Land Acquisition – Much Ado About Nothing

This is the way the world ends

Not with a bang but with a whimper.

(T. S. Eliot: The Hollow Men)

This famous poem, which ends with the above quoted lines, is linked to a number of overlapping themes. The entire drama covering the period from the introduction of the amendments in end 2014 to the Land Acquisition, Rehabilitation and Resettlement Act, 2013 (LARR Act 2013) through an ordinance, to the “sound and fury” over its introduction in Parliament as a Bill in 2015 (LARR Bill 2015), down to its final quiet burial in the end of August 2015 reminded me of this piece of 20th century literature. What was touted to be a grand effort at reform in making land available for the nascent “Make in India” industries and the infrastructure to support rapid industrialisation came a cropper in the face of a politically motivated, generally ill-informed campaign to preserve the “pristine” nature of the LARR Act 2013 which the LARR Bill 2015 sought to amend. After the heat and dust of the battle settled, there was only one clear loser — the average Indian citizen who hoped for better amenities, job opportunities and an improved standard of living.

What was the LARR Bill 2015 trying to do that so aroused the ire of the supporters of the LARR Act 2013? The Amendment Bill sought to exempt certain categories of projects from the social impact assessment and public consent provisions, including public private partnership infrastructure projects on lands owned by the government, going beyond the exemption from public consent already available in the LARR Act 2013 to projects of the government, its public sector undertakings and other entities essentially in the public sphere. There was no dilution of any of the provisions relating to compensation or resettlement & rehabilitation. This makes the defensiveness of the government of the day about the LARR Bill 2015 all the more inexplicable; it dissimulated where it should have unequivocally come out with a confident statement about its commitment to improving the lot of India’s citizens. In any case, as has been pointed out by Sanjoy Chakravorty (A Lot of Scepticism and Some Hope: Economic & Political Weekly, 8 October 2011), about 90 percent of land acquisition and displacement of people has been occasioned by government projects, so it is rather strange that an impression has been created that the LARR Bill 2015 is intended to further private corporate interests. A lot of hullaballoo has been created around non-issues to score political points and the likely damage to India’s long-term growth prospects by a seriously flawed Act has not been analysed or debated.

The manner of calculation of compensation has major implications for the economic viability of projects requiring acquisition of land, apart from its implications for the distortion of already imperfect land markets. Land valuation at four times the market (or consented) price, for rural areas, and twice for urban areas has no rationale. This will sharply raise project costs and also create a piquant situation in peri-urban areas, with demands for compensation as in rural areas impacting the economics of urban and industrial development in the peripheral areas of cities. The requirement for the social impact assessment to be carried out before the preliminary notification of the land is incomprehensible; any administrator connected with land acquisition will tell you that this will immediately lead to land speculation in those areas. Bengaluru witnessed this phenomenon when land was to be acquired for the NICE corridor road on its fringes; the Vijayawada-Guntur belt is also experiencing sharp escalations in land prices with the forthcoming development of the capital city for the new state of Andhra Pradesh. Inordinately high land cost will act as a dampener for land acquisition and will also exert upward pressure on prices of land privately acquired.

Multiple layers of bureaucracy will have an adverse impact on prompt acquisition. A potential investor will have to run the gamut of a social impact assessment, getting public consent, fixation of land compensation and approval of the resettlement and rehabilitation package before getting possession of the land for actual construction. This is, of course, presuming that environmental clearances and approval of the District Collector for conversion of agricultural land to non-agricultural use are forthcoming in a timely manner and that the proceedings do not get bogged down due to, firstly, lack of public consent and, secondly, demands for enhanced compensation and other contentious issues to be decided by the Land Acquisition, Rehabilitation and Resettlement Authority set up under Section 51 of the LARR Act 2013. Recourse to other legal procedures (e.g. writ petitions) by interested parties to secure higher compensation or to contest the need for acquisition can further delay matters. Even with an outmoded Act like the Land Acquisition Act 1894, with its anti-landowner bias, it took anywhere up to several years for land to actually come into the possession of the acquirer. The LARR Act 2013 is likely to further increase this period, leading to project cost escalations.

Historically, industrialisation has proceeded based on the conversion of land from agricultural to nonagricultural use and on the ability of the agricultural sector to feed a population increasingly dependent on off-farm employment. This process has not been without its share of conflict, as brought out by Richard Hofstadter in his seminal book “The Age of Reform (1955)” where he describes the agrarian revolt of the 1890s in the USA and the attempts to harness it for political purposes. Not only did these agrarian movements fail to take off, quite to the contrary, as Hofstadter puts it “…the prosperity of the commercial farmers was achieved not only in spite of but in good part because of the rise of American industry and the American city“. As urban demand for food grew, agricultural prices registered a significant upturn. Improved efficiency in and mechanisation of farming operations, coupled with finance and transportation arrangements, contributed to a rise in farm incomes. At the same time, the excess rural population found employment opportunities in the cities. State support and guidance on farm produce distribution issues and the rapid growth of farmers’ cooperatives (in the areas of credit, mutual insurance, public utilities, marketing and purchasing) reduced the exactions of middlemen and diverted more income into the pockets of farmers.

What is truly unfortunate about the entire land acquisition mess is the ill-conceived effort to create a hostile relationship between the agricultural sector and the industrial/infrastructure sectors. On the one hand, there has never been a holistic approach of government to tackling issues from the farm to the table, nor has there been any concerted effort by organised farm lobbies to get government to invest in measures designed to enhance agricultural productivity and incomes. The result, with a large population still dependent on agriculture for survival, has been increasing pressure on land and temporary or permanent migration to urban settlements. With greater access to education and growing aspirations, the younger generation seeks a shift from an unviable life in agriculture. The distressing occurrence of farmer suicides is testimony to the failure of government to address farm issues, be they irrigation, crop insurance, productivity or remunerative markets. Archaic labour laws and an entrepreneur-unfriendly business environment have limited job creation in industry and related ancillary services. When 3 million people, many of them graduates, apply for a few hundred jobs as peons in government, something is definitely horribly wrong. And yet, the present debate on land acquisition procedures has not sought to focus on what could be done to ease the availability of land for industrial growth while also protecting the interests of the agricultural community. One interesting suggestion from Maitreesh Ghatak and Parikshit Ghosh (The Land Acquisition Bill: A Critique and a Proposal, Economic and Political Weekly, 8 October 2011) is to allow the land transfer price to be determined through an auction process rather than rely on bureaucratic determination through generally flawed sales statistics. Displaced farmers would be given the option to receive compensation either in cash or in the form of land. The government would buy more land than needed for the project to enable offer of land outside the area acquired for the project to those farmers who want land in return for land surrendered. This approach has the advantage of allowing the farmer to quote his consent price, which will probably reduce subsequent litigation for enhanced compensation. I am not advocating this or any other specific measure; what I seek to highlight is that there has been no informed debate on possible solutions that meet the needs of industry for land while also giving farmers a fair deal.

In fact, the entire brouhaha is reminiscent of the lines of another famous poet, W. B. Yeats “The best lack all conviction, while the worst are full of passionate intensity“. A law which was passed in a spirit of misguided sympathy for the farmer but is likely to severely impede economic development did not come up for a sorely needed review. The government of the day sought cosmetic changes in the law but, faced with an obstructive opposition in Parliament, meekly capitulated, consoling itself with the reflection that, since land acquisition is a concurrent subject under the Constitution of India, state governments can pass their own laws to simplify and speed up the land acquisition process. In that case, no purpose is served by Section 107 in the LARR Act 2013 which only permits such legislation by state governments as provides more favourable terms in respect of compensation and rehabilitation and resettlement provisions; it is anyhow unlikely that any state government will enact legislation that is seen as more onerous than the Central law, since this gives its opponents a ready political handle to beat it with.

We are, therefore, in a situation where a neo-Luddite combination of professional politicians and city-bred intellectuals, both without exposure to the realities of the farming sector, are effectively sealing opportunities for a large agricultural population to benefit from industrialisation. Adding to land market rigidities, while also stumbling on labour market reforms and doing little to improve the ease of doing business (best exemplified by the flip-flops on the Goods and Services Tax legislation), are hardly the best recipes to enthuse private Indian and foreign investors. The brunt of this economic obtuseness and political opportunism will, as always, be borne by the long suffering masses of India.


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2 Responses to Land Acquisition – Much Ado About Nothing

  1. A slightly different take : why is so much land required, in hundreds if not thousands of hectares? Apart from continuous process industries, there is little justification for acquiring land that subsequently lies unused or under utilised. Let us start with PSUs: in my State -Tamil Nadu – there are lakhs of hectares lying very much the way they looked when they were acquired. Just to name a few : the Ordnance Factories in Trichy and Chennai, the almost defunct Pharmacological Factory off St Thomas Mount, the failed factories of the failed industrial estates and last but not least, the huge tracts of land given to private developers like Mahindra for a song(and six pence).

    • vramani says:

      You are very right, but some of the greatest land grabbers have been the “temples of modern India” (to use a Nehruvian phrase). It came home to me 20 years ago when I was informed of the infinitesmal land required for an oil refinery in Singapore vs. an Indian refinery. As my blog mentioned, most land acquisition has been for the public sector. Not that the private sector does not have more than its share of speculators who hope to capitalise on rising land values. Three possible solutions, for consideration: (1) transfer the land only after financial closure to avoid companies sitting on land; (2) specify the use and prohibit all other uses, on the lines of urban zoning restrictions; (3) resume the land if stated projects do not come up in a specified period.

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