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Terming the new Land Acquisition, Rehabilitation and Resettlement Bill as highly populist, industry in Gujarat largely felt that this would lead to an uphill task ahead to buy or acquire land for industrial purposes.
"There is going to be confusion related to various parameters of the new Land Bill, for example the issue of market rates. It is very difficult to determine exact market rates especially for agricultural land. In Gujarat market prices are determined on the basis of jantri rates, however, in case of agricultural land, jantri rates might not be available across the entire state. Also, when the issue of paying double the market rate to landowners in urban areas, and four-times the price in rural areas comes, there could be manipulations. On the whole, there is no clear guideline," said Yatindra Sharma, managing director at KHS India and past president of the Gujarat chapter of Confederation of Indian Industry (CII).
The new land bill, named "The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill 2013" has been approved by both the houses of the Parliament in September 2013. It repeals the previous Land Acquisition Act of 1894, and it awaits the President's assent to become a law.
With the Lok Sabha elections round the corner, not many modifications are expected in the Land Bill which is being seen as move by the government to woo the vote bank.
"The government is trying to bring about the new bill as an attempt to please the vote bank. It is largely a pro-farmer stance, and hardly any modification is expected keeping the industry point of view in mind," said a senior official in a major pharmaceutical company in the state on grounds of anonymity.
A recent ICRA report on the impact analysis of the new Land Acquisition Bill says, "The Bill stipulates that private entities and public-private-partnerships (PPPs) carrying out public purpose projects may approach the government to acquire land on their behalf after receiving the consent of 80 per cent (70 per cent for PPPs) of the landowners. While the 80:20 clause transfers more onus on the project owner to receive consent, it relieves the government of the 'political disadvantage' of displacing farmers."
The head of the Gujarat business of a real estate company said, "In most cases, a plot of land has several owners. Now in case of a big project which requires land in excess of 200-300 acres, as it is, there would be many such plots and multiple owners. It would be very difficult to get consent from 80 per cent of owners."
The involvement of the government in smooth land acquisition for private or PPP projects will become crucial when acquiring land for large projects, as buying land through direct negotiations can be a challenging task for organisations. ICRA feels that companies are bound to show a preference to states that are pro-active in making land available. "On the whole, in private purpose projects where large tracts of land are required, companies are bound to show a preference to states that are pro-active in making land available. A good example is the state of Gujarat which has provided opportunities to various automobile manufacturers who were facing issues in setting up facilities in other states. Hence the policy at state level will become a key variable in capital investment decisions," the report said.
Already states like West Bengal are having trouble in acquiring land for industrial parks and similar projects, Sharma said adding that, "Initially, Gujarat would have an advantage, but going forward it too will start experiencing growth restrictions. Compared to states like Rajasthan and Bihar where one has to face legal issues with land in industrial parks, in Gujarat, at least, land in such parks is 'clean'. Companies would prefer to buy land in industrial parks, but even these parks would be in short supply after some time."
Talking about compensation, Sunil Parekh, advisor to Crisil said, "Anything that distorts the market process would lead to corruption and would not be sustainable." According to the new Land Bill, one would have to pay higher compensation at the rate of four times market value of rural and two times for urban land.
Cost of development would go up for real estate developers, as a result. ICRA says, "They would also need to budget for sharing the developed land or the appreciation benefit with the affected families. All these factors would impact housing prices as well as the profitability of developers, depending on the ability of the market to absorb the price increase. Players with already built up land banks will be in an advantageous position."
