How the profit of land is diverted into industries or charity?

A landlord is someone whose most of the earnings and power in society derives from ownership of land, rents coming from land or sale and purchase of lands while industrialist is someone who creates real production and earns incomes from productions.

The landlords, in general, have a poor reputation in people, mainly educated middle classes while industrialists are respected.

The problem is; once upon a time, land-ownership of all individuals were defect known to all. E.g., everyone in the village used to know how much land everyone else owns. Therefore, it was difficult for a landlord to claim that his income is not from rents and is from industry.

Whereas today, under the garb of the right to privacy, the landownerships are treated like some national security secrets and not disclosed.

Now Godrej via “charitable trusts” owns some 3500 acres in Mumbai alone! How much is worth of these 3500 acres? At a throwaway price of Rs 200,000 per square meters, it would be about Rs 2, 83,000 crores! Moreover, that is what Godrej owns in Mumbai alone! Add its land in Thane, Gujarat, and the whole of India; it could be several times this amount.

Related: Nine landowners control a fifth of Mumbai’s habitable area

In addition, Tata owns some 10-20 times more land than Godrej (not in Mumbai though –Tata have sold most of the properties in Mumbai). And So-called charitable Christian Missionaries own some 50-100 times more land than Tata and Birla. Adani, Ambani, etc. also own a huge amount of plots. Tata, Godrej Birla, Schindia, Gaekwad (of Baroda), etc. and Missionaries got plots from British for assisting British in ruling India. Moreover, supporting British in controlling Congress, RSS, and CPI all along! And many of these “industrialists” had the network of Khabaries that in total was more than Khabaries that then Indian Police had! The most of them remained loyal to British (and now Americans) even after freedom.

So again, maybe they owned land. However, it is possible that their industries never benefited from plots they owned! The industries made their profits from which they expanded.

Well, this is how most financial operations run

(1) The land was sold as huge profits – the way landlord would do.

(2) A portion of money obtained was used to buy land outside cities so that when cities grow, that land can be sold at higher price.

(3) A portion of land profits was diverted into their industries to increase its base, its volume and show a profit.

Moreover, many times, nefarious land hoarding was in accord with so-called NA permissions. Big Industrialists will sell their land in the city at high prices. Then buy land outside the city for cheap. The land outside the city is cheap because there is NO Non-Agriculture land permission, no roads, etc. The moment the Industrialists have bought say over 90% of city outskirts’ area, immediately, town planning scheme will be put, Non-Agriculture land permissions will be given, roads and electric cables will be put, and so the price of that land will rise by ten times to 100 times.

That is why when you look at their books, quite often “other incomes” look large and covers the business losses and their revenue from land sales is almost zero. That is because revenues from land sales, via several accounting entries were diverted and show as “profits from running industry.”  So why the industrialists did divert the land sales’ profits and showed as industry profits? Why not just show it as profits from land sales?

Because if they had shown their incomes as profits from land hoarding, then reputation in society would decrease. The education class will rightly see them as leeches. So an illusion that “we are earning money by running industries” was needed. So a large number of industrial setups were run by merely hiring professional. In other words, the professionals are hired and given salary and land and place to work. The top keeps the control but doesn’t add any value. The upper part, in fact, is losing money. Say it earns Rs 100 crore by selling plots. Then it diverts all gains in industry, and industry will see profits of only Rs 80 crores. Therefore, there is a net loss of Rs 20 crores. In return, they were able to create an industrial empire, which enables them to give favors to many and control many. Besides, they get reputation of being industrialist and not land-hoarders

Is it illegal?

No. Did British did anything “illegal”? The real strength is NOT in doing something illegal, but forcing lawmakers to make laws/favors that make the someone observe like that, benefit looks as legal! So no illegal was done?

So all in, what’s “wrong”?

The bad part was — when they sold the land at an extremely high price, someone else lost the opportunity to start a business from his surplus income, because a huge part of his income was consumed in buy that land (or flat). Finally, It reduces competitiveness in the economy.

And another way to put same above statement is – when a person is earning huge money from land hoarding, and that person uses that money to pay costs, salaries, etc. in his company, then a competitor who doesn’t have access to such land-hoarding money will bleed and lose out. Also, this again will reduce the efficiency of the overall national economy.

So massive land-hoarding done by prominent industrialists did tremendous damage to the Indian economy. By diverting the profits of land hoarding and land sales into their industries, they managed to convince (or a fool?) public that They are industrialists and not landlords and land hoarders.

So finally, what is the solution?

The solution is that we activists campaign for a law-draft that ALL landowners’ land holdings will be disclosed on govt website including properties owned by individuals via HUFs, companies, trusts, etc. Therefore, that way, we will know that who are landlords and who is not?

Next is to put details of ALL land sales and land transfers that happened in past 100 years (or as many as available) on the net. That way, one will be able to see how apex elite men benefitted from transfer of land from British to their Charitable Trusts and so on

Once these two things are in the form a law, it will be clear whether these people are land hoarders or industrialists as they claim. And to what extent their past growth was due to industry profits and profits from land sales. And these two laws may increase demands for the wealth tax on land.

The views and opinions expressed in this article are those of the author. You are entitled to be agreed and disagreed with him. Further, any clarification or for the exchange of thoughts, you can approach to him.

Originally published on June 13, 2017