Dr. Syama Prasad Mookerjee Research Foundation

Amendments in Land Acquisition Act by NDA: Pro Development, Pro Farmer, and Pro Growth

Siddharth Singh

The growth of the Indian economy stagnated during the previous UPA Government due to an inordinate delay in pushing forward reforms and because of introducing changes that were impediments to growth. One of such acts was the Land Acquisition Act.The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act (LARR) had been pushed through by UPA in its dying days. It had many detractors. Most State governments, including several Congress-led ones, thought it was unworkable.

The UPA Government brought such Land Acquisition Act which severely failed to strike a balance between protecting farmers’ interests and industrial growth. This necessitated a fresh initiative on part of the NDA Government, which was voted to power in May last year over the issue of development, to make the Land Acquisition Act more plausible and prodevelopment. Last year, the then Rural Development Minister Nitin Gadkari had convened a meeting of the State governments in which some States had raised their reservation against the UPA’s Act. The key issues among them were the Centre’s role in land acquisition, consent clause in PPP projects and the need for impact assessment studies. States at that time wanted the consent clause to be removed from PPP projects, the definition of affected family to be reexamined and autonomy for state governments to be reestablished. The NDA Government can cite the example of the red flags raised by some of the congress ruled States to justify the amendments which it has proposed. Finance Minister Arun Jaitley recently said, “NDA has tried to achieve a balance between development and just compensation.” He added that the 2013 UPA Act put up barriers that are holding up projects worth almost $300 billion, or 18 lac crores.

The State needs land for any form of development. Land is required for housing, townships, urbanization, sub-urbanization, industrialization, infrastructure, both urban and rural, irrigation and defence of India. A larger public interest always prevails over private interest. However, the land owner who loses the land has to be more than adequately compensated. A highly complicated process of acquisition which renders it difficult or almost impossible to acquire land can hurt India’s development. When the 1894 law is amended in the 21st century, it must provide for a 21st century compensation and cater to the developmental needs of the 21st century. It cannot completely ignore the developmental needs of the society.Those who are opposing the changes today may do well to remember that the 1894 land acquisition act remained intact in this country for about 66 years after independence. The 1894 Land Act begins imperiously with, “Whenever it appears to the 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…” That draconian Land Act was neither expunged during the socialist government of Jawaharlal Nehru or Indira Gandhi or Morarji Desai, nor during the period when the Communists wielded great influence over India’s politics and policies in the mid-1990s.

Arun Jaitley’s speech on amendments in Land Acquisition Act in Rajya Sabha Activating a strong defense of the government’s proposed amendments in Land Acquisition Act, Finance Minister Arun Jaitley said in Parliament that:

  • “The amendments are in the interest of the people and that acquiring land for rural infrastructure is not being pro-corporate.”
  • “Please do not create an atmosphere where ‘industry’ and ‘infrastructure’ become bad words.” I appeal to the Congress. Please don’t create an environment where infrastructure and industry become bad words”.
  • “There are voices saying that the bill is anti-farmer and corporate friendly. Is working for Indian farmers being pro-corporate? How are we going to acquire land for the millions of migrants moving to cities? Are we reaching a stage where the word industry becomes a bad word?” he asked.
  • The entire misguided debate on land bill should end. Do we want investment to divert to other countries or we want it to come that in India.

Arun Jaitley accused congress leader Anand Sharma of “double standards” on the basis of a 2012 letter in which Mr. Sharma appears to support the same views he is currently objecting to. Mr. Sharma, who was Commerce Minister in the previous Congress-led government, had written to Manmohan Singh, the Prime Minister at that time, that the need to take the consent of farmers for land acquisition would seriously hamper infrastructure projects and slow down urbanization. Mr. Sharma wrote in the letter dated May 25, 2012 that “Insistence of consent of 80% affected families will seriously delay land acquisition…And in many cases halt essential infrastructure projects,”. Mr. Anand Sharma had also written in the letter that the restriction will have adverse long term implications for manufacturing and industrialization and will make land prices high and acquisition impossible.

The letter was held up in Parliament by Finance Minister Arun Jaitley on 26th Feb 2015 as proof of the Congress leader’s hypocrisy. NDA Govt’s amendments focuses on the land-loser as well as on land-acquirer For the land-loser, the proposed amendments not only retains all forms of compensation and rehabilitation, but also increases the number of those eligible for lucrative pay-offs by bringing into the ambit of LARR, 13 categories of acquisition that had been excluded earlier. These include the Land Acquisition (Mines) Act, the Atomic Energy Act, the Railways Act, the National Highways Act, and the Metro Railways (Construction of Works) Act. For the land-acquirer, the amendments proposed by NDA Govt in the land act tries to lessen the indirect price of acquisition and transaction by diluting requirements for social impact assessments and referenda.

The amendments try to lessen the indirect price of acquisition, the transaction and opportunity costs that have been listed. This it does by weakening or removing the requirements for social impact assessments and referenda. For the land-acquiring interest — be it the private or public sector — reducing the time for acquisition by several years, and thereby reducing the opportunity cost, is a huge benefit. When this is topped up with the reduction or removal of the cash cost of social impact assessments and referenda, it becomes a windfall for the acquirers too. LARR had placed an impossible double-burden on land acquirers: pay double or quadruple the highest prices in the world, and wait for several years to begin work on the ground. New amendments attempt to improve previous unworkable law LARR was meant to make the acquisition process just. But LARR was purely political and fundamentally bureaucratic in approach based on little or no recognition of some simple economic principles — on land markets and on transaction and opportunity costs. LARR raised the price of land acquisition to unsustainable levels. This price is not simply the money paid for acquisition and rehabilitation and resettlement. That is just one component of price, its direct component. There is a second component, an indirect price. This includes (a) transaction costs, which include the cost of doing social impact assessments, conducting referenda, running the massive new multilayered acquisition bureaucracy, etc. and (b) opportunity costs, which arise from the time taken to conclude an acquisition — doing social impact assessments, conducting referenda, etc. — time during which capital is not invested, infrastructure is not created, and production does not take place.

If all the steps defined in LARR were accomplished in the allotted time, each acquisition would have require about five years; in practice, it could take a lot longer. The Modi government’s proposed amendments in the land acquisition act is based on the principle that price matters to both the land-acquirer and the land-loser. So, how does the ordinance solve this problem? Quite simply, by splitting the direct and indirect prices for acquisition and keeping the direct prices unchanged while attacking the indirect prices. Analysis of Amendments proposed by Modi Govt If we analyze one by one all the contentious clauses that have created the confrontational situation between Government and opposition parties then the whole myth of the Modi Govt being anti-poor, anti–farmer as propagated by the opposition, gets busted:

(Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 will be hereinafter referred to as the principal Act) Amendment

  1. In the principal Act, in section

2 – (i) in sub-section (1), in clause (b), in sub-clause (i), the words “private hospitals; private educational institutions and” shall be omitted. UPA: In the UPA Land Act, sub-clause (i) of clause (b) of sub-section (1) of section 2 says the government can acquire land for infrastructure projects excluding private hospitals, private educational institutions and private hotels. NDA: The NDA Act has amended this clause so that now the government can acquire land for private hospitals and private educational institutions. The government cannot however acquire land for private hotels. Amendment 2. In the principal Act, in section 2 – (ii) in sub-section (2), after the second proviso, the following proviso shall be inserted, namely: –“Provided also that the acquisition of land for the projects listed in section 10A and the purposes specified therein, shall be exempted from the provisions of the first proviso to this sub-section”. UPA:The first proviso of sub-section (2) of section 2 in the UPA Act says that private companies would require the prior consent of at least 80% of those affected families before acquiring land. For public-private partnership projects (PPP), prior consent has to be of at least 70% of those affected families. NDA: The NDA amendment means that for projects relating to national security or defence, including preparation for defence, defence production; rural infrastructure including electrification; affordable housing and housing for the poor people; industrial corridors; infrastructure, social infrastructure and PPP projects where government holds the land, there is no longer any need to obtain prior consent of 80% (for private projects) or 70% (for PPP projects).

This is a major new change. These projects are usually massive in scale – industrial corridors alone would require an investment of tens of billions of dollars. Amendment 3: In the principal Act, after Chapter III, the following Chapter shall be inserted namely – “CHAPTER IIIA PROVISIONS OF CHAPTER II AND CHAPTER III NOT TO APPLY TO CERTAIN PROJECTS” 10A. the appropriate Government may, in the public interest, by notification, exempt any of the following projects from the application of the provisions of Chapter II and Chapter III of this Act, namely – (a) Such projects vital to national security or defence of India and every part thereof, including preparation for defence; or defence production; (b) Rural infrastructure including electrification; (c) Affordable housing and housing for the poor people; (d) Industrial corridors; and (e)Infrastructure and social infrastructure projects including projects under public private partnership where the ownership of land continues to vest with the Government,” UPA: Chapters II and III of the UPA Act are concerned with Social Impact & Pubic Purpose, and Food Security respectively. Chapter II talks of consultations with panchayats and municipal corporations, conducting preliminary investigations for determining social impact, and appraisal of social impact assessment report by an expert group. Chapter III, on the other hand, talks of food security and irrigable, multi-cropped land.

It specifically says that, save as otherwise provided in sub-section (2), no irrigated multi-cropped land shall be acquired under this Act. And sub-section (2) says: Such [irrigated multi-cropped] land may be acquired subject to the condition that it is being done under exceptional circumstances, as a demonstrable last resort. So, even though the UPA Act also put in clauses through which irrigable land could be acquired, it was strict and measured in its order – “under exceptional circumstances; as a demonstrable last resort”. NDA: By the amendment, the NDA government has expanded the list of projects that would not require Social impact assessment and prior consent of affected families for projects relating to national security or defence, including preparation for defence, defence production; rural infrastructure including electrification; affordable housing and housing for the poor people; industrial corridors; infrastructure, social infrastructure, and PPP projects – if the government so desires, there is no social impact assessment required, and no consultations required either with panchayats and municipal corporations. Amendment 4: In the principal Act, in section 101, for the words, “a period of five years” the words “a period specified for setting up of any project or for five years, whichever is later,” shall be substituted. UPA: Section 101 of the UPA Act states that if the acquired land remains unutilised for a period of five years from the date of taking over the possession, the land shall be returned to the owners. NDA: The NDA amendment has swapped a defined period – that of five years – with “a period specified for setting up of any project or for five years”. For example if because of some reasons the project get delayed then should we abandon it all together? Should we abandon a Nuclear Power Project that is in National Interest if it is not completed in 5 years? What about Railway Track Projects that may take more than 5 years? Amendment 5: In the principal Act, in section 105 – (i) for sub-section (3), the following sub-section shall be substituted, namely- “(3) The provisions of this Act relating to the determination of compensation in accordance with the First Schedule, rehabilitation and resettlement in accordance with the Second Schedule and infrastructure amenities in accordance with the Third Schedule shall apply to the enactments relating to land acquisition specified in the Fourth Schedule with effect from l January, 2015.”; UPA: Sub-section (3) of section 105 in the UPA Act had made an exception for the 13 acts of Parliament from the compensation and rehabilitation provisions that are in accordance with the first, second, and third schedule. NDA: The NDA amendment has removed the proviso shown above in quotes.

The Fourth schedule lists 13 Acts of Parliament, like the Railways Act, the Electricity Act, the Atomic Energy Act, etc (see page 45 of the UPA Act) and so now if government proposes to acquire land under then the onus is on the government to pay the compensation under those 13 acts of parliament which were previously denied under UPA law. In conclusion, would farmers not like such basic and defining facilities like colleges, hospitals or railways to develop and come up in their vicinity? Would farmers really want their children to travel long distances daily just for their studies? Would farmers not want a state of the art hospital with the latest facilities within an accessible distance? Do we expect farmers not to have access to enhanced electricity production and water to improve the productivity of their farms? Do we not want all parts of the country to join in a national development journey? It is in National Interest to ensure that we come up with a Land Law that delivers on Critical Projects that provide a 360 degrees benefit to Farmers. The Apex Court in an observation in 2011 had complimented the then Narendra Modi led State Government in Gujarat for its land acquisition policy since there were “no complaints of any forcible acquisition”. The apex court said “Gujarat is one state from where we do not receive any such complaints. Look at Ahmedabad which is developing but there are no complaints from that place. They have the same officers of the same cadre as in the rest of the country, whereas complaints of farmers and the poor being uprooted were pouring in from many other States.” Past records in Gujarat have shown the successful implementation of a very balanced and finely regulated land acquisition method, why should one not trust the Prime Minister to do the same at a national level now in taking forward the objectives of overall national progress?

(Siddharth Singh is Research Associate at SPMRF)