The amended Land Acquisition, Rehabilitation and Resettlement Act, 2013, will help shorten project timelines and drive development, feels the business community.
The amendments in the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (the LARR Act) vide an Ordinance effective from December 31, 2014 (Ordinance), have come under the scanner for allegedly tipping the balance in favour of business over agriculturists. However, the business community has been vocal in its support of the Ordinance which it says will help shorten project timelines and drive development.
The Working Sub Group on Infrastructure of the Planning Commission noted in its report on infrastructure funding requirements during the 12th Plan (2012-2017) that project delays due to unclear land acquisition policies are common, resulting in higher costs and impacting project viability adversely. Land acquisition was one of the ´critical pain issues´ identified by the Sub Group, impeding infrastructure growth, most notably in the case of Ultra Mega Power Projects. Significantly, delays in land acquisition result in additional interest in debt servicing for projects which have achieved financial closure. The Commission noted that similar issues are faced in the development of roads and highways, laying down railway tracks, development of urban infrastructure, for setting up cold storages, warehouses and almost every other infrastructure subsector. A statement released by the Prime Minister of India in relation to the Ordinance , sets out that the objectives of its promulgation were to expedite developmental works without compromising on farmer interests. The Ordinance appears to follow the above report. In the following, we analyse the provisions of the LARR Act read with the Ordinance, with a view to the objective of its promulgation.
- Exemptions from requirement of Social Impact Assessment (SIA)
As per the provisions of the Act , SIA involves a detailed study of the social impact of the project taking into account the views of the Gram Sabha, Municipality or Municipal Corporation concerned, with a view towards assessing whether, amongst other things, the proposed acquisition serves the public purpose, whether the land chosen for acquisition is the bare minimum required and whether acquisition of land elsewhere is feasible. It is evident that the SIA is a significant step in the determination of whether the acquisition of land in each case is bona fide. However, the government has been granted certain discretionary powers under Section (9) of the LARR Act which permits the government to exempt any land acquisition process from the requirement of conducting SIA if the land is needed for a public purpose, in cases of urgency. This applicability of this discretionary power made available to the government has however been restricted to the minimum area required for the defence of India or national security, emergencies arising out of natural calamities or any other emergency with the approval of Parliament. Indian law requires that discretionary powers granted by law should be the minimum possible and should impose standards or guidelines to regulate it, so that it does not tend to become arbitrary. It may be argued that the provisions under the original LARR Act are Constitutional, since they are expressly limited and where not so, are subject to Parliamentary approval.
In contrast, the provisions under the Ordinance appear to be untrammelled, since they permit the government to exempt acquisitions for projects involving defence or defence production, rural infrastructure including electrification, housing for poor including affordable housing, industrial corridors and such infrastructure projects comprising PPPs where the Central government owns the land, from the SIA requirement without specifying the circumstances in which the government would be entitled to do so. Further, exemptions for defence could be applied under Section 40 of the LARR Act or Section 10A of the Ordinance. Should Section 10A be incorporated into the statute subsequent to the lapsing of the Ordinance, the government may be well advised to reconsider its wide wording as well as clarify the interplay between Sections (40) and (10A).
- Exemptions from consent requirements
The LARR Act mandates that the consent of 80 per cent of affected parties be acquired in the case of private projects and 70 per cent in the case of PPP. The above-mentioned categories of projects have been exempted from this requirement under the Ordinance. The provision for the exemption of the consent requirement has drawn great criticism from all quarters, for the alleged reason of disenfranchising the farmers and families who stand to be affected by the acquisition of land. However, while it was intended as a beneficial provision, the original requirement under the LARR Act for gaining the consent of affected families for the acquisition of land would have run into tremendous practical difficulties.
The Agricultural Census 2000-2001 records that in India, about 10 per cent of rural households are reported to be entirely landless and a large percentage to be near landless. They depend on informal leasing arrangements. Further, 15-35 per cent of land is tenant cultivated and a large fraction of tenant farmers are not listed in government revenue records. Thus, with little to no official record of up to 35 per cent of Indian farmers and their families on an average, who stand to be affected by the acquisition of land, it is difficult to imagine how a consent mechanism set out in the LARR Act would have been implemented successfully.
Instead, it is possible that the consent mechanism under the LARR Act may be perverted by vested interests, such that land is developed with fraudulently obtained consent and without an eye towards the interests of the affected parties. The redevelopment of slums in Maharashtra which envisages a similar consent mechanism is rife with such illegalities. In such a context, the Bombay High Court has observed in Indian Inhabitant & Citizen v. State of Maharashtra (PIL No. 156 of 2006): ´[...] great element of discretion is vested with the SRA and it must exercise its power not only with higher degree of caution and fairness but should ensure that the scheme, meant for upliftment of the poor living in slum, is not abused by the powerful lobby of developers with the aid and favour of the Government functionaries. The very fact that such large number of complaints were received out of which the authorities and courts have found prima facie material shows that certainly the system is not working effectively and is unable to achieve the real purpose sought to be achieved by the enforcement of the provisions of this Act.ö Corruption and rent-seeking practices in land acquisition could only serve to increase costs and lower investor confidence in the Indian legal framework and cause unforeseen delays in what should be a smooth process. With speed and transparency as the objective, the Legislature should consider an alternative to the consent mechanism until sufficient data on tenant farmers and sharecroppers is in place to implement the existing consent mechanism, without derailing the entire procedure.
- Return of unutilised land
The LARR Act 2013 provided that land acquired under it which remained unutilised for five years, would be returned to the original owners or the land bank. The Ordinance states that the period after which unutilised land will need to be returned will be five years, or any period specified for setting up of the project, whichever is later. The flash report of the Ministry of Statistics and Programme Implementation on Central sector projects, notes that 104 out of 233 delayed projects -approximately 45 per cent - were delayed by over five years. The cause for delay is typically attributable mainly to delays in land acquisition, acquisition of environmental clearances, substantial litigation and contractual disputes. In view of these numbers, the time limit of five years under the LARR Act would seem to be impractical and detrimental to business interests unless the rationalization and simplification of land and environmental laws and the judicial process. Thus, the relaxation brought in by the Ordinance is likely to be welcomed by the business community.
The Ordinance has brought in several far-reaching changes to the LARR Act, most of which are in favour of speeding up the land acquisition process, thus favouring project development. However, certain provisions may need to be tweaked if the substance of the Ordinance is enacted into law upon its lapse, in order to ensure that such provisions do not face constitutional challenges, which would impact investor confidence in the stability of the legal regime. In the meantime, the implementation of the Ordinance by a proactive and transparent government has great potential to kick-start investment in infrastructure.
This article has been authored by Aakanksha Joshi, who is an Associate Partner and Divya Srikanth, who is an Associate at Economic Laws Practice (ELP), Advocates & Solicitors. They can be reached at firstname.lastname@example.org or email@example.com for any comment or query. The information provided in the article is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein.