Home » Look what's not moved: The Bill on the biggest immovable

Look what's not moved: The Bill on the biggest immovable

Look what's not moved: The Bill on the biggest immovable

Political expediency seems to be hijacking our land acquisition laws. On the one hand, Uttar Pradesh and Gujarat have declared that acquisition can only occur by consent, and the Land Acquisition Act will not be invoked. On the other, the Centre's amendments to the Amendment Bill may end up providing 33-year annuity to displaced farmers, luring them to sell land (… and vote). In effect, the amendments attempt to expand the rights of land-losers while restricting the types of projects for which governments can acquire land. As violence has marred land acquisition for commercial purpose across the country, the government needs to continue to use its powers in negotiating and invoking the Act and not depend on private companies alone, says Shashidhar Nanjundaiah.

Here's a quiz: If the Resettlement and Rehabilitation (R&R) Bill had not lapsed because of the dissolution of the XIV Lok Sabha, would the Gulf Finance House Economic Development Zone abutting Navi Mumbai have seen the large scale land acquisition last year? Among other new clauses, the Bill sought to prevent large scale displacement of people over the acquisition of land for projects such as economic zones.

This winter was bitter in more ways than one, as yet another momentous legislation eluded the Indian Parliament this Winter Session. The long-awaited amendments to the Land Acquisition (LA) Act had already been passed in the XIV Lok Sabha in 2009 along with the closely related R&R Bill but lapsed after the Lok Sabha was dissolved. Then, in August last year, as farmers violently protested at Tappal in Aligarh, Uttar Pradesh, for three weeks demanding a substantial enhancement in the compensation offered to them for their lands acquired to build the 165 km Noida-Agra Yamuna Expressway, Prime Minister Manmohan Singh assured them that the LA Amendment Bill would be introduced in the Parliament in the “next session”. Now, as political divisions take centrestage in New Delhi with the Trinamool Congress, the Bill still languishes.

Competitiveness as factor of LA Policy

Although it is clear that the sooner the LA Act comes into effect, the more uniform the acquisition processes will be across the country, states are now more competitive than ever before in attracting investments, and that aggression has often resulted in progressive, win-win cascading effects on land acquisition. Currently, states are following various methods, and some of the Amendments in the Bill actually borrow from what are surely the more desirable practices.

Annuity: Haryana's new practice to provide 33 per cent annuity to displaced farmers is innovative, and the “revised amendment” will include that clause. Haryana government's Industrial and Investment Policy 2011 has eased the norms of the land acquisition policy, with the state volunteering to undertake land acquisition on behalf of the private sector promoters of various projects with the purposes of enabling contiguity of project areas. Because such project areas are schemed to be in backward areas, and this is a lure many states have been adopting. Uttar Pradesh, too, has announced a cash plus annuity package for 33 years. While gearing up to accelerate private participation in its industrialisation, the state is also preparing to “outsource” the disbursement of its land acquisition compensation (Rs 20,000 per acre per year as annuity, with interest accrued each year) to insurance companies and banks, in the hope to amortise and optimise its cash flow. Uttar Pradesh's Principal Secretary for Infrastructure and Industrial Development VN Garg says expressions of interest have come in from LIC, ICICI, Bajaj Allianz, Allahabad Bank and SBI Life. “In a sense, this is a PPP,” says Garg. “We can also consider it to be a consortium.”

Land banks: The Amendment says that land banks must be compiled for industrial use. Building land banks from both government and private land, as introduced in Gujarat and Karnataka, is an example that clearly worked with states that have implemented it. Land banks have proved to be the clincher for both states, which aggressively—and successfully—pitched for Tata Nano and ArcelorMittal after the companies faced trouble in West Bengal and Orissa respectively.

Replacement: Compensation through “replacement” is now gaining currency, and experts believe that this is an equitable way forward. Indeed, as T Balakrishnan, Principal Secretary of Industries, Kerala, reminds us, “That is what we are supposed to do under the LA Act.”

If anybody knows the pain that land acquisition is, it would be Balakrishnan, who says that land acquisition is not as much about land as it is about livelihood. Kerala has seen narrowing of highways to accommodate more available land—such is the scarcity of land among the most densely populated states outside Delhi. As negotiation with private landowners in that state can often be with backs to the wall, replacement of livelihood is almost imperative there. “We try to give full rehabilitation when the livelihood is affected,” he says. “So we are using the LA Act only as a basic document but going beyond it in most of the cases.”

Consent: On the other hand, recent policy decisions from governments may also prove to be detrimental to the process of land acquisition. Recently, Uttar Pradesh (UP) Chief Minister Mayawati announced that land would be acquired only with the consent of farmers. Surely the peril in this policy is the uncertainty that it drags in? Her bureaucracy explained that the “collective will”—taking the consent of a majority and then applying the LA Act “only as a last resort” will continue. But the implementers displayed solidarity with the spirit of the policy.

“It's better to take consent and then negotiate,” Principal Secretary Garg says. “Rather than using a sledgehammer approach in taking away somebody's property, we try to create a conducive environment. We believe it is a progressive step.”

Gujarat followed UP's “consent” example, as Chief Minister Narendra Modi also declared that consent would be a mandatory rider in acquisition in “80-90 per cent of the cases”. Gujarat's Industries Minister Saurabh Patel said the market price of each piece of land would be decided not by the government or any middlemen but by the Centre for Environmental Planning and Technology University (CEPT). Besides getting the market price, farmers would also be later paid 10 per cent of the price secured from the industries allotted to the developed plot. One per cent holding of the developed plots would also be given back to the original land-owning farmer for the purpose of commercial activities or bought back by the GIDC at commercial rates.

Agricultural land: The new amendment almost bars acquisition of agricultural land, and Balakrishnan has a radically different view when it comes to acquisition of agricultural land. “That clause is ridiculous. You cannot keep agricultural land as agriculture land forever. With economic changes over time, it is quite natural that agricultural land is put to either individual, commercial or financial use,” he explains, indicating that such changes are a law of economic evolution.

Chiranjiv Chowdhary, Commissioner (R&R), Government of Andhra Pradesh, declined to answer our pointed questions on the LA Bill, but offered that the subject of land acquisition has to be examined with reference to socio-economic impact of land acquisition on the land losers in the past, how much and which category of land could be diverted for non-agricultural uses in the light of competing demand for land from multiple stakeholders, the issue of food security and declining trend in agriculture productivity, etc. “Therefore, the issue of land acquisition and proposed amendments have to be viewed in larger context of agriculture sector, poverty and livelihood and so on, and will also have to be considered simultaneously with the same focus.”


“Several days ago, somebody came to us demanding an underpass to go through his constituency to succumb to the pressure of the local village. Well, we just delayed the process by three to four months, and at whose cost?” recalls SM Roy, CEO, Lanco Infrastructure. Roy adds, “There is blackmailing in this country. There is a need for the government to make these policies very clear.” We suspect the sighs of relief and the anxious wringing of hands among private participants of the infrastructure industry are split down the middle. The anxiety among private entrepreneurs—particularly those on whom the sword of time overruns hangs, such as EPC players—is understandable. That category of entrepreneurs believes that they can much better negotiate with landowners and arrive at the right prices. Roy says: “Once the contract is given to a private implementer, they will directly go to the villagers, and the problem will be much simpler. But we aren't being allowed to do so.”

Ajay Saxena, PPP expert for Maharashtra, Asian Development Bank (ADB), differs. “In a negotiation between the poor and the rich, the farmer often does not even have the knowledge of what price the land could've fetched, and he ends up losing monetarily and otherwise. I believe that for land acquisition, there should always be a base rate, and anything lower shouldn't be acceptable. Farmers should be made aware, by the government, that it is a government owned project being executed by a private concessionaire, but should anything go wrong, there is the provision of a window where they can complain. So they can take their problems to the government, and don't have to run after the private players, where they inevitably get a bad bargain.”

For the category of believers, the awaited LA (Amendment) Bill is what the doctor ordered: the private companies will acquire 70 per cent of the land before the government can intervene and facilitate the remainder. Although infrastructure will be “public purpose” and the above rule will not apply (the government will acquire 100 per cent of the land), many units that are ancillaries or related to infrastructure may continually seek clarity on the hair-splitting definition of “public purpose”. The clause will largely bring a sense of assurance among private players, since the portion of the land unacquirable by negotiation can now be acquired by the government's invocation of the Act. For the government, in theory, this system will ensure that a fair price will ensue.

But renewable energy contracting firm Synefra's Managing Director JR Tanti reminds us that land acquisition is much more than the acquisition. “There is no exit clause in the Act. The new law should provide for a policy for return of the acquired land to the original owners if the project is abandoned, or the scope of the project is changed, reducing the requirement of land or for excess land acquired through overestimation of requirement.”

At present, the “public purpose” clause encompasses establishment of installations pertaining to national security, infrastructure and facilities designated as “social infrastructure,” such as health, education and space research. The good news for private parties is that the land they will acquire can also be defined as “public purpose”.

However, many entrepreneurs in infrastructure—private project developers and contractors—will still find the new mandate inconvenient. Companies with muscle have often displayed impatience when it comes to government's way and stretched timelines—and costs—while acquiring land, and have frequently expressed the wish that private players be given the chance to completely handle land acquisition in infrastructure. On the other hand, smaller players will heave the proverbial sigh of relief because over the past two years, land acquisition has improved upon its own ranking as the number one culprit in infrastructure project bottlenecks. They can now hope that the government can be somehow made responsible for any delays in land acquisition. What happens to EPC contractual responsibilities when this Bill becomes law, though, is anybody's guess.

The Amendments

Highlights of the Bill

• The Land Acquisition (Amendment) Bill, 2007 amends The Land Acquisition Act, 1894.
• For acquisition resulting in large-scale displacement, a social impact assessment study must be conducted. Tribals, forest dwellers, and those with tenancy rights are also eligible for compensation.
• Acquisition costs will include payment for loss or damages to land, and costs related to resettlement of displaced residents.
• While determining compensation, the intended use of land and value of such land in the current market is to be considered.
• The Bill establishes the Land Acquisition Compensation Disputes Settlement Authority at the state and central levels to adjudicate disputes resulting from land acquisition proceedings.
• Annuity of up to 33 years to land losers.
• Agricultural land especially land under assured irrigation and multi-cropped land is acquired only as a last resort.
• The following criteria in assessing and determining the market value of the land: (i) the minimum land value, if any, specified in the Indian Stamp Act, 1899 for the registration of sale deeds in the area, where the land is situated; or (ii) the average of the sale price for similar type of land situated in the village or vicinity, ascertained from not less than 50 per cent. of the sale deeds registered during the preceding three years, where higher price has been paid; or (iii) the average of the sale price, ascertained from the prices paid or agreed to be paid for not less than 50 per cent. of the land already purchased for the project where higher price has been paid, for the purpose of item (iii) of clause (f) of section 3, whichever is higher.

Key Issues and Analysis

• The Bill bars the jurisdiction of civil courts on all matters related to land acquisition. It is unclear whether there is a mechanism by which a person may challenge the qualification of a project as 'public purpose.'
• The definition of 'public purpose', instead of being made stringent and narrow as many had recommended, is being widened. A longstanding criticism of the LA Act has been that the 'public purpose' for which land is being acquired is not open to contestation. The Settlement Authority is a judicial body but could be entirely staffed by members without judicial qualifications or experience.
• When acquired land is resold, the original acquirer is to distribute 80 per cent of the capital gains to the original owners or their heirs. This implies that every acquirer must track the original owners and their heirs in perpetuity. Also, the resale price of land may be difficult to compute when it is part of a larger deal in which a company is taken over.
• Companies have to offer part of compensation as shares or debentures. Unlike shares, debentures do not provide the land owner with a share of the profits of the project.
• The Bill makes special provisions for compensation if land is acquired under 'urgency'. The term 'urgency' is not defined.

Analyse this: Lavasa

In October last year, the Maharashtra state government decided to employ an oxymoron and “legalise the irregularities” by Lavasa, the Rs 48,000 crore private township nestled in verdant hills near Pune whose promoters Hindustan Construction Company (HCC) have defiantly stood up to the MoEF's orders and to land acquisition protests. Of the 282 hectares acquired tribal land, permission from the government had been sought for only 102 hectares. Lavasa will pay market rates and a penalty for the remaining land. Among other shocking “irregularities”—something that Indian terrain is hardly unfamiliar with—has been massive razing of hills, where no cutting of hills was permitted, and rampant construction well above the limit allowed beyond 1,000 m above sea level. It is well reported that NCP leader Supriya Sule—daughter of arguably the state's most powerful man Sharad Pawar—and Congress leader Narayan Rane have lent support to the project on public forums.

Crystal-unclear: GFH EDZ

Where there is a will, there's money, and issues like land acquisition for a project that is close to a Chief Minister's heart can melt away with the stroke of a pen. As construction on the Rs 45,500 crore Gulf Finance House Economic Development Zone (GFH EDZ) commenced last May in Panvel on the fringes of Navi Mumbai, it became the country's largest, foreign direct investment (FDI)-driven integrated development project with arguably the least media attention.

The developer told the media in March last year that the project has received “verbal approval” from Maharashtra's environment ministry. What started in 2006 as a unique Energy City project with a 300 acre requirement grew under former
Maharashtra Chief Minister Ashok Chavan's initiative to a 2,100 acre project to include entertainment and telecom. Land was quickly converted into Zone 1 only for this purpose, and most of it is already acquired with no hurdles from the environment ministry or other agencies, despite its proximity to the Navi Mumbai airport whose land is mired in environmental problems. The concept of Integrated Economic Development Zones grew with this project, which is estimated to provide employment to a whopping 2.5 lakh people. The project is promoted by the Bahrain-based Gulf Finance House, which is among the successful and innovative Islamic investment banks in West Asia. The Mumbai Metropolitan Region Development Authority (MMRDA) is now a partner.

Highway land acquisition: Independent arbitrator is an advantage

National Highway Authority of India's (NHAI) land acquisition is really a breeze when compared to other industries: Projects are brownfield, no courts to deal with, and above all, no Urgency Clause since all road projects are urgent.

NHAI's mandate is different from those for industries, since the growth mostly involves expansion of existing alignments. This is usually accomplished by acquiring small strips of land, only five to 10 m wide, along a highway. If the area is fragmented and acquisition gets difficult, bypasses or new alignments are built to avoid trouble. Highways provide much better opportunities for landowners.

NHAI's land acquisition is governed by a specific act, the NH Act, not by the Land Acquisition Act. Under this Act, people cannot move the courts, but approach an arbitrator, which would be revenue officials appointed by state nomination to decide compensation and deal with disputes.

This ensures much better and much speedier disposal of cases, which do not have to go through the system of courts. Everything is decided by the arbitrator, the single person who can take a decision.

Because landowners cannot question the acquisition itself and the authority lies with the government, disputes are somewhat simpler. (This is contrary to the provisions in the Land Acquisition Act, whereby landowners can question the purpose of the acquisition.) However, landowers can, and sometimes do, challenge the compensation. The cost of land acquisition in highways hovers around only 10 per cent of the total cost, and although this cost increases each year, it is still not burdensome.

The problems arise in greenfield highway projects, which are on the anvil, since acquired land may not exist on those stretches. A road cannot be commissioned even if a small portion of a stretch is not acquired—leading to cost and time overruns.

VK Sharma, Assistant General Manager, NHAI (vksharma@nhai.org)

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