Responses to the Land Acquisition ordinance so far have been generally influenced by political or ideological considerations. For instance, civil society groups think that harassing industry is the best way to help the poor, and hence are shocked at the concessions given to land acquirers in the ordinance. They do not realise that employment generation per unit of land is higher in non-agricultural uses than in agriculture.





For instance, a power plant may displace a few hundred households but would create tens of thousands of new jobs by providing power to small industry, and to tubewells that would increase both gross cropped area and productivity. At present, the share of urban dwellers in total population of India is 38 per cent, but they occupy only 6 per cent of the total area of the country. Growth through industrialisation and urbanisation would not only increase labour productivity but will reduce pressure on farm land by pulling people away from land to new non-farming occupations.



Under the 2013 Act, acquisition of even one acre of land would have taken at least four or five years as the proposal would have to pass through about a hundred hands. It established several new committees each with its activists and experts who would conduct a Social Impact Assessment, and their report would be vetted by another Expert Group. In addition, Rehabilitation and Resettlement (R&R) Committee, a State Level Committee, and a National Monitoring Committee were to be created to oversee reports generated by junior committees.



Delay in completion of formalities, likely under such a complex structure, would delay payment of compensation thus harming farmers and causing uncertainty in their rehabilitation. By adopting a fast track process, the ordinance would certainly reduce delays and to that extent helps farmers too. Further, its decision to bring the excluded Acts, such as the National Highways and Coal Bearing Acts under the Land Acquisition Act for compensation and R&R purposes is a pro-farmer step.



However, by enlarging the list of projects where no consent of landowners is needed even to profit oriented private colleges and hospitals, ordinance has almost killed the voice of farmers in the acquisition process. In the 2013 Act, at least for private projects, landowners could have asked for compensation higher than two to four times the recorded value through negotiations, but under the ordinance, most land acquisition would not need consent, and hence compensation would be identical and non-negotiable whether land is needed for government or for profit industry.



The 2013 Act did not deal satisfactorily with frequently observed rapid appreciation of acquired land, giving rise to resentment among the original owners who felt cheated when within a few years land prices start skyrocketing, greatly benefiting real estate dealers. This also deters other potential landowners from accepting only one-time compensation. To avoid such an unfair outcome, a part of the appreciated value should be given to the original land owner. The 2013 Act defeated this idea by stipulating that a share of capital gain should be paid only if no development has taken place on the land in question.



Spurious minimal “development” by the acquirer (such as planting a few trees) then releases him from this obligation thus denying landowners to benefit from appreciation in the value of land. The ordinance should have removed this proviso. Further, in order to check acquisition of land far in excess of need (with a view to do profiteering), the ordinance should have imposed heavy tax on land remaining unused after a stipulated period, and this tax should have been shared with the original land owners.

Low compensation

Striking a balance between the interests of industry and landowners one should bear in mind that the total land cost, if land is made available without delay or litigation, is not more than 2 to 5 per cent of the project cost. For instance, the total project cost of the proposed steel plant by the Korean firm POSCO is Rs 54,000 crore and it will displace 700 households.



If POSCO had decided to spend even 1 per cent on the displaced people, each one of them would have received Rs 80 lakh as compensation. However, actual compensation that was being offered was just Rs 10 lakh to 15 lakh leading to resistance and even violence. A 4000 MW thermal plant costs about Rs 30,000 crore and displaces about 300 households. Thus earmarking just 1 per cent of the project cost for acquisition could make each displaced family a crorepati.



From industry’s point of view, the price of land acquisition has two elements. One is the direct price paid for acquisition and R&R, which go directly to the affected households. The second element is an indirect price that includes transaction costs (such as the cost of conducting social impact assessments, running the new multiple-layered acquisition bureaucracy, bribing land mafia and politicians), and opportunity costs (production forgone as a result of delays in securing approvals and fighting court cases). The direction of any amendment to the colonial 1894 law should have been to substantially increase the direct costs and drastically cut down the indirect costs. The 2013 Act unfortunately did not strike a good balance between the two.



It increased indirect costs, and did not accept the National Advisory Council’s recommendation of increasing compensation to six times the recorded price, and passing a share of future escalation of land price to landowners. The ordinance is pro-industry and continues to be anti-farmer. It encourages acquisition of excess land for profiteering. It does not do justice to landowners, but may help the process of growth by speeding the process of acquisition, though sometimes through coercion and police firing on the dissatisfied farmers.



(The writer is former secretary, Department of Rural Development, Government of India, and former member, Planning Commission)