New Delhi: In fields now bearing wheat, cotton and cumin, Prime Minister Narendra Modi promises to build a city rivaling the most advanced in the world. Farmer Ganpatbhai Chauhan doesn’t believe a word of it.

“They say this will become like Singapore, our land will turn into gold," said Chauhan, 45, sitting on a rope cot on the veranda of his house in the village of Sarasla, showing the notices he has received to vacate about a third of his 22 acres. “It’s all lies. Losing my land will ruin me."

The cluster of mud houses with clay-tiled roofs is one of 22 villages in the flat alluvial wheat basket of Modi’s home state Gujarat that is earmarked for Dholera, a city designed to be larger than Berlin when completed in about three decades. The government sees 100 such urban centers transforming the fortunes and image of the nation, which accounts for almost one of every five people in the world. Farmers see an attempt to seize their land cheaply.

It’s a standoff that has hampered India’s development for decades. Since January, it’s become even worse. That’s when the previous government passed an Act requiring consent from at least 70% of owners before the government or companies can buy land for infrastructure projects. Since then, not one large tract of land has been acquired for development.

“It’s an impasse," said Rajya Vardhan Kanoria, chairman of the Task Force on Land Reforms and Policy at the Federation of Indian Chamber of Commerce and Industry (Ficci) in New Delhi. “All land acquisitions are suspended. It’s not helping anybody—neither industry nor the farmers."

Road block

More than ₹ 1 trillion of projects are stalled as a result, including ₹ 60,000 crore of roads, 20 new coal mines by state-run Coal India Ltd, and steel mills for ArcelorMittal and Jindal Steel and Power Ltd. Without them, Modi’s plan to accelerate India’s urbanization by upgrading cities and building new ones won’t get off the ground.

“Even if companies raise the offer price to win over farmers, it’s almost impossible to acquire the land because of a complicated regulatory process that can take four years or more," said Kanoria, who is also chairman of Kolkata-based Kanoria Chemicals and Industries Ltd, which has factories in Gujarat and Andhra Pradesh states.

The poster child for the land impasse is Dholera. Conceived in 2007 when Modi was chief minister of Gujarat, it’s to be the heart of a Japanese-backed $90 billion industrial corridor stretching 1,500km between Delhi and Mumbai, India’s two biggest cities.

Super city

Billed as “a new Gujarat within Gujarat," the development zone would triple industrial output and quadruple exports from the region, according to its website. A new port and airport and modern highways and rail links will attract automotive, electronics, biotechnology and other industries, according to the plan.

The vision has failed to overcome reality.

Villagers have blocked the project for years. In 2009, Modi introduced a special investment-region law to speed things up, allowing the government to seize 50% of farmers’ land and compensate them with developed property elsewhere. So far, nothing has been done beyond sending letters to the farmers, asking them to vacate part of their acreage.

Near the entrance to Chauhan’s village, home to about 100 families, a large printed poster hanging on a wall warns officials to stay out. In June, encouraged by the new federal law, the farmers took their case to court.

What they’re fighting over is some of the most fertile soil in Gujarat, a plain about 100km south of the state’s biggest city of Ahmedabad and near an inlet of the Arabian sea where a port for the new city is planned.

Destroying villages

The only buildings are the farmers’ simple houses. Authorities say they will begin work on roads and drains by March.

“The government will be forced to scrap this project as they are acquiring land bypassing all norms and procedures," said Sagar Rabari, secretary of the Khedut Samaj, a farmers’ association. “They can’t build cities by destroying villages and snatching away people’s livelihoods."

For Gujarat officials tasked with persuading farmers to sell, the new law requiring group agreements has made a difficult job harder.

“The whole land pooling and readjustment is a tedious process," said Ajay Bhadoo, chief executive officer of the Dholera SIR Development Authority in Gandhinagar, Gujarat’s purpose-built state capital just north of Ahmedabad. “We will keep on pursuing them to vacate their land."

Reluctant landowners

Part of the problem is that each of India’s 29 states now has to adjust its own laws to conform to the new federal act, a process that could take years. In the meantime, landowners are holding off from selling in the hope of higher prices, said Sheetal Sharad, an analyst at New Delhi-based ratings agency Icra.

“Land acquisition has become the single largest roadblock for infrastructure development," Sharad said. “There is lack of clarity on how to proceed following the federal law."

India’s land laws have bedeviled development for decades as consecutive governments courted votes of the nation’s 800 million rural residents. Previous rules forced owners to sell land if it was considered to be in the public interest. The laws were widely abused, leading to clashes between farmers and officials that fueled Maoist rebellions in some mineral-rich states.

The standoff is exacerbated by buyers’ unwillingness to pay higher prices after years of being able to seize land cheaply, said Niranjan Sahoo, an analyst at New Delhi-based Observer Research Foundation, an independent think tank.

Cheap deal

“The mindset of companies and authorities hasn’t changed," he said. “They still want to take away land at a very cheap rate."

Eight of 20 major projects, worth ₹ 1.65 trillion, were shelved in 2011 and 2012 because of the failure to acquire land, Icra said a September 2013 report. Work on 81 national highway projects stretching 8,126km has yet to start three years after the contracts were awarded.

The new Act was supposed to make the process more transparent. Land can be acquired for projects that involve a public-private venture once 70% of the affected farmers agree, or 80% in the case of the government obtaining land for a private company to build power stations, ports or other infrastructure. Social-impact assessments and resettlement and rehabilitation packages also are required.

Gaining strength

“The Act has given us strength to fight," said Vighji Singh Patel, a farmer in Shela village who may lose half of his 40 acres to the Dholera project. “If they’re determined to buy it, let them acquire our land under the new law."

Modi’s government is trying to amend the Land Act in line with his Gujarat laws. That won’t be easy because his Bharatiya Janata Party (BJP) doesn’t have enough seats in the upper house of parliament and some parties will reject the proposal as too anti-farmer, said Sahoo at Observer Research.

Meanwhile his Dholera dream remains stalled. The Gujarat high court has issued notices to the state and federal government asking them to respond to the villagers’ petition.

“We’d like to sell our land on our own terms," said Patel, the farmer in Shela village. “If you want to buy it, come to us and negotiate the price directly." Bloomberg

Subscribe to Mint Newsletters * Enter a valid email * Thank you for subscribing to our newsletter.

Share Via