How states can get around 2013 land acquisition law

In an address to the nation on the mann ki baat programme on All India Radio on August 30, 2015, the prime minister Narendra Modi, announced that the government would not re-promulgate the land acquisition ordinance. As he said during the course of his address: “Tomorrow [August 31, 2015] the Land Bill will lapse and I have agreed to it. The government will not re-promulgate [an] ordinance, but will include 13 points to reform the land acquisition law to benefit farmers.”

Up until 2013, the Land Acquisition Act 1894, a remnant of the British era, was in force. It gave more or less absolute powers to the government to acquire land wherever and whenever it wanted to, by paying a pittance for it. As Jairam Ramesh and Muhammed Ali Khan write in Legislating for Justice—The Making of the 2013 Land Acquisition Law: “The 1894 Act was a comparatively short legislation that left much to the discretion of the acquiring authorities.”

Many wrongs were committed by the government and the politicians under the 1894 Act. This Act was replaced by the Land Acquisition, Rehabilitation and Resettlement Act (LARR) 2013. The 2013 law calls for consent from 70% of families whose land is being acquired, in case of public private partnership projects and 80%, if the land is being acquired for a private company.

A social impact assessment also needs to be carried out. This assessment needs to answer questions like whether the “proposed acquisition serves public purpose” and “whether land acquisition at an alternate place has been considered and found not feasible”. Over and above this, the 2013 law also has clauses dealing with rehabilitation and resettlement of those affected by the purchase of land and the compensation they need to be paid.

In fact, Bhartiya Janata Party (BJP), which was in the opposition at that point of time played a key role in the passage of the 2013 Act. The standing committee formed to look into the Land Acquisition, Rehabilitation and Resettlement Bill 2011, which finally led to the 2013 Land Acquisition Act, was headed by the current Lok Sabha speaker Sumitra Mahajan. The committee made 28 recommendations out of which 26 were accepted. Recommendations made by Sushma Swaraj, the then leader of opposition in the Lok Sahba, were also accepted.  The point being that the BJP played a key role in the passage of the bill, which it has wanted to dilute after coming to power.

The problem was that all land acquisition came to a standstill after the Act was passed. What did not help was the fact that the Indian corporates over the years have become used to the government providing them with all the land they require on a platter.

In December 2014, the Modi government, after being in power for six months, brought in an ordinance that proposed changes to the 2013 Act. As mentioned earlier, to acquire land under the 2013 Act consent of 70% of land owners in case of public private partnerships and 80%, in case land is being acquired for private projects, is required.

The ordinance did away with this consent clause for affordable housing, defence, rural infrastructure, industrial corridors and infrastructure projects. The social impact assessment clause was also done away with in these cases.

The trouble was that the exempt categories were very broadly defined and almost anything could come under them. As Ritika Mankar Mukherjee and Sumit Shekhar of Ambit Capital wrote in a recent research report titled Failure to amend land law to exacerbate sense of ‘policy drift’: “The opposition as well as supporters of the NDA alike were aghast by the proposed legislation as potentially these five exempted categories could cover a majority of projects for which land can be acquired…For instance, how is rural infrastructure defined? Can a shopping mall be defined as rural infrastructure? Can land be acquired for a mandi and the top floors turned into a multiplex?”

The Lok Sabha, where the Congress has only 44 members, eventually cleared the changes that the ordinance would make to the 2013 Act, in May 2015. But the changes did not go through the Rajya Sabha, where the Modi led National Democratic Alliance does not have enough members.

Meanwhile, the government re-promulgated the ordinance thrice and after August 31, 2015, the ordinance was allowed to lapse. The government understood that it would not be able to push the changes through the Rajya Sabha.

This means that we are now back to the 2013 Act, under which almost no land acquisition has happened. The question is what happens from here? The states needs to take the lead and come up with their own laws in order to ensure that the land acquisition process continues.

As finance minister Arun Jaitley wrote on his Facebook page yesterday: “Acquisition of property is a List-III, Entry 42 subject provided for in the concurrent list. The provisions of article 254(2) clearly provide that a State Government can bring a legislation on a Concurrent List Subject which conflicts with the Central legislation provided the Presidential assent is given to such legislation. The States are thus fully empowered to amend the 2013 Land Law and seek Presidential assent before the amendment can be effected.”

What this means that states can bring in their own land acquisition laws from now on. As per the 2013 Act, for rural areas the minimum compensation promised is anywhere between two to four times the market value of land along with the value of the assets on that land. For urban areas the minimum compensation promised is two times the market value of land along with the value of the assets on that land. Hence, the compensation offered by the 2013 Act should become a floor price for the compensation that states will offer under their own Acts.

What further helps is the fact that the BJP is currently in power in 11 states, which are likely to come up with their own land acquisition laws, in line with the Modi government’s ordinance than the 2013 Act. In fact, Tamil Nadu, where the AIADMK is in power, a party closer to the BJP than the Congress at this point of time, has already done that.

As Mukherjee and Shekhar write in their research report: “Tamil Nadu was the first and only state to seek and receive Presidential assent to exempt three major categories from the purview of the Land Acquisition, Rehabilitation and Resettlement Act. In particular, land acquisition done under the Tamil Nadu Highways Act, 2001; the Tamil Nadu Acquisition of Land for Industrial Purposes Act, 1997 and the Tamil Nadu Acquisition of Land for Harijan Welfare Schemes Act, 1978 is outside the purview of the consent clause and Social Impact Assessment clause.”

Around four-fifths of the land acquired in Tamil Nadu is acquired under the three acts mentioned above. Hence, given that the Tamil Nadu government has totally managed to work around the binding provisions of the 2013 Act.

The social impact assessment clause and the consent clause are at the heart of the 2013 Act. While the clauses are necessary in order to protect the interest of the people who own land, at the same time one needs to keep in mind the fact that 13 million Indians are entering the workforce every year. And jobs need to be created for these individuals. For jobs to be created more industry needs to set up. And that requires land. This is a point those opposing the dilution of the 2013 Act need to keep in mind.

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)

The column originally appeared on Firstpost on Sep 3, 2015

How the Congress party got corporates addicted to govts buying land for them

One of the main questions that has been asked in the current controversy surrounding the issue of land acquisition is—why does the government need to buy land? Jairam Ramesh and Muhammad Ali Khan try and answer this question in their new book Legislating for Justice—The Making of the 2013 Land Acquisition Law. 

As they write: “Acquisition of property is founded upon the universally recognized principle of ‘Eminent Domain’.” And what is Eminent Domain? “[It] is the power of the Government…to take over resources for the greater national good. At its most basic Eminent Domain refers to the inherent authority of the Government to acquire private property on the payment of fair compensation for a use that benefits public at large,” explain the authors.

Further, a lot of public infrastructure gets built because of Eminent Domain. As Ramesh and Khan write: “Without the power of Eminent Domain, the Government could not establish the infrastructure that we rely on—roads, hospitals, airports, public schools, common facilities such as warehouses for farmers, playgrounds for children all are made possible through the use of Eminent Domain.”

So far so good. But why does the government have to acquire land for private companies? Before I get to answering this question, it is important to realize that the land acquisitions carried out by the government in India can essentially be divided into two eras—those carried out before 1991, the year of the economic reforms, and those carried out after.

As Michael Levien of the Johns Hopkins University writes in a recent research paper titled From Primitive Accumulation to Regimes of Dispossession: Six Theses on India’s Land Question: “Since 1991, India has passed from a regime that dispossessed land for state-led industrial and infrastructural expansion to one that dispossesses land for private—and increasingly financial—capital. Between 1947 and 1991, the Indian state largely dispossessed land for public-sector projects to expand the industrial and agricultural productivity of the country. The main forms of this dispossession were public sector dams, steel towns, industrial areas, and mining.”

But that changed after the economic reforms of 1991, when the private sector began to play a more active and larger role in the Indian economy. The economic reforms unleashed the Indian IT and BPO industry. These sectors had an unending appetite for land and the government helped them by acquiring land for them.

Gradually, public-private partnerships became the preferred method for building physical infrastructure. And this led to the government acquiring more land for private firms. In fact, as Levien points out: “Crucially, compensating private infrastructure investors with excess land and/or development rights became an increasingly popular method of cost recovery in these arrangements—whether for roads, airports, or affordable housing (Ahluwalia 1998; IDFC 2008, 2009). Infrastructure investment thus became a vehicle for private real estate accumulation, culminating with Special Economic Zones in the mid-2000s.”

Hence, land became a sort of a currency for the government. Also, given that the government could acquire land for private firms, it is obvious that a lot of politicians must have made a lot of money as well.

Nevertheless, the question is how did the government get around to acquiring land for the private sector? Before the 2013 land acquisition law was passed, land acquisition in India was governed by the Land Acquisition Act 1894—a law from the time when the British ruled India.

In fact, an amendment made in 1984 to the 1894 Act expanded the government’s ability to “acquire lands for a public purpose ‘or for a private company’”. This amendment allowed the government to acquire land for private companies. And it is worth reminding the readers, those were the days when the Congress party ruled the country.
It was this amendment which was abused by the various state governments around the country to acquire land for private companies. This amendment allowed the government to acquire land from farmers at cheap rates and then sell it on to private companies at a significantly higher price.

The ‘Yamuna Expressway’ is a very good example of this, where the land was acquired by the Uttar Pradesh from farmers and then sold on to private parties at multiple times the price the farmers had been paid for it.

As Ramesh and Khan point out: “In 2009, the Uttar Pradesh Government had indeed acquired land as part of a concession agreement and then resold it to Jaypee associates group as part of a bundling project for the construction of the Yamuna Expressway. There was no legal bar on doing so under the old law [i.e. the 1894 Act].” Further, the purpose for which the land was acquired could be changed as well.

The corporates preferred the government acquiring land for them and then selling it to them at a higher price because of several reasons. Land records in India are poorly maintained and purchase of land can easily be challenged in court at a later date.

As Nitin Desai writes in a recent column in Business Standard: “Many companies want the government to acquire land for them…as to have the assurance that their right of ownership cannot be challenged by some new claimant.”

Further, as Ramesh and Khan point out: “After the initial round of consultations in July-August 2011, it was also acknowledged that land values are, on an average, a sixth of their represented or book value as drawn out in the circle rate. As one moved away from urban centres the disparity became more striking with land records not having been updated for decades in some parts of the country.”

As per the 1894 Land Acquisition Act the government had to compensate the owner of the land at market value. But given that the government land records were infrequently updated, the government on many occasions got away with paying a pittance in comparison to the ‘real’ market value.

Even if the government were to then sell on the land to a corporate firm at a higher price, the firm would still get a good deal because of the huge differential between the price as per the government land record and the real market price.

Another reason corporates liked to outsource the land acquisition process to the government lay in the fact that the 1894 Act had an ‘urgency’ clause. As Ramesh and Khan write: “Section 17 of the Land Acquisition Act, 1894 was used to forcibly disposes people of their land in a frequent and brutal fashion by suspending the requirement for due process…Section 5A…allowed for a hearing of objections to be made but put no responsibility on the Collector to take those claims into consideration.”

So people could complain, but it was up to the Collector whether he wanted to listen to them or not. Further, the definition of urgency was also left “to the authority carrying out the acquisition.”  This clause allowed the collector to “take possession of the land within fifteen days of giving notice”. He could take possession of a building within 48 hours of giving notice. No private company could hope to acquire land at such a quick pace.

The irony is that the 1894 Land Acquisition Act was allowed to run for almost 66 years after independence. The Congress party ruled the country in each of the decade after independence and chose to do nothing about it. Under the 1894 Act the government could acquire land in a jiffy, without adequately compensating the land-holder. When the Act was finally replaced, what came in its place has made it next to impossible to acquire land.

In fact, Ramesh and Khan,rather ironically admit to that in their book, when they write: “The law was drafted with the intention to discourage land acquisition. It was drafted so that land acquisition would become a route of last resort.”

To conclude, as far as the land acquisition process is concerned, it is safe to say that we have jumped from the frying pan into fire.

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)

The column originally appeared on Firstpost on May 28,2015 

Sonia Gandhi, Congress protesting against land acquisition law is sheer hypocrisy


Vivek Kaul

Sonia Gandhi, the soon to be replaced president of the Congress party if media reports are to be believed, is leading the charge against the land acquisition bill. And this is very ironical given that it was the Congress party which created the land acquisition mess in the first place.
Until 2013, land acquisition in India was governed by the Land Acquisition Act 1894. This Act came into being during the period of British rule in India and survived for nearly 120 years.
A 1985 version of this Act stated: “Whenever it appears to the [appropriate Government] the land in any locality [is needed or] is likely to be needed for any public purpose [or for a company], a notification to that effect shall be published in the Official Gazette [and in two daily newspapers circulating in that locality of which at least one shall be in the regional language], and the Collector shall cause public notice of the substance of such notification to be given at convenient places in the said locality.”
Given the fact that the Act was a remnant of the British era, it gave enormous powers to the government to seize almost any land that it wanted to. The British were the rulers of India, and not a democratically elected government. They could do what they wanted to.
The surprising bit was that the Land Acquisition Act 1894 managed to survive through 66 years of independence as well. It was abused by almost all governments over the years. The governments seized land from people and handed them over to corporates who made a killing. It would be safe to say that many politicians also benefited in the process.
The humble farmer whose land was being seized saw this happen. The land that was acquired from him at a pittance(if at all anything was paid) by the government was handed over to private parties and everyone except the farmer benefited in the process.
Hence, the trust that is required for any system to work completely broke down. And this will not be easy to repair. Unless this trust is rebuilt land acquisition for business purposes will not be easy at all. The farmer or individuals whose land is being acquired need to start to feel that they are not being taken for a ride.
Further, given that governments acquired land for them, Indian corporates have become lazy over the years. Also, many of them started to see themselves as landlords and wanted land just for the heck of it. This can be said from the inefficient use of industrial land in India.
Let me first share something from personal experience. I grew up in Ranchi, which had many public sector enterprises. The biggest of them all was the Heavy Engineering Corporation (HEC). It was built on land acquired from farmers. But only a small portion of the total amount of land that was acquired was ever put to use. Large portions of land at HEC were simply lying unused.
Professor R Krishna Kumar makes a similar point in a recent column in The Hindu Business Line in a more precise way: “
Japan uses a mere 1.9 million hectares for residential and industrial use. This is only 5 per cent of their land; forest cover in Japan is a whopping 67 per cent. Compare this with the 22 million ha of Indian non-agricultural land. That is, Japan uses less than 10 per cent of the non-agricultural land available in India to produce three times more industrial output! The inefficiency of Indian industry in land-use is glaring.”
Hence, those corporates who have acquired land over the years haven’t put it to efficient use, given that they haven’t paid for it or got it an extremely concessional rate. One look at the five-star campuses of Indian IT companies should make this clear as well.
The Congress party was in power for most of these 66 years with only brief interludes where other coalitions came to power in Delhi. And it chose not to do anything about the 1894 Land Acquisition Act, for nearly six decades, even though it was in power in every decade after independence. In 2013, the party put forward The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013, which went to the other extreme and brought all land acquisition to a standstill.
Hence, the party protesting against the
The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Ordinance, 2014, which is nothing but the Congress 2013 Act with a few amendments, is nothing but sheer hypocrisy. After taking the people of this country for ride on more than six decades, the party suddenly seems to have discovered its humane side.
To conclude, for the land acquisition system to start working again the trust that has been lost needs to be rebuilt. For this to happen the government needs to proceed very carefully. As Namita Wahi writes in a column in The Indian Express: “Acquisition of land by the state for private industry must only be done upon the showing of a demonstrable public purpose in each case.” And that is very important.

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)

The column originally appeared on Firstpost on Mar 18, 2015