In 44 months, the standing committees of Parliament which examined the land acquisition bills have done an about-turn on the issue of the state securing land for privately-owned and operated infrastructure.
The previous Lok Sabha standing committee on rural development scrutinised an amendment bill to the Land Acquisition Act of 1984 and gave a report in October 2008. The bill had proposed that for private projects with substantial public benefits, including infrastructure, 70% of land should be bought on the basis of negotiations and the state could step in for acquiring the rest. This was considered necessary to ensure contiguity of plots and to prevent holdout, that is, a minority of landowners putting a project at risk by not parting with land, or seeking an exorbitant price. Landowners were to be compensated for such expropriation at 1.5 times the highest sale-deed price of the past three years, in addition to a 30-60% bonus. If the project area were sufficiently large, those displaced by the act of the state would also be entitled to relief and rehabilitation under the law.
But the committee recommended that the state should acquire all the land, even for private infrastructure. The decision was unanimous, despite the committee comprising members like Hanna Moolah of the Communist Party of India (Marxist), which is not exactly a supporter of private enterprise.
Justifying its stance, the previous committee said the 70:30 approach would persuade private companies to seek more land than necessary. It would also be discriminatory. Those who voluntarily parted with land would not be entitled to state-provided relief and rehabilitation. News that an infrastructure project was being set up would drive up prices in the vicinity and the gainers would be those who play hardball.
The standing committee of the current Lok Sabha has swung to the other extreme. It favours a free market all the way. It asks, if prices of the two other factors of production, that is labour and capital, are market-determined, why should those of the third factor be controlled? Though the new bill (to repeal and replace the 1894 colonial law; the amendment bill of 2007 had lapsed with the previous Lok Sabha) proposes that private companies secure a higher share of land (80%) through negotiations, the standing committee is reluctant to allow acquisition even of the remaining 20%. This despite the proposed higher compensation: four times the previous three years? sale deed price in rural areas and half the rate in urban areas, apart from relief and rehabilitation for persons displaced by projects in excess of 100 acres and 50 acres respectively. The committee also had an issue with compensation. It seems to agree with industry chamber Ficci that the proposed compensation formula would have a cascading effect on subsequent projects, in the sense that if the developer of the first project paid four times the price, the second developer would have to pay 16 times the amount. Its solution: a multi-member pricing commission!
The previous committee felt that the ban on acquisition of irrigated agricultural land was impractical. So it suggested that wherever such land was acquired, the collector should certify that there was no alternative. The current committee not only forbids the acquisition of multi-cropped land, it says there should be no acquisition of any cultivable land at all.
In forbidding land acquisition for private industrial or infrastructure purposes, the committee cites international practice. In 2006 President George Bush Sr said the US government would acquire land ?only if the general public benefits?, not merely to advance the economic interest of private parties (by this definition private Indian infrastructure projects should qualify). Expropriation of land is the exception in Canada, it says. There is no provision for state acquisition in the EU. In Japan, land was acquired at very high prices for the expansion of Narita airport.
Both the committees have been wary of giving the government discretion in defining what constitutes public purpose for understandable reasons. Governments have misused the provision. Rita Sinha, the former secretary of the department of land resources, cites the example of the army acquiring land from a Rajasthan farmer for a golf course by invoking emergency provisions. Chief Minister Mayawati got the Noida-to-Agra Yamuna Expressway privately executed by giving the developer fertile farmland to develop townships on, to recover the investment and more. In other words, farmers paid for the project, not the state.
Such excesses need to be checked. But by going overboard, the current committee will not help industrialisation or infrastructure development. Even entrepreneurs willing to pay a fair price want the state to step in, if only to be assured of a clean title, so that they do not end up wasting time on litigation over fraudulent deals. Currently, registration is just proof of a transaction; it does not guarantee title. Following a Cabinet decision of August 2008, the department of land resources is engaged in a mammoth exercise to update land records in rural areas based on the Torrens system. The best practice under this system is to set up a fund paid with a levy on land transactions to compensate those who have come to grief by trusting the title deeds. But this is many years away.
The standing committee has made some useful suggestions like requiring majority consent of the village panchayat for acquiring land, rather than just consultations with them (clearly the imprint of Mani Shankar Aiyar, a champion of panchayati raj). But it errs by barring the state from acquiring land for infrastructure and large industrial projects. That will only drive unscrupulous entrepreneurs to local power lords.
The author is Economic Policy Editor, CNBC TV18