not whether to release surplus government lands; this is happening and will continue. The operative question is whether the governance arrangements for management of public lands can be improved to ensure that alienation of these assets better serves the public purpose. The first lesson from international experience is that individual governmental agencies rarely, if ever, identify excess lands voluntarily to permit redisposition of lands no longer needed for their service function. Successful utilization of public lands has mostly happened when a strong centralized government agency has mandated the identification and redisposition of excess lands to ensure proactive management of these assets. The costs of holding onto lands allocated to government departments and agencies are very small. Decentralized agencies have little incentive, therefore, to get rid of them.

Second, there must be a reliable and consistent inventory of public lands that allows scrutiny by higher level authorities of public land holdings, in particular Finance Ministries/Departments, to ensure that valuable assets are not held indefinitely when they could be converted to other use, public or private. The absence of a regularly updated, centralized, and consistent inventory of public lands also leaves considerable scope for alienation through sale, grant, or most likely leasing, of valuable lands without scrutiny of these transactions.

Third, successful experiences from countries with a federal structure point towards a separation of management arrangements for state and federal level land assets. All of this must begin with a comprehensive inventory of public lands. A good inventory should record (a) location and dimensions of each land parcel (b) legal title and any restrictions on development (c) current use and future planned use, if part of a public development plan and (d) valuation by parcels of economic significance. Such an exercise should be carried out by all departments in a ministry and by all agencies depending on a ministry for their funding, as well as, by all public sector undertaking (PSU) owned wholly or partly by government.6 Consistency and comprehensiveness are more important than introducing sophisticated technological platforms that may slow down the creation of the desired inventory. These must then be made publicly accessible. A publicly accessible inventory of public lands is an essential element in accountability.

Fourth, create a centralized process for identifying excess or surplus public lands. Once a list of “surplus” land has been identified and made public, market forces and perhaps other agents of government can focus on the most attractive or useful surplus parcels and express demand for them.

Fifth, create administrative and financial incentives for excess land disposition and sound asset management. One way of achieving this is to place the onus on government agencies to justify why they should hold any land parcels, by requiring them to demonstrate their necessary role in the agency’s public service provision. Regardless of whether the land is ultimately disposed of, or not, such an exercise identifies the extent to which land is held as an asset by the government.

Sixth, institute an annual land audit using the principle of value for money in identifying excess public lands. Land held by government should be viewed as an input into the provision of the public service for which the landholding agency is responsible. All public landholdings therefore should regularly be reviewed, with the goal of divesting those properties not necessary or cost-effective for service provision. Property having no efficient use is to be put on the open market at full value (whether for rent, lease or outright sale). Such an audit and its underlying principle will also help in acquisition and allocation of public lands.

And finally, once the audit system is in place, the actual management of the surplus land and the generation of its value must be undertaken by specialized agencies, with a well-defined public interest objective (which, in most cases will involve land value maximization in some form) and clear indicators for evaluating their performance which, in turn, will have to be incentivised. This is not rocket science but requires political will and leadership that enables a government to work in the public interest.

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