Vinayak Chatterjee: Land and the greater common good

The new Land Acquisition Act is far more progressive than the critics suggest

The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013, popularly called the land acquisition Act (LAA) received presidential assent on September 27, 2013. Many growth enthusiasts have been vociferous about how subversive the Act is, and how it will destroy industrialisation for all time to come. But we must pause to take stock of what the LAA seeks to achieve, and why it is a comprehensive and well-meaning legislation whose time had come.

Here are 10 reasons the LAA deserves positive consideration.

(i) The notorious colonial era Land Acquisition Act of 1894 was being thoroughly misused. Under its catch-all "public purpose" window, the state was the biggest culprit. Jairam Ramesh, the principal architect of LAA, is on record saying:

• "Across India, land has been acquired by government and it remains unutilised even after 30 to 40 years of acquisition. The government itself was the biggest squatter".
   
• "PSUs have been the worst defaulters in terms of their poor record of resettlement and rehabilitation."
   
• "Over the decades, over 4 crore [40 million] tribals had been displaced without rehabilitation and compensation, and could possibly be a prime cause for Left-wing extremism in affected parts of the country."

Clearly, the new LAA's predominant purpose is not to stop the private sector in its tracks, but to save India from its own government.

(ii) The LAA applies only to "sarkari" acquisitions, NOT land purchases in general. It is an enabling legislation for the land sought to be "acquired" by Central and State governments for any "public purpose", for public-private partnership projects, and in those cases where the government is being explicitly asked by the private sector to acquire large tracts for big private projects. It does not apply to the purchase of private land for private purposes, where deals are privately handled. The LAA is often being misunderstood as affecting "all" land purchases. Thus, the checks and balances are geared to ensure acceptable behaviour by the Central and State governments as well as the private sector. And it does not debar the private sector from seeking government assistance, or government providing the same, as long as the LAA guidelines are followed.

 

(iii) The term "public purpose" has now been clearly defined. The misuse of this clause under "eminent domain" was the bane of the earlier legislation. It led to forcible, heartless acquisition programmes as well as "lazy acquisitions", where acquired land was hugely in excess of needs or just left unutilised. More dangerously, the licence to define anything as "public purpose" resulted in crony-capitalism in land deals. It is reported to have peaked at the height of the special economic zone fever, resulting, as we all know, in a spate of protests. The other route cleverly followed was for private sector to sign joint ventures with state-based entities giving the state a minority stake in a project and then getting the state to forcibly acquire land at notified low prices.

(iv) The biggest bee in corporate India's bonnet seems to be "acquisition cost." Economists Rajiv Kumar and Prashant Kumar, in an article in the Financial Express on September 5, 2013, have meticulously calculated and presented this aspect of increased cost. They have taken a representative area called Nasrullaganj in Madhya Pradesh and have shown that because of the LAA, the cost of acquisition will shoot up by seven times from the current Rs 12.91 lakh/acre to Rs 89.90 lakh/acre. What does this mean? NTPC has announced a 4,200-Mw thermal power project in Lara, in neighbouring Chhattisgarh at an estimated investment of Rs 30,000 crore. Central Electricity Authority guidelines state that the project should require about 2,400 acres. So, the land cost (with Nasrullaganj economics assumed) is Rs 2,158 crore, which is 7.2 per cent of project cost. Is that unreasonable considering that land is an appreciating asset in perpetuity, and that this price tries to reset the social equation of large-scale displacements?

(v) Obviously, large projects will consciously have to move from more expensive areas to affordable interiors. This is another way to develop Bharat.

(vi) It is the first time in India's economic history that any land acquisition has been compulsorily tied up with statutory resettlement and rehabilitation (R&R). This is not just for the land owners but also for those whose livelihoods get affected - indeed a humane initiative.

(vii) The combination of "public purpose", "consent", "compensation" and "R&R requirements" will finally put a stop to the thoughtless acquisition of fertile farmlands for factories. There are enough available choices and the LAA now leads both government and industry to follow a rational "merit-order" for identifying land for industrialisation. The diagram shows this merit order.

(viii) In keeping with the spirit of Amartya Sen's "The Argumentative Indian", the provisions of the draft Bill were rancorously tossed around between stakeholders, and ruling and Opposition parties for almost four years. Nobody can accuse the government of insufficient consultations! A 119-year old legislation was replaced by an overwhelming majority of both Houses of Parliament, in the best traditions of democratic processes.

(ix) An unambiguous and practical methodology has been laid out for determining acquisition price, removing the subject from the discretion of district administration.

(x) There is genuine concern about complex procedures taking about five years to complete a major land acquisition process. The central government appears acutely cognisant of this aspect and offers mitigating factors which are likely to be:

• Collapsing time by making many of the activities allowable in parallel, rather than sequential, whilst the Rules to the Act are being written.
   
• "Competitive populism" among states since many try to simplify procedures to attract investments, even as they now begin to align their own State LAAs to the constitutionally mandated central LAA.
   
• A central mechanism for constant review to address problems faced by industry in acquiring land.

Corporate India would do well to focus its energies on holding the government's feet to the fire on implementation (and increasing the size of the outlays if required) of the Rs 1,000-crore National Land Record Modernisation Programme that is seeking to zone, digitise and computerise land records. This step alone will go a long way towards transparency and ease in private land deals. It should also insist that state governments set up Land Bank Corporations to develop large tracts of land with trunk infrastructure under public expenditure (much like the Delhi-Mumbai Industrial Corridor model) and make such pre-developed land available for all kinds of economic activities, be it residential, commercial, institutional, or industrial.

There is little doubt that history will record the LAA as a comprehensive legislation with heart and empathy that achieved the very difficult balancing act of marrying economics, sociology, and development. Many other developing countries are now reportedly considering using the Indian LAA as a template for their own solutions to the land problem. Indians should actually be proud that we were able to enact the legislation whose edifice rests on the laudable pillars of genuine public purpose, consent, fair compensation, resettlement and rehabilitation, and transparency.

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The author is the chairman of Feedback Infra.
vinayak.chatterjee@feedbackinfra.com; Twitter: @Infra_VinayakCh