UDF government courts controversies

The open sparring in the UDF over the lease of estates in Nelliampathy and the controversy over regularisation of conversion paddy fields have dented the image of ruling United Democratic Front (UDF) in Kerala.

The Government Chief Whip P. C. George took cudgels against Forest Minister K. B. Ganesh Kumar for initiating steps for takeover of estates over expiry of lease or violation of lease conditions including sale or conversion of the estates. Mr. George’s contention is that the Forest Department is acting against farmers, meaning the estate owners.

Nelliampathy Estates

Nelliampathy Estates

Estate owners have been trying every trick in the book to prevent reversion of their estates. They have also gained support of a section of the UDF in favour of their efforts to retain the leases.  However, a section within the UDF is opposed to it. In fact, there was a section favouring the estate owners in the previous LDF government also. However, the CPI which was in charge of the Forest portfolio had favoured take over.  After the UDF government came to power, interested groups were working for change of policy and that yielded some results.

The fight in the UDF over the issue would not die down easily as much is at stake.

Similar is the situation on the question of reclamation and conversion of wet lands and paddy fields. Those attempting large scale conversions had received the support of a section of the previous government. Now, they were getting almost full support from the Cabinet with it approving a proposal to regularize pre-2005 conversions. This would have helped realtors and investors in resorts and other projects. However, opposition is growing in the UDF with V. M. Sudheeran and others openly speaking against the decision. What they are pointing at is obvious.

These controversies are accentuating dormant internal schisms in the front and could even threaten the cohesion of the government.


Banks plan to divert farm loans to investments in real estate

The State Level Bankers Committee in Kerala plans to press the Reserve Bank of India to treat loans for purchase of estates as agriculture finance.  If approved, the proposal is sure to create serious problems in the State.

Banks are already reluctant to give loans to genuine farmers. Even now, agricultural loans go to money lenders who, in turn, lend to the farmers. This arrangement suited the banks and their managers because of supposedly higher assurance of repayments. Besides, bank managers, who are corrupt, stood to gain from such lendings.

This situation was one of the causes behind the recent farmers’ suicides in Wayanad district. It was difficult for even landed farmers to get loans from scheduled banks not to speak of those living on contract farming. The money lenders provided them funds which, in turn, came from the banking system.

The latest proposal of the SLBC is actually aimed at classifying lending to the real estate and tourism sectors as agriculture finance, and helping the banks to show that their targets in sanctioning agricultural loans have been achieved. For investment in estates is not really investment in agriculture. Every school girl knows that there no sufficient profits in plantation sector, except in the case of rubber and occasionally cardamom, to justify large investments.  Those investing in estates are actually investing for capital appreciation and also to use estate land for non-agricultural purposes.

The real estate prices are already on the high side in Kerala, and with the banks pumping in money, it is bound to go up further.  The common man is already not in a position to buy land even for housing not to speak of farming. With real estate becoming the prime investment attraction in the State, land is likely to be concentrated in the hands of the rich. This is already happening despite the ceilings under the Land Reforms Act. Plantation is exempted from land ceilings, and lucre now is UDF government’s policy in favour of allowing certain portions of plantations for tourism purposes.  The current trends are likely to defeat the purpose of land reforms and invite fresh clamour of ceilings. Kerala may soon have only real estate in the hands of the moneyed and hardly any farm lands as we knew it in the past.

On the long term, banks may also be risking their money. The real estate boom can collapse if tourism is hit by economic recession elsewhere or degradation of the environment. Any disruption in flow of money from the Gulf countries or weakening of the information technology sector can also hit the real estate prices.

Agriculture will never pay enough to repay large loans given for investment in estates. It is also notable that if the banks are genuinely interested in lending to agriculture, it can and do lend for planting operations.  However, the history of lending to plantation sector in the State is replete with examples of banks giving loans without ensuring proper collateral.  Several estate owners don’t have proper title over much of their land.  If the RBI gives the green signal for sanctioning loans for purchase of estates, the banks may now lend for ‘buying’ leased, environmentally fragile  and excess lands.