{"id":182,"date":"2006-05-25T14:24:28","date_gmt":"2006-05-25T08:54:28","guid":{"rendered":"http:\/\/www.wokay.in\/2006\/05\/25\/why-should-it-be-sacrifice\/"},"modified":"2006-05-25T14:24:28","modified_gmt":"2006-05-25T08:54:28","slug":"why-should-it-be-sacrifice","status":"publish","type":"post","link":"https:\/\/www.aadisht.net\/blog\/2006\/05\/25\/why-should-it-be-sacrifice\/","title":{"rendered":"Why should it be sacrifice?"},"content":{"rendered":"

A few months ago, a Tehelka reporter was interviewing some of us at IIM Bangalore for a special feature on the perception of leftism on Indian campuses. The interview drifted from perception of the left parties, to the question of who would speak for the poor, and then to the Narmada Bachao Andolan. Someone- I can’t remember if it was the reporter who asked if we believed in it or one of us who stated that he did- brought up the concept of ‘sacrifice’ – that the displaced people should be willing to sacrifice something for the good of the entire nation.<\/p>\n

It’s sad. As managers, we’re supposed to look for win-win solutions. But we’re conditioned so badly by the national discourse on the Narmada dam that everything turns into a sacrifice: either the displaced people should sacrifice their land for the benefit of farmers and agriculturists, or urban residents should sacrifice their comfort to maintain traditional tribal lifestyles.<\/p>\n

But why must either side sacrifice anything<\/em>?<\/p>\n

The transaction looks like a sacrifice because it’s terribly onesided. The victims of displacement get only land- if the incompetent administration gives it to them in the first place- while the beneficiaries of the dam get water and benefit from increasing real estate prices.<\/p>\n

Is there any way to ensure that the people who lose their land benefit to the same extent that the people who get the water do? Yes, there is- and it relies upon the concept I introduced in the previous post<\/a>– financial options.<\/p>\n

If the development- whether it’s building a dam, or building a township on agricultural land- does what it’s supposed to, land prices will rise significantly in the area that is being developed. If the development is a dam, the acquired land will not see a price rise, but the land that does get access to irrigation thanks to the dam will see a rise in value. For a real estate development, things are even more straightforward- the acquired land is developed, and sees a rise in value.<\/p>\n

What if you compensate the people whose land you are acquiring with call options on the land which benefits? The option can have an exercise price equal to the current price- or perhaps with a modest premium- and it can be exercised on a date after the development is expected to be complete.<\/p>\n

(Of course, I am not suggesting that compensation should be purely in options- just that options should form part of a compensation basket that also includes land and cash.)<\/p>\n

As you’ll recall, a call option means the option holder can buy the asset at a fixed price (which we’re assuming is the current price). Let’s say that prior to the construction of the Narmada dam, Ahmedabad residential property is trading at Rs. 300 a square foot. Displaced people are given call options to buy say, five hundred square feet of Ahmedabad residential property at exactly this price: Rs. 300. After the construction of the dam, and diversion of water to Ahmedabad, residential property rises in value thanks to improved availability of water. It’s now worth 500 rupees a square foot. Multiply the difference- two hundred rupees a square foot with the number of options: five hundred square feet- and that’s one lakh rupees. (Of course, these figures were just to illustrate the concept.) And with some neat usage of financial derivatives, we’ve solved the problem of unequal gains.
\nThere are some problems associated with this idea that I can think of off the top of my head. I’ll discuss how to solve these in another upcoming post.<\/p>\n","protected":false},"excerpt":{"rendered":"

A few months ago, a Tehelka reporter was interviewing some of us at IIM Bangalore for a special feature on the perception of leftism on Indian campuses. The interview drifted from perception of the left parties, to the question of who would speak for the poor, and then to the Narmada Bachao Andolan. Someone- I […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[54,8,31],"tags":[],"class_list":["post-182","post","type-post","status-publish","format-standard","hentry","category-business","category-business-and-economics","category-public-policy-and-politics"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p7AOU2-2W","jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/www.aadisht.net\/blog\/wp-json\/wp\/v2\/posts\/182","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.aadisht.net\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.aadisht.net\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.aadisht.net\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.aadisht.net\/blog\/wp-json\/wp\/v2\/comments?post=182"}],"version-history":[{"count":0,"href":"https:\/\/www.aadisht.net\/blog\/wp-json\/wp\/v2\/posts\/182\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.aadisht.net\/blog\/wp-json\/wp\/v2\/media?parent=182"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.aadisht.net\/blog\/wp-json\/wp\/v2\/categories?post=182"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.aadisht.net\/blog\/wp-json\/wp\/v2\/tags?post=182"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}