Column : Reform hopes ride on Land Bill

Written by R V Kanoria | Updated: Dec 17 2012, 05:53am hrs
Issues like govts role in land acquisition, the definition of public purpose and rehabilitation norms need to be adequately addressed

The last few weeks have been witness to several important reform measures taken by the government and its steely resolve to assist the industry. Whether it was FDI in multi-brand retail or the setting up of the Cabinet Committee on Investments, a strong message has been sent to investors that this government is committed to usher in the next generation of reforms in the country, which have been long awaited. Of course there are much bigger reforms that industry is eagerly awaiting.

However, all these efforts could come to naught if the Land Bill, which has been approved by the Cabinet, does not facilitate industrial development in the country. Though we do not have the details of the Bill approved by the Cabinet, we would like to express some of the fundamental concerns of the industry with regard to the Bill. We hope that these concerns and the implications of the Bill for the economy as a whole and not just with regard to a particular section, are seriously deliberated in Parliament before being approved.

First, we need to assess the implications on the overall economic development in the country. Our industrial sector is already reeling under a prolonged slowdown and the Bill in its present form could prove to be a further dampener to industrial growth. It has serious implications for the development of the Indo-Gangetic plains which encompass the states of Punjab, Haryana, Uttar Pradesh, Bihar and West Bengal. These areas are amongst the most densely populated regions of the country and the passage of the Bill would result in denying the people of this area the opportunity of participating in the industrial growth of the country. Here, I would like to quote our Prime Minister from his recent speech at Punjab Agricultural University: However, we must recognise that even as Punjab leads in agriculture, it cannot afford to neglect the development of the non-agricultural sector, particularly the manufacturing sector. The youth of Punjab will increasingly look for productive employment opportunities outside agriculture and it is necessary to ensure that there are enough employment opportunities for them. One way of doing this is for Punjabs agriculture to develop post farm agro-processing linkages. As we understand, the Bill suggests that each state have certain restrictions on the use of multi-crop or agricultural land. This would stop the gradual shift in the labour force we are seeing today from agriculture to industry and services. I would urge all the Parliamentarians to have a relook at the clause in the Bill which would deny the youth of this country an opportunity to rise.

The second fundamental concern with regard to the Bill, which we hope would be taken into account, is the role of the government in land acquisition for industry. We understand that many political parties feel that the government should not acquire land for industry except for public purposes, hence the scope of public purpose should be clearly defined and limited. We agree that in order to ensure that the legislation is not subject to misuse, the public purpose clause needs to be properly defined so that it leaves no room for wide interpretations. While it is difficult to have an exhaustive definition of public purpose, it can be defined in a limited manner. However, what is important here is that any such definition should not rule out the role of the state in land acquisition for the industry. In a densely populated country like India, the state must necessarily have a facilitating role in land acquisition for the industry as in some cases where large pieces of land need to be acquired there may be a problem for a marginal number who hold out. In case of large projects there is going to be a problem for private sector in the last mile purchase. In such cases if the government does not facilitate acquisition then in all possibility the projects may not take off. Hence, in those cases where 75% of the land has been purchased the Bill could provide for acquisition for private sector if requested by industry. FICCI had written to the GoM members last month that in the case of large projects like steel and cement especially, there is going to be a problem for the private sector in the last-mile purchases. But, the Bill has so far clearly stated that the government will not have any role in the acquisition of land for the industry other than public purpose.

The third fundamental concern is with regard to private purchase transactions. Applying rehabilitation and resettlement (R&R) provisions for private purchase transactions (not acquisition) defies economic logic. We understand that the Bill seeks to provide R&R to affected families even for private purchase of land above a certain threshold to be fixed by State governments. Hence, land prices determined by market forces and agreed between the buyer and seller must be kept outside the R&R provisions.

Further, in case of the acquisitions for public purpose for the private sector, we understand that there is not much change in the R&R provisions of the Bill. We feel that this would put an unfavourable burden arising from higher costs and administrative requirements. Solatium of 100% of total compensation as suggested in the Bill is on the higher side and a huge increase from the existing norm of 30%. We want the annuity policies as originally suggested in the Bill to be replaced by onetime fee or levy otherwise the industry would be bound by such commitments for twenty years which would be difficult to administer.

Fourthly, coming to the consent requirement, we feel that in the case of acquisitions, the consent of the majority of land owners (say around 67%) and not affected families should suffice rather than 80% or 70% as being discussed. Besides, FICCI has also been emphasising the need for applicability of any legislation on a prospective basis only and not retrospectively as it creates uncertainity in the economic environment. At the same time, it is necessary to convey certainty of land use changes. In order to ensure that land owners get a market value for their land, we have suggested that land use changes be notified well in advance before the acquisition. This would enable fair evaluation of the land including its future use.

As I mentioned earlier, the industry acknowledges that the government is committed to reforms. But as a nation we need to take a holistic and a fundamental view on whether we want to deny the people of this great country the vast opportunities for employment and empowerment by jeopardising the very foundation of industrialisation i.e. availability of land.

The author is immediate past president, FICCI