The New Land Acquisition Act: Acquiring Land for Development

          After coming to power in May 2014, the new government changed the land acquisition rules by promulgating an ordinance thrice. According to the amendment, the consent clause and the social impact assessment are not necessary if land is acquired for national security, defence, rural and social infrastructure. After coming to power in May 2014, the new government had introduced nine key amendments to the earlier land acquisition law that was passed in 2013.

          According to the proposed amendments, a mandatory social impact assessment and a consent clause – 70% consent from landholders for public-private partnership (PPP) projects, and 80% for private projects – were done away with in the case of five categories of projects. These included defence, rural infrastructure, affordable housing, industrial corridors and infrastructure. However, the amendments were shelved after objections from the opposition parties. According to the government, the amendments were expected to promote the Make-in-India initiative which seeks to provide boost to domestic manufacturing. Estimates suggest that projects worth 53,000 crore ($9 billion) are stuck due to land acquisition problems.

          India’s new land acquisition Bill, praised in some quarters and reviled in others, is a complex piece of legislation. While the title of the old law conveyed that its primary purpose was to expedite the acquisition of land, the principle objective of the new Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill, 2013 is fair compensation, thorough resettlement and rehabilitation of those affected, adequate safeguards for their well-being and complete transparency in the process of land acquisition.

          There was unanimity of opinion across the social and political spectrum that the erstwhile Law (The Land Acquisition Act 1894) was draconian and suffered from various shortcomings. Under the 1894 legislation, once the acquiring authority had formed the intention to acquire a particular plot of land, it could carry out the acquisition regardless of how the person whose land is sought to be acquired is affected. There was no real appeal mechanism to stop the process of the acquisition. A hearing (under section 5A) was prescribed, but this was not a discussion or negotiation. The views expressed were not required to be taken on board by the officer conducting the hearing.

          There were absolutely no provisions in the 1894 law relating to the resettlement and rehabilitation of those displaced by the acquisition. The urgency clause was the most criticised section of the Law. The clause never truly defines what constitutes an urgent need and leaves it to the discretion of the acquiring authority. As a result, almost all acquisitions under the Act invoked the urgency clause. This resulted in the complete dispossession of the land without even the token satisfaction of the processes listed under the Act.

          The rates paid for the land acquired were the prevailing circle rates in the area which are notorious for being outdated and much below the market rate. Hence, the rates were not even remotely indicative of the actual rates prevailing in the area. Even where acquisition had been carried out, the same would be challenged in litigations on the grounds non-remunerative rates. This resulted in the stalling of legitimate infrastructure projects.

          In the wake of repeated litigations and disputes over forcible land acquisitions, the Supreme Court had found the 1894 Act to be a ‘fraud’, having ‘scant regard for the welfare of the common man’. The Apex Court had further observed that “[T] he provisions contained in the Act,...do not adequately protect the interest of the land owners/persons interested in the land. The Act does not provide for rehabilitation of persons displaced from their land although by such compulsory acquisition, their livelihood gets affected …To say the least, the Act has become outdated and needs to be replaced at the earliest by fair, reasonable and rational enactment in tune with the constitutional provisions, particularly, Article 300A of the Constitution.”

          It was against this background that a new law titled ‘Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill was passed and enacted by the Parliament in 2013.

The Features of the New Act

Updating Land Records and Utilising Govt Lands: Land Records in most parts of the country are fragmented and disorganised. In most cases, they haven’t been updated for decades. The new law overcomes that by ensuring the Collector updates the land records and also pays up to four times the value to correct any inaccuracies. The Collector has to make sure that no other unutilized lands are available before he moves to acquire farm land.

Protecting the Marginalised and Environment Impact Assessment: The inequality in terms of bargaining power between large-scale corporations and small farmers and other marginalised groups increases the likelihood of unfair agreements. Contracts tend to be signed in favour of the party negotiating from a greater position of strength. That is why government is required to bridge the gap and bring balance to this relationship. The Bill mandates a social impact assessment of every project which must be completed within a period of six months.

Fair Compensation to Farmers: Given the inaccurate and unrealistic nature of circle rates, the Bill proposes the payment of compensations that are up to four times the market value in rural areas and twice the market value in urban areas. In addition to those losing land, the Bill provides compensation to those who are dependent on the land being acquired for their livelihood.

Provision for Resettlement and Rehabilitation: This is the very first law that links land acquisition and the accompanying obligations with resettlement and rehabilitation. The new Act discusses in details the elaborate processes for resettlement and rehabilitation. The Act also outlines the benefits (such as land for land, housing, employment and annuities) that shall accrue in addition to the one-time cash payments.

Retrospective Application: To address historical injustice, the Bill applies retrospectively to cases where no land acquisition award has been made. Where awards are made but no compensation has been paid or possession has not been taken, compensation shall be paid at the rate prescribed under the new Act. Where the Award has not been made, the entire process shall be considered to have lapsed. Also, in cases where the land was acquired five years ago but no compensation has been paid or no possession has taken place, the proceedings shall be deemed to have been lapsed and the land acquisition process is to be started afresh in accordance with the provisions of this Act.

Participatory Acquisition: A ‘comprehensive, participative and meaningful’ process (involving the participation of local Panchayati Raj institutions) has been put in place prior to the start of any acquisition proceeding. Monitoring Committees at the national and state levels to ensure that R&R obligations are met have also been established.

Safeguards for Scheduled Castes and Tribes: No law can be acquired in scheduled areas without the consent of the Gram Sabhas. The law also ensures that all rights guaranteed under such legislation as the Panchayat (Extension to Scheduled Areas) Act 1996 and the Forest Rights Act 2006 are taken care of. It has special enhanced benefits for those belonging to Scheduled Castes and Scheduled Tribes.

No Dispossession without Compensation and Rehabilitation: The law provides that no one shall be dispossessed until and unless all payments are made and alternative sites for the resettlement and rehabilitation have been prepared. The Third Schedule even lists the infrastructural amenities that have to be provided to those that have been displaced.

          The Collector shall take possession of land only ensuring that full payment of compensation as well as rehabilitation and resettlement entitlements are paid or tendered to the entitled persons within a period of three months for the compensation and a period of six months for the monetary part of rehabilitation and resettlement entitlements commencing from the date of the award. However, families will not be displaced from this land till their alternative R&R sites are ready for occupation within 18 months from the award.

Provision Against Forcible Acquisition: In cases where PPP projects are involved or acquisition is taking place for private companies, the Bill requires the consent of no less than 70% and 80% respectively (in both cases) of those whose land is sought to be acquired. This ensures that no forcible acquisition can take place.

Safeguards for Food Security: To safeguard food security and to prevent arbitrary acquisition, the Bill directs states to impose limits on the area under agricultural cultivation that can be acquired. The acquisition of agricultural land and multi-crop land has to be carried out as a last resort. There will be definite restrictions on the extent of acquisition of such land in every state to be determined by the States concerned.

Unutilised Land to be Returned and Share in Land Sale to Third Party: In case land remains unutilized after acquisition, the new Bill empowers states to return the land either to the owner or to the State Land Bank. No income tax shall be levied and no stamp duty shall be charged on any amount that accrues to an individual as a result of the provisions of the new law. Where the acquired land is sold to a third party for a higher price, 40% of the appreciated land value (or profit) will be shared with the original owners.

Protects Livelihood: If land is purchased, then there are no benefits for livelihood losers who are usually far greater in number than the land owners. This Bill ensures that their interests are taken care of and they are not simply displaced. In the case of irrigation or hydel projects, affected families may be allowed fishing rights in the reservoirs.

Damages for Standing Crops and Remunerative Compensation: The final award has to include damage to any standing crops which might have been harmed due to the process of acquisition (including the preliminary inspection). In case their land is acquired for urbanization purposes, 20% of the developed land is to be reserved and offered to these farmers in proportion to the area of their land acquired and at a price equal to the cost of acquisition and the cost of development. Given the way in which market value is to be calculated and the imposition of a solatium of 100% over and above the amount, the farmers are guaranteed a fair price for their land.

Reduced Dependency Period for Compensation Eligibility: To qualify for benefits under this Act, the time period has been reduced to three years of dependence on the acquired land from earlier five years. The definition of affected family includes agricultural labourers, tenants including any form of tenancy or usufruct right, share-croppers or artisans who may be working in the affected area for three years prior to the acquisition, whose primary source of livelihood stands affected by the acquisition of land.

Provision for Housing, Annuity or Employment: All affected families are entitled to a house provided they have been residing in an area for five years or more and have been displaced. If they choose not to accept the house, they are offered a one-time financial grant in lieu of the same. All affected families are given a choice of annuity or employment. If employment is not forthcoming, they are entitled to a one-time grant of Rs.5 lakh per family.

          Alternatively, they are to be provided with an annuity payment of Rs.2000 per month per family for 20 years which will be adjusted for inflation. All affected families which are displaced from the land acquired shall be given a monthly subsistence allowance equivalent to Rs.3000 per month for a period of one year from the date of award. All affected families are also given training and skill development while being offered employment.

Monetary Benefits: All affected families are given multiple monetary benefits such as transport allowance of Rs.50,000 and resettlement allowance ofRs.50,000. Each affected family of an artisan, small trader or self-employed person shall get one-time financial assistance of such amount as the appropriate government may, by notification, specify subject to a minimum ofRs.25,000. In case of acquisition of land for irrigation or hydel project, the rehabilitation and resettlement shall be completed six months prior to submergence of the lands proposed to be so acquired.

Discussing Land Acquisition:

          One may ask as to why should private entrepreneurs, who stand to benefit from the project, not be required to procure it through market purchases at prices negotiated with the sellers? In the Indian context, there are at least two potential justifications for state intervention in these cases.
First, ownership rights in India are poorly defined and disputes on specific parcels of land are common. Therefore, whenever a project requires a large piece of contiguous land, the entrepreneur is likely to run into smaller parcels within this piece of land whose ownership rights are in dispute. This creates the problem of identifying the sellers of the smaller parcels.

          Second, even if ownership rights are well defined, procurement of land through purchase may run into what is called the “hold-up” problem. A subset of sellers may simply refuse to sell their land except at such price that would wipe out all potential private earnings from the project. This may dissuade the entrepreneur from undertaking the project. Once again, if the project serves significant public purpose, invoking of the state’s acquisition powers may be justified.

          Distinguishing between Acquisition and Purchase of Land, especially in democratic societies, is to disapprove of any coercion. In the context of land acquisition, this disapproval translates into rejection of the taking of land by the government without the consent of the owner. But when both buyer and seller agree, the transaction can be completed as a purchase instead of acquisition. The view that consent is always necessary amounts to arguing that all ownership transfers must be through purchase transactions, eliminating the need for a land acquisition law.

          The reason why countries nevertheless have land acquisition laws is that in many situations public purpose overrides the private right to retain a specific property. In such situations, most countries allow acquisition of that property by the government without consent of the owner. Indeed, traditionally, acquisition without consent is seen as a symbol of sovereignty of the government. Without it, even building stat highways would be difficult if not altogether impossible.

          As long as the purpose is justifiable and compensation is fair, much of the discourse on land acquisition does not question the state’s right to take private property without consent of the owner. Traditionally, Indian laws have given the government considerable leeway for acquiring private property in public interest. Without such power, nationalization of private property would be extremely difficult. Prime Minister Indira Gandhi could nationalize banks, coalmines and oil companies with ease during the late 1960s and 1970s precisely because the Constitution permits the same in public interest.

          Even the Land Acquisition Act, 2013 allows acquisition of land without consent when the appropriate government undertakes such acquisition “for its own use, control and hold” for a set of specified public purposes. In these cases, the new law only raises the compensation over what was provided in the old law to a level that is regarded as socially fair. The recent decision by the present government has gone a step further by making the same high compensation applicable to acquisitions under the thirteen central laws that had been entirely exempted from the original 2013 law.

          In addition to raising the compensation, the 2013 Act introduces a distinction between the treatments of land acquired for a set of specified public purposes for the government’s own use, hold and control and that acquired for the same public purposes but for private or public-private-partnerships (PPPs) projects. Whereas the Act permits acquisition without consent when land is for the government’s hold, use and control, it requires the consent of 80% of the owners if land is for private projects and of 70% of them if land is for PPP projects.

           A legitimate need for acquisition by the state itself (to build public goods such as roads, schools and hospitals) can be undermined and stalled by groups with vested interests. If there is no sovereign power to compel these groups, a single individual or group of individuals can hold a process hostage merely by refusing to part with land. Further, in times of crisis such as war, famine and floods, coupled with absence of legislation clarifying and guiding the state’s exercise of ‘eminent domain’, situations can emerge jeopardising human lives and public interests.

          Even assuming that the parcels may be bought from the existing occupants in such cases, the possibility of a future court ruling in favour of alternative claimants may create sufficient uncertainty to dissuade the entrepreneur from undertaking the project. Acquisition by the government overcomes this problem. If the project serves a sufficiently important public purpose, government intervention in the form of acquisition with appropriate compensation may be justified.

          The force of these arguments, of course, hinges on the existence of private or PPP projects of sufficient public value. A moment’s reflection would show that in a developing country with limited public resources and manpower at the disposal of the government, there is no dearth of such projects. To build rural roads, highways, affordable housing, industrial corridors, educational institutions and hospitals, public capital must often be combined with private capital, management skills and entrepreneurship.

          The recently lapsed ordinance by the present government had its justification in precisely this argument. It had sought to give appropriate governments the option to exempt private and PPP projects in high-priority areas such as rural roads, affordable housing, industrial corridors and infrastructure from the consent requirement in the 2013 Act. The exemption did not extend to private or PPP projects in areas that did not enjoy high priority.

          Under the 2013 Act, except when the appropriate government acquires land for its own use, hold and control, land acquisition is estimated to take minimally four to five years. In addition, there remains uncertainty with respect to eventual successful completion of acquisition. Need for a less time-consuming alternative to the current regime for private or PPP projects in areas such as rural roads, affordable housing, infrastructure and building cities remains.

          Under the Indian Constitution, land acquisition belongs to the Concurrent List. Article 254(2) of the Constitution allows a state to amend a central Act on the Concurrent List provided the central government approves of the amendment. Reportedly, states of Rajasthan, Maharashtra, Assam, Karnataka and Madhya Pradesh have already amended or in the process of amending the said LARR Act, 2013 sooner or later. The same instrumentality can be applied to land acquisition subject to the central government giving its approval.

          As it happens, the state of Tamil Nadu has already amended the 2013 Act. Tamil Nadu amended the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 by inserting a new section — Section 105 — that exempts land acquisition for industrial purposes and highways from the provisions of the Centre’s land Act. In view of the fact that the central government has given approval to the Tamil Nadu amendment, it is unlikely that it would refuse other states a similar amendment, should they choose to introduce it.

          An additional instrument that governments may use to make acquisition more acceptable to landowners is land pooling. The idea here is to purchase or acquire more land than is required for the project and eventually transfer each landowner a fraction of her land back from the excess land after the project is complete. Because major public purpose projects such as highways raise the value of the surrounding land, the value of the fraction of the original piece of land returned could be higher than the value of the full piece prior to the completion of the project, the landowners may find such a deal attractive.

          Alternatively, government may take land on long-term lease rather than purchase or acquire it. Again, landowners may find this option attractive because it allows them to keep ownership of land, earn an assured return and retain the option to renegotiate the terms once the initial terms of the lease expires.

          Production of any kind of goods and services requires land. However, delay in land acquisition, protests and resistance on the part of the displaced—as has been observed in West Bengal and Odisha—have become a big hurdle for investments in the infrastructure sector. Land acquisition is becoming risky and uncertain in India. It has become a national issue around which much mobilisation and protest has taken place. Environmental clearance is another cause of delays, cost overruns and risks in infrastructure projects, which is linked intrinsically to land acquisition.

          While many have observed the problems faced by the poor due to the land acquisition process, there has been little attempt to understand its current status and find solutions for the private sector. The problem has either been due to the bureaucratic working of the governmental machinery, which has brought out delays in land acquisition, or in terms of the monopoly of the governments in implementing a suitable land acquisition law benefiting both the entrepreneur and the farmer.

         

          From the economy point of view, it is essential to ensure that the land acquisition Bill gets implemented at the earliest and the issue is not further politicised. An immediate reform in the land acquisition procedures was one of the first priority areas of the new government, riding high on the development agenda. Land acquisition is central to the government’s thrust on infrastructure development, and without a suitable law on the same, the government would find it difficult to execute its Make-in-India programme aimed at providing a boost to manufacturing and job creation with the objective of taking India back to high growth trajectory.