September 3, 2011

In Parliament

The government has published the draft National Land Acquisition and Rehabilitation and Resettlement Bill
for public discussion and feedback. The Bill will replace the Land Acquisition Act, 1894.

Land acquisition refers to forcible takeover of land from its owner; this is different from land purchase which implies a willing seller. The Land Acquisition Act, 1894 as well as several state level laws govern this process. In 2007, the government introduced a Bill to amend the 1894 Act. It also introduced the Rehabilitation and Resettlement Bill to provide statutory rights to people affected by land acquisition. Both these Bills lapsed in 2009. The 2011 draft Bill combines the two objectives, with several modifications.

Let us look at three important elements related to any law on land acquisition. First, what are the purposes for which involuntary acquisition may be made. Second, what should be the compensation paid to land holders. Third, how are the interests of the wider community in that area safeguarded.

It is generally accepted that the government may exercise the power of acquisition only if it serves a wider public purpose. However, public purpose can be defined widely. For example, it is clear that roads, highways, water pipelines, railways, defence, police stations etc. are public goods. When we move to other items, it is difficult to draw a strict line. Is a power plant a public good? What if it is privately owned? What about an industry that generates jobs? Should ownership matter, i.e., would one distinguish between a public sector steel plant and a privately owned one? What about urban redevelopment?

The 1894 Act is open to wide interpretation. It defines public purpose as land for village sites, town or rural planning, residences for poor and displaced persons, planned development, government schemes for education, health and slum clearance, land for a public office, and for land needed by a state corporation. It also permits acquisition for a private company if it is for a public purpose, or “likely to prove useful to the public”. The 2007 amendment narrowed this list to three specific purposes: strategic defence use, infrastructure, and for a company if it has purchased 70 precent of the required land through private purchase. The 70 percent criterion was included to ensure that availability of contiguous land is not held back by a minority of land holders.

The draft 2011 Bill has a different list. It defines public purpose as (a) defence, police and safety of the people, (b) infrastructure, industrialisation and urbanisation projects of the government where the benefits largely accrue to the general public, (c) village and urban sites, residences for the poor, government schemes for education and health, (d) other projects including those for private companies, where 80 percent of the affected people have given consent, and (e) residences for the poor and people displaced by natural calamities or due to government schemes.

It can be seen that there are clearly significant differences from the earlier formulations. The government continues to have the power to acquire land for most of its projects. This will include industrialisation and urbanisation, so the state land development authorities and industrial development corporations can continue to acquire land. However, for private companies, the requirement is now 80 percent of the affected people, a change from 70 percent of land area. The definition of project affected family included the land owners, landless labourers and artisans whose primary source of livelihood is affected, tribals and traditional forest dwellers, and any other individuals assigned land by the government. This opens up a scenario in which most farmers (say, 95 percent) in an area are willing to sell their land but the project can be stalled unless 80 percent of the labourers (who could even be inter-state migrant labour) agree to the scheme.

The 1894 Act states that the current fair market value of the land (and all standing crops, buildings etc.) should be paid as compensation, with a premium of 30 percent to compensate for the compulsory nature of the acquisition. It specifies that the current land use (and not the intended use) be the guiding factor in determining compensation. The 2007 Bill amended this to use the intended land use. The draft Bill goes back to the earlier formulation. It however changes the method of calculating the fair value. It states that the value should be multiplied three times in rural areas (presumably to compensate for the under-reporting of land prices in sale deeds). It further gives a 100 percent premium for the compulsory nature. Thus, rural land is acquired at six times and urban land at twice the price of recent transactions.

Usually, land prices rise by a multiple if the land use is changed for a commercial venture. The question is who should get the benefit of this windfall: the original owner (as he has been invested in the land), the project developer (as he has been partly the cause of increase in valuation), or the exchequer (as the windfall is partly caused by the sovereign function of land zoning).

The draft Bill gives the entire benefit to the developer (though there is an increased compensation to the land owner).

Other affected people
The draft Bill requires the acquirer to provide rehabilitation and resettlement to all affected people, including land owners, landless labourers and artisans whose livelihoods are adversely affected. It includes a subsistence allowance of Rs 3,000 per month for 12 months, an inflation-indexed annuity of Rs 24,000 for 20 years, free housing, resettlement and transport allowance (total Rs 1 lakh), and employment or Rs 2 lakh. The acquirer is also required to provide infrastructure facilities in the resettlement area, including schools, health centres, panchayat buildings, post offices, fair price shops etc. Curiously, even a company purchasing land over 100 acres in the free market will have to meet these requirements. Other than gaming possibilities (purchase in smaller lots), this may not fall into Parliament’s lawmaking domain as free land purchases are in the state list of the constitution (unlike acquisition of property which is in the concurrent list).

Land acquisition has been a contentious issue, and there have been several recent cases of unrest following such acquisition across the country. High profile incidents include acquisition for the Tatas in Singur, Posco and Vedanta in Orissa, the nuclear plant in Jaitapur, and the various projects around a highway in Noida. These cases indicate the need for a law that can provide a fair balance between the property rights of the land owner and the wider good of the general public. The new draft Bill provides an opportunity to find such a balance.

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