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- An archaic law's journey
1894: Land Acquisition Act passed
1998 Oct: Union Ministry of Rural Development initiates amendment process
2007 Dec: Land Acquisition (Amendment) Bill, 2007 introduced in Lok Sabha
2007 Dec: LA Bill referred to the Standing Committee on Rural Development
2008 Oct: The committee submits its report to Parliament
2008 Dec: Many of the recommended amendments approved by UPA government
2009 Feb: LA Bill passed a day before the dissolution of the 14th Lok Sabha
2009 Feb: LA Bill is tabled in the Rajya Sabha but not cleared; it lapses
An industry-friendly state's pro-farmer policy
Policy shift: Gujarat Chief Minister Narendra Modi (sitting, second from right) with industry captains at the Global Investorsâ€™ Summit 2007. Gujarat has drafted a new policy which puts the onus of land acquisition on private companies
During the Vibrant Gujarat Summit in 2003, detergent manufacturer Nirma proposed a cement plant at Mahuva in Bhavnagar district. The `450-crore project was to include a 50-mw captive power plant. Eight years on, Nirma is yet to begin work on the 1.91-million-tonne-per-annum cement plant because the acquisition of 268 hectares required for the project has run into opposition from farmers.
While the protesting farmers and the Union Ministry of Environment and Forests have maintained the land identified for the project is wetland, the state government has classified it as wasteland. The project now faces relocation as the Centre has filed a report with the Supreme Court opposing the land allotment on the ground that it is an environmentally sensitive wetland that supports cultivation in the area.
This was the trigger that prompted the Narendra Modi government to rework its land acquisition policy earlier this year. According to the reworked policy, the state will not forcibly acquire farmland for private projects. Says Principal Revenue Secretary P. Panneervel: "The new land acquisition policy is not only farmer friendly but also addresses the welfare of those who give up land for a public utility." He says henceforth the state will not get involved in any land acquisition for private projects.
"The investor has to deal with the landowners himself.'' The government will acquire land only for public utilities but only with the landowner's consent and after providing him with a host of compensation benefits. Gujarat's stand is much like that of Mamata Banerjee's, who had prompted the UPA I to include a similar proposal in its Land Acquisition Act Amendment Bill 2009 (that lapsed with the dissolution of the 14th Lok Sabha). In May, Home Minister P. Chidambaram spoke of the need for a new policy - either reviving the lapsed Bill or introducing fresh legislation in the monsoon session. As land is on the Concurrent List, states can have own policies but will have to be in consonance with the Centre's law, Jairam Ramesh, Union Minister for Rural Development, has said. "They can build over the provisions contained in the Centre's law."
"If the government acquires farmland, the owners lose the option of bargaining as the price is fixed by the state," explains a member of the Group of Ministers headed by Agriculture Minister Sharad Pawar that examined the Bill in 2008-09.
A working group of the NAC, however, has recommended that land for private projects should be acquired primarily by the government. Towards the end of May, the NAC proposed that in the case of projects where more than 400 people were affected, private companies should be barred from buying land directly from farmers. "The problem with asking private companies to buy at least 70 per cent of their land requirement on their own before going to the government to acquire the remaining 30 per cent is that different farmers will get different prices for their land," says NAC member N.C. Saxena.
Few companies are keen on acquiring land on their own, though their reasons are different from the one cited by Saxena. "There is no denying that a farmer should get a fair value for his land, but it is just not possible for one company to talk to hundreds of farmers and collate the land," says Pradeep Dhobale, Executive Director, ITC. "It just cannot happen without government intervention."
The Confederation of Indian Industry, or CII, too has rejected the proposal of shifting the onus of acquisition to companies. It has suggested that state governments should continue to acquire and aggregate fallow and barren lands for use by industry by setting up state land bank corporations. "There needs to be a provision for setting up land bank corporations to facilitate acquisition and disbursement of land for industrial use; digitisation of land records and also zoning of land as these will be key for systematic development of industrial land," says Chandrajit Banerjee, Director General, CII.
Ground realities that make a case for the use of Eminent Domain by the government include a holdout problem when unless some people agree to sell their land, a project cannot materialise, or where only a specific piece of land serves the purpose in question such as for mineral extraction. The shoddy state of India's land records also creates a need for the government to step in. (See Where Does the Title Stop?) Companies that have tried to acquire land by themselves have often ended up in disputes involving unclear ownership titles, or have had to face holdouts by locals, invariably at the behest of activists.
Even then, the danger is that the government's increased involvement in land acquisition can spur a politician-businessman nexus. Already, the land mafia across the country is creating a new class of moneyed politicians.
How to give farmers a fair share
The Union Ministry of Rural Development's background research before it readied the now-lapsed Land Acquisition Amendment Bill 2009 brought to fore some hard-to-ignore ground realities.
For instance, officials in the ministry discovered that compensation in at least 80,000 cases of forced land acquisition in Rajasthan has been pending since Independence. Land had been taken from farmers for defence use. Many of the cases contesting the acquisition are still in the Supreme Court. "One of the complaints was that a golf course for the defence forces had come up on land acquired from the farmers," says Rita Sinha, who was Secretary of the Department of Land Resources when the survey was carried out. "Even if they win, the farmers will probably be paid at the 1947 land rates or eight annas (50 paise) an acre."
The real issue is not the price paid for the land acquired. Even if farmers get Rs1 crore per sq metre they will be resentful if they find five years after they sold that the price of the same land has escalated five times. Yet, escalation is unavoidable as land prices in India tend to be depressed. For agricultural land to be used for non-agricultural purposes such as manufacturing or real estate development, a 'non-agricultural use clearance' from the local authority or state government is needed. It is only after such conversion that the land's price begins to rise.
For instance, when the UP government acquired 157 hectares in Shahberi village, Noida - subsequently struck down by the Allahabad High Court in May - it said the land would be used for industrial purposes. But within 11 days, the land use was changed to residential. The state government paid farmers Rs850 per sq metre but sold the land to builders at Rs10,000 per sq metre.
The consensus is that farmers will feel less alienated from the growth process if they are given a share in the value created from their land. "We have to develop a methodology where both agriculture and industry are winners in a transaction," says Issac A. George, Chief Financial Officer, GVK Power & Infrastructure.
The amended LA Act Bill that lapsed had proposed that land should be valued on the basis of its intended use at the time of acquisition, and 80 per cent of the gains from its sale to private players should be handed over to the original owners. An alternative suggested by the NAC is that every time a piece of acquired land changes hands for the next 20 years after it was bought from the farmer, 25 per cent of the gains should be shared with him. The idea sounds great, but implementing it may not be easy. "How will I keep track of the change of ownership? There is also the power of attorney route (by which land can effectively change hands without any sale being registered) ," says a district magistrate in Rajasthan, requesting anonymity.
"Tracking the second and third sale in each case will be a Herculean task," says George. Such an effort, he feels, will also encourage concealment of true value of properties and generate more black money. He also urges a look at the flip side. "What if the land is sold at a loss? Can the farmer be asked to share the loss," he asks.
Expenditure on land purchase, says George, will have to be part of the capital cost; once a company goes into operations it cannot keep debiting from its capital cost. Whatever the acquisition cost, it has to be charged as a capital expenditure in the initial years before commercial operations begin.
Additional reporting by E. Kumar Sharma and K.R. BalasubramanyamCommentQuote0Flag