Land acquisition in India

Ref Leader, Business Standard March 3, 2009

Land acquisition remains one of the key factors which is slowing down industrial growth in the country.The government’s failure to get land acquisition and rehabilitation bills passed by Parliament before the elections is a setback to reforms in this area. The two bills — the Land Acquisition (amendment) Bill, 2007, and the Rehabilitation and Resettlement Bill, 2007, aimed at avoiding a repetition of the violent incidents that rocked Nandigram and Singur. The final version, passed by the Lok Sabha without debate and in the absence of the Opposition got stuck in the Rajya Sabha because of stiff resistance from opposition parties.

The Bill to replace the antiquated Land Acquisition Act of 1894 sought to balance the need for acquiring land for development with the interests of the land owners and moved the law quite significantly to the side of the land owners. Thus, it confined forcible land takeover to just three purposes — strategic use, public infrastructure projects and commercial ventures which are strictly in the public interest. Also industry would have to commercially buy 70 per cent of the land required for a project before the state government could step in to acquire the rest. Industry has complained in some cases that such a change in the law would have made it difficult to set up new units, because land acquisition would have become next to impossible. However, this is not really true. The experience with some of the special economic zones shows that land was privately acquired to a substantial degree, without the use of force.

The rehabilitation Bill, too, had some welcome stipulations—like undertaking rehabilitation prior to land takeover, and providing employment or equity participation to the affected families. The value of land goes up dramatically once it changes from agricultural to industrial. The benefit from this flows almost entirely to industry. It is only fair that those who did not get any benefit from such change of end use should get an additional benefit, in terms of jobs or shares.

However, the whole legislative exercise could have proved futile, since the amendments would not have been binding on states as they are free to have their own policies in these areas. Some state governments have already put in place their own land acquisition and rehabilitation policies. Considering this, it makes sense to leave it to the new government to decide on the best course of action.