Reformation Policy or Ploy: The Indian Government’s new Land Acquisition Ordinance

By Sarah Mary Stanley*

Ordinance appears to be the watchword for the incumbent government as of late, with the most recent one inciting fervent debate over an extremely fragile issue. The recent ordinance passed by the government on the 29th of December, 2014 to ease and amend certain provisions of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 has resulted in heated discussions all over the country and so there is a need to understand the issue at hand and to critically analyse its pros and cons.

History of the Land Acquisition Act

In India, the Land Acquisition Act had been prevalent from 1894 till it was repealed by the passing of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act in 2013. The provisions as per the Act of 2013 included the required projects coming under the purview of Public Private Partnership to attain the consent of 70% of the land-owners whose land was being acquired, a social impact assessment to be conducted for every land acquisition and a retrospective clause wherein the proceedings of land acquisition would expire if either there was no physical possession of the said land or if compensation was not paid within a time period of 5 years and the land would have to be returned.

The rigorous procedural framework of the Act led to the industrialists demanding for its reformation which included the need to remove the consent clause, regulate the requirement of social impact assessments to large projects, a reorientation of the compensation clause and to expunge the clause for the return of unutilised land to the owners. The fundamental objective of the ordinance passed was to reform these certain provisions in the Act that were proving to be bottlenecks in the economy’s endeavour to maximize growth keeping in mind the welfare of the citizens being affected.

Key Features of the Land Acquisition Ordinance

A quick glance through the provisions of the Act might elicit a negative reaction that the process sounds cumbersome and dragged out. In the ordinance issued by the government  these provisions are done away with especially in the case of projects related to the infrastructure or social infrastructure sector,affordable housing, national security and industrial corridors as well as those coming under PPP wherein the acquired land would remain in the ownership of the government. The retrospective clause was also changed wherein acquired land need only be returned to owners if it remained unused for a period of ten years. As a bonus and with an aim to balance the scales, the government stated that the rehabilitation and resettlement clause would now also be applicable to the previously exempted 13 legislations which included the Special Economic Zone Act, 2005, the Atomic Energy Act, 1962, and such.

Evaluation of the Ordinance

An initial evaluation may consider this as a supposed win-win situation, wherein essential developmental projects have more leeway for moving forward and the land-owners receive a guarantee for compensation, resettlement and rehabilitation in previously exempted cases. However, a thorough perusal reveals the need to discuss the provisions of the Act, its administration and the true nature of the bottlenecks that are constricting growth.

On examination, the removal of the Social Impact Assessment does away with accountability to a large extent. Without such an assessment, there is no proper manner of finding out the actual number of citizens that get affected by such degree of land acquisition which include not just the land-owners. Without the said assessment only the land-owners receive recompense, when earlier, compensation would also have been received by those dependent on the land for their livelihood.Due to the high population density of the country there is a high dependency on land and other natural resources, therefore such an act would affect the lives and livelihoods of not just the owners. The Social Impact Assessment to a great extent was prosaic and time consuming because of its requirement for all projects irrespective of size and due to a lack of structure of methodology for evaluation by the constituted expert committee. However, the accountability that it provided was undeniable as it helped to exactly estimate the cost of compensation, resettlement and rehabilitation that have to provided (as it also allowed for the estimation  of indirect dependents on land) and if administered effectively could have even helped to reduce grievance litigation.

The alteration to the Act for elimination of the consent clause with respect to certain areas is as of now only an agreement from the side of the Centre. There is no certainty that the mandate will be exercised and further mandates will not be put into place by the States, whose support is crucial in projects as the state level authorities are finally responsible for the possession of land.  Also, the consent clause has only been eliminated for PPP projects thus leaving private players still in a quagmire over the procedure wherein they require 80% of consent for their projects. This brings into play a level of disparate treatment of public projects and private funded projects, wherein through the normal route private players will still be plagued by delays whereas the less regulatory route requires a partnership with the government.

A McKinsey Study in 2009 on “Building India Accelerating Infrastructure Projects”stated that one of the major bottlenecks in acquisition of land for continuation of projects was the under-valuation of the price of land being acquired, which the ordinance does not address as the compensation clause has been left as it is. Land acquisitions would become an easier process if the valuation of land, for the purpose of providing compensation, was done effectively and not based on registered value that is more often than not an under-valued price and which also does not take into account the value that will be lost to the owners due to appreciation as a result of construction of infrastructure.

A Goldman Sachs report states that an increment in the cost of purchasing land (a direct cost) would not prove harmful in the long run as prompt appropriation of property will amount to lesser indirect costs.The dispute resolution mechanism that is made use of in India is another obstacle in itself especially due to its lack of exaction. It further adds to project delays due to lengthy litigation periods. All of this results in an increment in the cost of project, with regard to just the acquisition of land, which is injurious to private investment in the long run.

A survey of media reports and court cases by Rights and Resources Initiative shows that there have been 252 conflicts in just 165 districts of the country over the acquisition of land (inclusive of private land, diversion of forest land, transfer of common land). In India, approvals for projects are given with only 15 to 20% of the required land being acquired and land conflicts due to the above reasons would only further stall construction and development as well as the flow of investment.

A factor that is also not considered to a great extent is that the burden of poorly gauged projects falls on the shoulders of the public sector banks that have to take over the non-performing assets.

The analysis of the factors as mentioned above brings us to the conclusion that the acquisition of land may not pose as much of a problem as the framework that is in place for the process of acquisition and the efficiency and effectiveness of its administration. The ordinance route that has been adopted by the government most certainly does not inspire confidence in its ability to move reforms in the legislative section of the government and also the stability of its proposed policy changes.

The examination of the proposed modifications to the Act of 2013 indicates that the ordinance, in effect, fails to address the confirmed quandaries that plague the land acquisition issue in the country and it makes us question the true purpose of this initiative as to whether it actually serves to protect the interests of the citizens and the growth of the country or whether it only serves to elevate the political agenda of the government during a time of low faith and is in fact a ploy to control market players and market acquisitions and strengthen the power of the Government entity at the Centre rather than correct market failures.

Suggestions

In retrospect, appropriate solutions can be identified for all the issues; however the fundamental correction to be made is to provide a definitive right to the people over their land and resources, which would provide them with the certainty and stability of ownership to conduct negotiations and enable them to advocate their needs and participate in the developmental process. Social Impact Assessments should also be reinstated at least for medium to large scale projects, where the assessment is done by an expert group that currently deals with and is familiar with the situations of the area under consideration (possibly with no political affiliations) and the final approval has to be provided by them in consultation with the local self-government and not by the state. An avenue must be provided for private players to forge deals themselves with the owners without additional cumbersome regulatory requirements.

The deals made could include an agreed upon modest compensatory package over and above which the private players could offer the owners continued payment of a percentage of profits for a certain period (a steady income flow) as an incentive.Another solution could be to let the owners maintain their rights over the property (therefore they will receive aid only for resettlement and rehabilitation) till after the completion of the projects, based on which they can then sell their property to take benefit of the appreciated land value, thus providing them with added incentive to give consent for the sale of their land.

*The author is a research intern at CPPR

 

References:

 

  • (n.d.). Retrieved 12 30, 2014, from Wikipedia: http://en.wikipedia.org/wiki/Land_Acquisition_Act_1894
  • (n.d.). Retrieved 12 30, 2014, from Wikipedia: http://en.wikipedia.org/wiki/The_Right_to_Fair_Compensation_and_Transparency_in_Land_Acquisition,_Rehabilitation_and_Resettlement_Act,_2013
  • (n.d.). Retrieved 12 30, 2014, from PRS Legislative Research: http://www.prsindia.org/billtrack/the-land-acquisition-rehabilitation-and-resettlement-bill-2011-1978/
  • (2014, 11 25). Retrieved 12 31, 2014, from Rights and Resources Initiative: http://www.rightsandresources.org/news/as-modi-government-in-india-proceeds-with-economic-development-agenda-new-map-tracking-land-disputes-shows-disturbing-rise-in-conflicts-with-local-people/
  • A Mark of Urgency Land Ordinance a Step Towards Reviving Investment Climate. (2014, 12 31). Business Standard.
  • Asthana, S. (2014, 12 31). Land Acquisition Act: Right Step, Wrong Route. Business Standard.
  • (2009). Building India: Accelerating Infrastructure Projects. McKinsey.
  • Decoded: What Changes HAs the Narendra Modi Goernment Made in the Land Acquisition Ordinance. (2014, 12 30). Daily News and Analysis.
  • Dugal, I., & Sanjay, P. (2014, 07 25). India Opens the Funding Tap for Infrastructure Projects. Live Mint.
  • Government Approves Ordinance to Ease Land Acquisition. (2014, 12 30). Business Standard.
  • Modi Government to Give Industry its Promised Land. (2014, 12 29). Hindustan Times.
  • Nataraj, G. (2014). Infrastructure Challenges in India: The Role of Public-Private Partnerships. Observer Research Foundation.
  • Ordinance Raj begins, 2 days ahead of 2015: Land acquisitions can now be accelerated. (2014, 12 30). The Economic Times.
  • (2013). Public Private Partnership: Partnering for Growth. India Brand Equity Foundation.
  • Research, P. L. (2012). Legislative Brief The Land Acquisition, Rehabilitation and Resettlement Bill, 2011. New Delhi.
  • Union Cabinet Approves Amendment to Land Acquisition Act. (2014, 12 29). The Indian Express.

 

 

Disclaimer: The views expressed here are solely those of the author in her private capacity and do not necessarily represent the views of Centre for Public Policy Research.

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1 Response

  1. Radhakrishna Tripathy says:

    Do not acquire land :)

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