The land question

IIM-A’s new index is a building block for better price discovery

A functioning land market is imperative as India is becoming less of an agrarian economy due to the shift in population from the villages to the towns.

The government must address its unfinished reform agenda to free up the land market if its $1.4-trillion infrastructure-led push for growth is to bear fruition. In its first term, it sought to amend the Land Acquisition, Rehabilitation and Resettlement Act through an ordinance, but did not succeed due to a political backlash. IIM-Ahmedabad’s new agri-land price index (ALPI)—developed in collaboration with digital agri-land market place SfarmsIndia—must therefore be welcomed as a beginning of a process to free up the land market by removing uncertainty in agricultural land valuation. Better price discovery is necessary to aid acquisition as the right price of rural land—in contrast to well-functioning markets in the cities—has proved elusive. The challenge at the village-level is that transactions are unrecorded, reflecting distress sales that tell us more about the agrarian crisis and the differentiation taking place among farmers than about the rural land-market.

The index would act as a reliable source for benchmarking land prices and help in potential conversion of agricultural land into real estate or for industrial use. Some of the factors for determining the agricultural land price include irrigation facilities, distance to nearest town or airport, and proximity to an international airport. The index has been developed for 107 districts of Andhra Pradesh, Telangana, Karnataka, Maharashtra, Tamil Nadu and Uttar Pradesh, and can be easily scaled up nationally. According to Prasant Das of IIM-A, it would help adopt more scientific measures for providing compensation for land acquisition.

A functioning land market is imperative as India is becoming less of an agrarian economy due to the shift in population from the villages to the towns. This process of development has been highly conflict-prone as land acquisition is being contested by villagers, and tribals, who believe their land is being acquired for a song. Land acquisition was an important factor behind a FDI steel project in Odisha getting shelved seven years ago. The project to make the world’s cheapest car also had to relocate to another state due to land conflict. The bullet train project between Ahmedabad and Mumbai is still a work-in-progress with land acquisition yet to get completed. The upshot is that although India has around 200 million hectares of agricultural land, acquisition remains a contested terrain.

While better price discovery through an ALPI is necessary, it is equally important that other steps are taken to ensure that a land market develops in the country. Writing in The Print, Anirudh Burman argues the need for improving the poor quality of land records, the absence of which creates grounds for endless litigation. The framework of restrictions on the transferability of land rights, depending on the type of land, proposed land use, and the occupational or residential role of the interested buyer also must be addressed. Complex administrative procedures create impediments that hamper the smooth functioning of the land market. The Registration Act 1908 and state revenue laws, for instance, require the completion of two separate processes to effect a land transfer. This, and poor state capacity, leads to interminable delays. Any overhaul will require a rethink of such processes. An ALPI can kick-start some of these desired changes to make land acquisition less conflict-prone.

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