Source: Ideas and Institutions | Issue #38
Analysis
Setting Up Solar Power Parks: Is Land a Binding Constraint?
Is land a binding constraint to economic development in India? I have written elsewhere on the lack of reforms in land markets, and more eminent scholars have pointed out to land being one of the primary constraints to India’s economic development. I was therefore intrigued to see a statement by the Union Minister for New and Renewable Energy and Power, Mr. R.K. Singh, in Parliament this July, saying that 170,000 acres of land (687,965,592 square meters, or 68,700 hectares) have been made available for the development of solar power parks. This is more land than the entire urban territory of Mumbai. This essay examines how land has been acquired for solar power parks in India and, through this examination, seeks to understand the degree to which land was a binding constraint in this project.
Solar Power in India
Today, India is the fourth-largest solar power producer in the world. This is commendable given the constraints that initial efforts to develop solar power faced in India. The government’s initial approach envisaged incentives for smaller solar power plants and projects. This, however, did not work. According to the government, “projects developed in scattered manner leads to higher project cost per MW and higher transmission losses. Individual projects of smaller capacity incur significant expenses in site development, drawing separate transmission lines to nearest substation, procuring water and in creation of other necessary infrastructure. It also takes longer time for project developers to acquire land, get all types of clearances and permissions etc. which ultimately delays the project.”
To overcome these issues, in 2014, the Indian government introduced a scheme titled “Development of Solar Parks and Ultra-Mega Solar Power Projects,” which was to last until 2023–24 and has now been extended until 2025–26. The scheme proposed “supporting the States/UTs in setting up solar parks at various locations in the country with a view to create required infrastructure for setting up of solar power projects. The solar parks provide suitable developed land with all clearances, transmission system, water access, road connectivity, communication network, etc.”
This scheme allowed the creation of solar parks by government entities, state governments themselves, and private firms. While the scheme envisaged the commissioning of 40 GW of solar power, according to the minister’s statement in July 2023, about 12 GW had been completed, and in all, 38 GW of cumulative capacity has been sanctioned. While only 12 GW of capacity has been added so far, this has already made India the third-largest solar power producer in Asia and the fourth in the world.
Land as a Constraint for Solar Park Development
Solar power generation is land-intensive, and the government estimates that 1 MW of solar power addition requires around 4 acres to 5 acres of land. It is estimated that the total land requirement for meeting the government’s target of producing 175 GW through renewable energy is in the range of 55,000–125,000 square kilometers (5,500,000–12,500,000 hectares). So far, 170,000 hectares have been developed. While this is a small proportion of the total land required, the fact that this much land has been acquired within a relatively short period of time begs the question of whether land is truly a binding constraint.
On the one hand, the availability of land has been flagged by many as one of the most important problems when it comes to setting up solar parks. For example, according to one news report, “Apart from module prices, land acquisition has been a major challenge for solar power manufacturers.” A source quoted in the report said, “Installing a megawatt of solar power requires on average four acres of land. So various developers face challenges in acquiring it and that’s one reason for the delay.”
Another news report states that land continues to be an issue for renewable energy projects because of poor land records, a lack of explicit land allocation policies for renewable energy, and delays in clearances for land use.
According to another article, while most of the land favorable for solar radiation coincides with wasteland in India, “wasteland is also not favoured by project developers. Developing projects in wastelands increase costs partly because of the inhospitable terrain and partly because of the lack of supporting infrastructure. Transmission infrastructure required to move power generated to consuming centres also increase cost.” This means that agricultural land with good locational characteristics is in higher demand.
On the other hand, land is being acquired through different mechanisms for the development of large solar power parks. This shows that despite the persistence of long-lasting problems in land markets, these do not become binding constraints. It is true that, in all probability, they do create significant transaction costs for all parties concerned, but, as the next section highlights, these problems do not prevent transactions from taking place.
Procuring Land for Solar Parks
A quick survey of state documents and news reports throws up a combination of at least five different strategies to make land available for solar power parks. These are:
- Private land leasing: Under this model, the developer of the solar park is a private entity that enters into a voluntary agreement with landowners to lease out their land for a period of 25–30 years on the payment of annual rent. This mechanism has been announced as part of the policies of many state governments, such as Maharashtra, Karnataka, Tamil Nadu, Uttar Pradesh, Himachal Pradesh, and Delhi. Projects developed under a land lease mechanism are operational or under development in many of these states.
- Leasing government land: The alternative leasing mechanism is to lease out government land, either empty land or wasteland, for these projects. The Indian government’s guidelines encourage states to do so: “Land for setting up of the Solar Park will be identified by the State Government unless the implementing agency has its own land. In order to provide for such a large tract of contiguous land with appropriate insolation levels, the State Government may prioritize the use of government waste/non-agricultural land in order to speed up the acquisition process.”
Andhra Pradesh is pursuing a hybrid of these two mechanisms, where a government agency, acting as an intermediary, took advance possession of the required land and leased out the land to the power company: “The District Collector shall hand over advance possession of land including path ways to NREDCAP and the land shall be allotted on alienation basis to NREDCAP by fixing reasonable market value. After getting advance possession of the land, NREDCAP will allow the developer to start the construction duly taking necessary undertakings. NREDCAP shall enter into lease agreement with the developer once the project is commissioned." - Purchasing land privately: The third option is, of course, for the private firm to purchase land privately. In this regard, some states, like Maharashtra, have made the process of converting the usage of agricultural land for non-agricultural purposes much easier. Developers do not require prior permission from land revenue authorities if they wish to convert agricultural land for setting up power projects. Only an intimation is required.
- Land acquisition by the government: While this option is not being used or discussed in policy documents, it always remains an option.
- Consensual land acquisition by the government: Madhya Pradesh has a “voluntary” land acquisition policy, which was used to acquire land for a solar power project in Rewa.
These varying mechanisms therefore highlight a certain degree of adaptability in dealing with the constraints present in land markets. Solar power parks have been approved, commissioned, and developed through these mechanisms. There are two aspects of these coping mechanisms that are worth noting:
- The emphasis on the use of unused government land: This is a welcome development since large tracts of government land remain unused or underutilized. The use of these lands for the development of power projects signals a shift in approach toward greater utilization and monetization of unused land and reduces the stress on land that is already being used for other purposes, such as agriculture.
- The shift toward land leasing as opposed to purchases or acquisition through eminent domain: The high costs of land mean that either purchasing land or acquiring it under land acquisition laws is becoming increasingly difficult. This is necessitating a shift toward the leasing of land. This is beneficial for the following reasons:
- Under most of the policies I studied for this essay, the title to the land remains with the owner, and the possession reverts back to the owner after 25–30 years.
- Leasing is beneficial for agricultural landowners who are not assured of a regular and viable income stream either due to the absence of guaranteed markets or the relative infertility of the soil. Leasing out the land provides landowners with regular rent and provides income stability.
- Importantly, given the history of often unfair and conflictual land acquisition in India, land is not compulsorily acquired from landowners and leasing is voluntary.
What Does This Show About Land Being a Binding Constraint
These developments can be interpreted either way.
One is to argue that these coping mechanisms are an indication of binding constraints in the land markets in India. The official targets for solar park projects have not been met, and the nonavailability of land is a serious constraint. Governments are adapting to these constraints through different mechanisms to make land available for solar power parks.
The other argument, which I have increasing sympathy for, is that these coping mechanisms and their relative success are an indication of the fact that land availability is not a binding constraint in every case. This is because:
- A large amount of land has in fact been made available through the use of different mechanisms. The fact that these mechanisms are working is an indication of the fact that land markets can be made to work if the correct policy mechanisms are adopted. In many cases, revenue land/government land has been provided. Unused government land is being monetized.
- The fact that leasing agreements are working successfully highlights the fact that we cannot use the most extreme examples—of failure to purchase or acquire—to understand the nature of land markets. Land leasing is a perfectly viable and legitimate transaction in land markets, and the willingness of landowners to lease out their land to industry highlights the fact that private transactions in land markets do work well, provided, again, that the right policy mechanisms are used.
We should not care about whether these transactions are occurring in the absence of a policy framework or are being facilitated by it. The absence or presence of land leasing policies by themselves is not a metric by which to judge the eventual outcome of whether private developers are able to lease-in or purchase land required for their projects.
The fact that innovations in policy mechanisms are occurring after the reform of the 1894 land acquisition law also gives rise to an additional thought: maybe the old acquisition law was an intellectual binding constraint. The wide discretionary powers enjoyed by the Indian state under that law and the low amounts of compensation payable made it easy to acquire land, and compulsory land acquisition became the default for facilitating all industrial development. Its reform in 2013 has probably forced the Indian state to think out of the box.
In conclusion, land policies and approaches toward land utilization seem to be a bigger binding constraint than land availability.
—By Anirudh Burman
Review
Madhava Rao’s Enterprise: Then and Now
In the book The Progressive Maharaja: Sir Madhava Rao’s Hints on the Art and Science of Government—first published in 2022, with the paperback edition available this month—political philosopher and historian Rahul Sagar has reintroduced a text that was almost lost to us. Over the years, people came across different versions of it—a version has been online since 2007—but it is not clear how many appreciated its context and importance, which Sagar presents in a detailed and worthy introduction. In the versions floating around, the order of the text was neither logical nor chronological. Sagar has recovered the original text.
What is the Text About?
It is a series of lectures that the then dewan of Baroda, Raja Sir Tanjore Madhava Rao, delivered in 1881 to prince Sayaji Rao Gaekwad to help prepare him for his ascendance to the native state's throne. They were a distillation of Rao’s experiences in government and his vast readings on governance. These lessons were an attempt to teach the virtue and principles of good government to someone who was to become a king, not because of his abilities but because of his fortune.
Sagar explains how Rao’s experience as a statesman led him to believe that the native states could serve their citizens well through good governance. In his fifteen years (1857–1872) as the dewan of Travancore, Rao had helped it become a model native state, thereby establishing a formidable reputation for himself. He had then served as the dewan of Indore from 1873 to 1875 before becoming the dewan of Baroda in 1875.
The big idea animating Rao’s lectures was that of a constitutional monarchy promoting the happiness of the people. He had drafted a constitution for the native states (given in Appendix I of the book). Since the constitution did not find acceptance, the other option was to explain the importance of constitutionalism to the prince. Rao did not expect the prince to bind himself to constitutional constraints based on a plea. In the lectures, his appeals to higher ideals are juxtaposed with warnings about the risks that bad government posed to the maharaja, mainly the possibility of being removed from power by the British, as had happened with Malhar Rao, Sayaji Rao’s predecessor.
What Do the Lectures Teach?
In the first lecture, Rao states the fundamental principles. He starts with a plea to achieve good governance to promote the happiness of the people. He suggests that the state should be seen as a public trust and that the maharaja should place the happiness of his people above his own happiness. This means giving up powers to act arbitrarily, showing no partiality to a class, creed, or friend, treating all people with consideration, employing all classes in public service, avoiding unequal taxes, and giving equal justice to all. Such a government, Rao suggests, will also live long.
In lectures 2–15, Rao lays down the principles of internal administration while explaining how things were, advocating for the continuation of reforms he had undertaken, and discussing future priorities. Rao suggests that the government’s core role is “to take measures for the security of the life, liberty, person and property of the people.” This requires an adequate and efficient police force backed by a strong and disciplined military and proper judicial tribunals for dispensing justice. Further, Rao suggests that the government should focus on public health, education, public works, food supply, encouraging industries, and other functions. On each issue, Rao makes suggestions on the objectives and the instruments to promote them. He also gives suggestions on the duties of the maharaja, organizing the palace department and the public administration system, and structuring the salaries.
Rao recommends many principles for administration, such as meritocracy in appointments to public office; equality before the law (including for the maharaja); rational administration without routine intervention by the maharaja; noninterference with religious practices, except when they harm others; diversity of castes and creeds in higher administration; and a focus on administrative efficiency. He also makes suggestions for avoiding the bad aspects of old filial and communal systems while retaining the good practices.
Lectures 16–21 are about foreign relations. These are mostly focused on how the maharaja should deal with the British Raj. Rao suggests a conciliatory and even obedient approach; the main objective seems to be not antagonizing them. To a contemporary reader who sees the country’s colonial history in terms of a foreign power conquering a “free” people, who then undertook a long struggle for freedom that ultimately ended with the achievement of independence through the dint of their own efforts and sacrifices, Rao would appear too accommodative.
The dewan served more at the pleasure of the British government than he did at the pleasure of the maharaja. Even the maharaja could be deposed by the British government. Rao had begun his career a few years before 1857 and must have seen the mismatch in power and what the British were capable of when faced with resistance. Importantly, the lectures had been approved by the British government. One could, therefore, argue that he was saying what could be said and no more. Sagar also presents such a realist interpretation.
In Lecture 22, Rao concludes the lectures on internal administration and foreign relations by reiterating the importance of promoting the happiness of the people, with a reminder that the position of a maharaja is one in which great power is inseparable from great responsibilities, and stating that the maharaja must adhere constantly and faithfully to these principles, which involve “great self-denial” and great firmness in resisting “multifarious seductive influences.”
Lectures 23–45 are about the personal conduct of the maharaja. The essence of these lectures is that being a maharaja is more difficult than one might think. It requires self-denial, sound judgment, a restrained disposition, and other rare qualities. Rao makes many useful suggestions on identifying intriguers, handling one’s anger, being firm with reasoned decisions (without being obstinate), taking and using advice, encouraging honest discussion, willingness to compromise, not seeking shortcuts to fame (instead, doing the right things and letting fame follow), trusting and backing the administration, not working too hard (devoting time for recreation and learning), cultivating good judgment by studying how others judged difficult matters, evaluating the alternatives before taking a decision, acting in good faith, and so on. In Lecture 46, Rao concludes by emphasizing that theoretical knowledge alone is not “sufficient in the government of human beings.” The maharaja must constantly add “the benefit of actual practical experience.”
What Was Rao Trying to Achieve and Why?
Rao suggests that the maharaja should make the people happy and not make the British government unhappy. Some may argue that the people could not be truly happy under a foreign government. However, Rao did not see a straightforward way out of British rule. The key is to understand what he saw as the sources of British power and the weaknesses of the native states and the regimes this country had seen earlier.
In Chapter 16, he writes, “The power of the British Government is all the more irresistible because it is derived from a combination of physical with intellectual and moral power.” Rao saw that the main sources of British power were institutional. Rao also seems to believe that, in terms of good governance, earlier governments in India were worse off and many of the contemporary native states were no better. Rao suggests that the native state needed to learn from the British government and other sources of modern thinking on government. He suggests learning from the laws framed by the British government and quotes thinkers like Francois Fenelon, Emer de Vattel, and Edmund Burke at length.
Rao quotes native sources as well: on the rule of law, he quotes the Upanishads to say that “The Law is the King of Kings”; he cites the Dharma shastras to underscore that the “first duty of the ruler is to promote the happiness of the people”; and he quotes the Vedas to suggest that “he alone lives who lives to do good to others.” It seems Rao believed that although some of our traditional sources contain certain high principles, countries like Britain had developed new modes of governance that India needed to emulate in the native states to promote the happiness of the people. Implicit in Rao’s enterprise is that in modernity, such happiness and the abilities of the state are strongly associated. Rao would not have agreed with the suggestion that Indians needed to be civilized by the British, but he did see advantages in learning about modern governance from them.
Rao gives many examples of how native states were often lacking in good government. He refers to issues such as misappropriation of the police, poor administration of justice, excessive taxation, princes undertaking private trade, deficiencies of “organization and discipline” in public administration, the tendency to not allow good public servants to continue for they do not allow “dirty work,” wrongful exercise of the rights of patronage, and so on.
Rao also saw good governance as necessary for the continued independence of native states, such as it was. The British had often intervened in these states in the name of bad governance. Referring to the principles suggested in the lectures, Rao writes, “They are those which alone will secure the continuance of existing independence to Native Princes.”
The emphasis that Rao gives to the conduct of the king is also worth thinking about. While this is not surprising given the context of the lectures, it nonetheless shows the importance Rao attached to the quality of the ruler. He explains how this may affect the working of the administration. Rao does not seem to believe that good public administration systems could substitute good intention and sound judgment from the maharaja. The qualities of the ruler would continue to matter. In this, he is more like the ancients than the moderns.
One way of describing Rao’s enterprise is that he wanted the native states to learn from more developed polities like Britain while distilling the best of their own sources of order to raise the quality of rulers and modernize public institutions to promote the happiness of the people. What this might have meant for the possibility of self-rule is unclear. For anyone looking to build abilities in the country’s own territories, native states were the place to be, despite the constraints posed by the British government. Rao wanted Baroda to be a model state like Travancore. If his enterprise had succeeded and many native states had flourished through good government that could resist the “irresistible” power of the British government by combining a virtuous ruler with techniques of modern administration, perhaps this would have bolstered the possibility of achieving self-rule based on what Machiavelli called “own arms and virtue” and reduced the dependence on the vagaries of fortune. There is a “build your strength, bide your time” spirit in Rao’s enterprise. Eventually, this may have also shaped independent India’s journey. But, as Sagar shows in the introduction, history took a different path.
The best leaders seem to hold in equal regard two conflicting thoughts. One is that, at any time, due to facts of human nature and the histories and complexities of social systems, how things are overwhelms how they should be. The other is a commitment to root their actions in some longing for how things should be. In this sense, Rao was among the best statesmen of his time.
Are Rao’s Ideas Relevant for Our Times?
One’s view on this question would depend on how one perceives politics and governance in today’s India. Since Rao’s time, there have been many changes in the regime and circumstances. Still, one might be persuaded to see Rao’s relevance on a few counts.
First, Rao’s principles on the core role of the government. His primary focus on advancing the happiness of the people is perennial. Sure, democracy opens and explicitly politicizes the question of what this happiness might mean. Also, since Rao’s time, our understanding of what a government can do efficiently has expanded. However, as India is still a long way from achieving security and prosperity, Rao’s basic ideas are quite relevant.
Second, the principles of sound public institutions, such as the rule of law and participative and deliberative policymaking. Globally, such principles are no longer a rarity the way they were in Rao’s time. In India, we would be hard-pressed to find public institutions that routinely follow participative and deliberative policymaking processes. As far as the elected governments are concerned, when a party secures sufficient electoral power, it starts behaving as if its power to do what it wants also obviates the epistemic reasons for evidence, consultation, and agreement, and the law can be made to mean anything it wants. Can we say that in situations where the law is on one side and political power (or money) on the other, the former side tends to prevail, or that our policymaking processes are adequately deliberative and participative?
Third, consideration of experience and expertise while making appointments to a public office. Even though the role of pedigree in such matters has declined for good reasons, the principle still holds. Lenin once wrote that all can be trained to run the country, and then went on to suggest that they should. Nationalists of a peculiar kind go further; they seem to believe that love of the nation (or the expression of it) is qualification for high office. While it is true that persons of any background can govern, and it might also be true that love for the country can be motivating, relevant capabilities are still necessary. Can we say that the governments in India give due importance to capabilities in appointments to public office?
Fourth, the role of good intentions and sound judgment by leaders. When we think of democracy, we tend to think that the people decide. However, the people only choose the representatives. The representatives choose the issues to address, frame them, and decide on policies. Confusing the question of electoral choice with the question of policymaking allows skilled politicians to turn democracy on its head, transforming it from a mechanism for holding rulers accountable to an alibi for bad government. Issues of justice, performance, and conduct are reduced to the question: how many seats did you win in the last election? This, we must concede, is the second-most important question in a democracy. The most important question in a democracy is the same as that in any regime: what is politics doing to create conditions in which humans can flourish? Can we say that our leaders generally work toward creating such conditions and do so with good practical judgment?
Fifth, the importance of leaders’ conduct. Despite the contemporary focus on the government’s “monopoly of coercion,” which makes politics seem like a competition over who gets to coerce, the scope of politics is broader. A prime minister is not just someone who coerces us. Their conduct also shapes the civic norms in the polity. The shaping of citizens is essential to politics and has consequences for the republic. Like the native kings Rao worried about, leaders in democracy can behave badly, just that they tend to do so in the name of the people. Can we say that most of our political leaders are exemplars of civic virtue?
Finally, Rao’s approach to politics—seeking genuine improvements in the people’s happiness and the state’s capabilities through institutional changes while addressing enormous challenges from within and outside the polity—is inspiring. Sagar deserves gratitude for bringing him out from the shadows.
—By Suyash Rai