Economic Environment

Towards a pragmatic Land Acquisition policy for Industrial Use

Page 1 of 10

Table of Contents
Table of Contents............................................................................................................................ 2 1.0Objective ................................................................................................................................... 3 2.0Land Acquisition Bill 1894.......................................................................................................... 3 3.0Impediments in land acquisition and its impact on industrial progress......................................3 4.0Critique of current Bill for Industrial use.................................................................................... 3 5.0Why do we need a new law?...................................................................................................... 3 6.0Land Acquisition and Rehabilitation and Resettlement Bill 2011 (LARRB).................................3 7.0Process Flow of LARRB 2011...................................................................................................... 7 8.0Institutional Structure of LARRB 2011........................................................................................ 7 9.0Pros of LAARB 2011.................................................................................................................... 8 10.0Critique of LARRB 2011............................................................................................................ 8 11.0Limits of the LARRB 2011......................................................................................................... 8 12.0Land Acquisition across the world............................................................................................ 9 13.0Recommendations................................................................................................................... 9 14.0Innovative Solutions ................................................................................................................ 9 15.0Conclusion.............................................................................................................................. 10

Page 2 of 10

1.0 Objective
Insert here

2.0 Land Acquisition Bill 1894

Insert here

3.0 Impediments in land acquisition and its impact on industrial progress

Insert here

4.0 Critique of current Bill for Industrial use 5.0 Why do we need a new law?
Public Concern Heightened public concern on Land Acquisition issues Absence of a national law to provide for the resettlement, rehabilitation and compensation for loss of livelihoods

Outdated Law

While multiple amendments have been made to the Original Act, the principal law continues to be the same i.e. the Land Acquisition Act of 1894

Need for balance

Addressing concerns of farmers and those whose livelihoods are dependent on the land being acquired While facilitating land acquisition infrastructure and urbanization for industrialisation,

6.0 Land Acquisition and Rehabilitation and Resettlement Bill 2011 (LARRB)
Rehabilitation and Resettlement (RR) was always kept out of land acquisition (LA). LARRB 2011 combines resettlement and rehabilitation with land acquisition for the first time in our legal history.
Page 3 of 10

Land Acquisition and Resettlement & Rehabilitation need to be seen necessarily as two sides of the same coin. Resettlement & Rehabilitation must always, in each instance, necessarily follow upon acquisition of land. Not combining the two R&R and land acquisition within one law, risks neglect of R&R. This has, indeed, been the experience thus far This is the first National/ Central Law on the subject of Resettlement and Rehabilitation of families affected and displaced as a result of land acquisition

Provisions of LARRB 2011: 1. Both LA and RR applies when government acquires land a. Government acquires land for its own use, hold and control b. Government acquires land with the ultimate purpose to transfer it for the use of private companies for stated public purpose (including PPP projects but other than national highway projects) c. Government acquires land for immediate and declared use by private companies for public purpose Land acquisition under 1.b and 1.c happens only when 80% of the affected families give consent to it. 2. Government will not acquire a. Land for private purpose of private companies b. Multi-crop irrigated land for public purposes 3. Only Rehabilitation and Resettlement provisions apply when a. Private companies acquire land greater than or equal to 100 acres b. Private company approaches government for partial acquisition for public 4. The bill clearly defines what the term public purpose means and it includes a. Strategic purposes (Example: defense, atomic energy) b. Public infrastructure and industry c. Land for Rehabilitation & Resettlement d. Village/urban sites for housing needs of the poor and providing health and education facilities e. Land for private companies for public purposes f. Needs arising from natural calamities

Page 4 of 10

5. The bill clearly defines affected families; Land Owners: a. Family whose land/other immovable properties have been acquired; b. Those who are assigned land by the Governments under various schemes; c. Right holders under the Forest Rights Act,2006 Livelihood Losers: a. A family whose livelihood is primarily dependent on the land being acquired b. May or may not own property 6. Minimum compensation for land: I. Market value of the land: a. the minimum land value, if any, specified in the Indian Stamp Act, 1899 for the registration of sale deeds in the area, where the land is situated; or b. the average of the sale price for similar type of land situated in the village or vicinity, ascertained from fifty per cent of the sale deeds registered during the preceding three years, where higher price has been paid; or whichever is higher PROVIDED THAT THE MARKET VALUE SO CALCULATED SHALL BE MULTIPLIED BY THREE IN RURAL AREAS. Value of the assets attached to land: a. Building/Trees/Wells/Crop etc as valued by relevant govt. authority; Total compensation = I+II III. Solatium: 100% of total compensation

II.

This implies that in case of urban areas, the award amount would be not less than twice that of the market value determined, whereas in rural areas it would be not less than six times the original market value. 7. Minimum R&R Entitlements: For Land Owners: a. Subsistence allowance at Rs. 3000 per month per family for 12 months; b. Rs 2000 per month per family as annuity for 20 years, with appropriate index for inflation; c. If house is lost, a constructed house of plinth area of 150 sq mts of house site in rural areas or 50 sq mts plinth area in urban area; d. One acre of land to each family in the command area, if land is acquired for an irrigation project; e. Rs 50,000 for transportation; f. Where land is acquired for urbanization, 20% of the developed land will be reserved and offered to land owners, in proportion to their land acquired; g. Upon every transfer of land within 10 years of the date of acquisition, 20% of the appreciated value shall be shared with the original owner whose land has been acquired;
Page 5 of 10

h. Mandatory employment for one member per affected family or 2 lakh rupees if employment is not offered; i. Offer of shares up to 25% of the Compensation amount For Livelihood losers (including landless): a. Subsistence allowance at Rs. 3000 per month per family for 12 months; b. Rs 2000 per month per family as annuity for 20 years, with appropriate index for inflation; c. If home-less, a constructed house (plinth area) on 150 sqmts of house site in rural areas or 50 sqmts in urban area, provided free of cost; d. A one-time Resettlement Allowance of Rs 50,000; e. Rs 50,000 for transportation; f. Mandatory employment for one member per affected family or 2 lakh rupees. Special Provisions for STs a. One acre of land to each ST family in every project; b. One time financial assistance of Rs 50,000 for ST families; c. ST families settled outside the district shall be entitled to an additional 25% R&R benefits (and a one-time payment of Rs 50,000) to which they are entitled in monetary terms; d. Payment of one third of the compensation amount at very outset to ST families; e. Preference in relocation and resettlement in area in same compact block; f. Free land for community and social gatherings; g. In case of displacement of 100 or more ST families, a Tribal Displacement Plan is to be prepared: i. Detailing process to be followed for settling land rights and restoring titles on alienated land; ii. Details of programme for development of alternate fuel, fodder and non-timber forest produce. 8. Infrastructural Amenities to be provided a. Schools and playgrounds; b. Health Centres; c. Roads and electric connections; d. Assured sources of safe drinking water for each family; e. Panchayat Ghars; f. Anganwadis providing child and mother supplemental g. nutritional services; h. Places of worship and burial and/or cremation ground; i. Village level Post Offices, as appropriate, with facilities j. for opening saving accounts; k. Fair price shops and seed-cum-fertilizer storage l. facilities

Page 6 of 10

7.0 Process Flow of LARRB 2011

8.0 Institutional Structure of LARRB 2011

Page 7 of 10

9.0 Pros of LAARB 2011

The new Land Acquisition, Rehabilitation and Resettlement Bill, 2011, which replaces the old colonial act from 1894, is promoted as a solution to the twin problems increasingly faced by many state governments over the last few years: how to attract and facilitate private capital investments, while at the same time preventing discontent amongst an increasingly marginalized and angry peasantry from boiling over The Bill integrates the question of displacement with that of rehabilitation. It expands the definition of project-affected population considerably. It specifies in greater detail the controversial notions of public purpose and public interest. It restricts acquisition of irrigated multi-cropped land and increases the rate of compensation It makes it mandatory for private companies to obtain the consent of at least 80% of the project-affected families.

10.0 Critique of LARRB 2011

Issues related to land pricing such as absence of properly functioning land markets, fragmented holdings, and mode of bargaining and determination of reservation price, intermediation and brokers, political arm-twisting, compensation to landless agricultural workers. Another critique is one of guaranteeing to the seller of land a fair share in the augmented value of the land in the future as the value can really shoot up once the land is put to use. At the same time the future value of any asset or land is not realised now and the seller and the buyer will have natural disagreements on the future value. The claim paper that is obtained by the seller after the sale of land in the current period is a legal instrument which entitles him to receive a part of the capital gain tax and that instrument can be traded in the market. A poor farmer who sells his land at a low price today, but is confident that the price will increase substantially in the future cannot get the part of the future price now even if he has that claim paper No claim for the seller in the future capital gain on the land

11.0 Limits of the LARRB 2011

The logic of market and its normative propositions are imported in the Bill, and thereby it tries to argue for providing just compensation to, and obtaining consent of, the affected families whose land is acquired. It expects that the solution to the conflict over land acquisition can be found within the logic of market. The logic of market holds well as long as people are willing to sell their land at a desired price (or for an attractive compensation and rehabilitation package). But the specific context which has given rise to resistance to land acquisition is not imperfect land market as the minister of rural development opines in his foreword to the draft Bill, but the non-existence of land market i.e., an absent market where there are no willing sellers for a particular land, though there are buyers. In other words, there is neither any existing relationship between the seller (landowners or possessors) and the buyer (the State or a private company), nor the former is willing to enter into such a relationship. The seller does not exist. This absent market is not analogous to the neoclassical understanding of imperfect or missing market which can be supplemented, created or ameliorated through positive interventions. This absent market is not a given, rather a political achievement, something that emerges out of the resistance movements
Page 8 of 10

against land acquisition. This resistance to acquisition cannot be simply reduced to a problem of unattractive price/compensation or exploitation of farmers by offering lower price.

12.0 Land Acquisition across the world

Insert here

13.0 Recommendations
Eliminate ambiguity on Public Purpose Compulsory Acquisition no alternate cases: Only in cases where the particular land under consideration is the only possible solution should the land be acquired. Otherwise all the alternatives should be properly evaluated and the decision should take into account the social impact of the transaction also. Acquisition challengeable in court: According to the previous act, only compensation charges could be challenged in court. The affected should be allowed to challenge the entire acquisition in the court. Timeline for Rehabilitation

14.0 Innovative Solutions

Focus on the market value of land in the future and treat the augmented part of the value as a capital gain which can be taxed following the standard practice. A novel part of the mechanism is that it binds the government to distribute the taxes, or a part of it, to the original sellers. Present value Seller Buyer Government Tax Capital gain on Future Value of land

The claim paper that is obtained by the seller after the sale of land in the current period is a legal instrument which entitles him to receive a part of the capital gain tax and that instrument can be traded in the market. A poor farmer who sells his land at a low price today, but is confident that the price will increase substantially in the future cannot get the part of the future price now even if he has that claim paper. But he can sell that paper to someone who can wait to receive the extra value in future For example, if the farmer expects to receive Rs 10,000 from the government next year, he can sell the piece of paper at Rs 8,000 today. If I am buying that paper, I shall get Rs 10,000 tomorrow and make a profit of Rs 2,000. The farmer gets the money much earlier and does not have to wait and I make some profit
Page 9 of 10

Appropriate planning: When the government plans for growth, a clear demarcation of land that can be used development for public use should be made. Only those lands can be used for development. This can substantially reduce the agency costs.

15.0 Conclusion
Insert here

Page 10 of 10