Friday, Sep 19, 2014

The real disaster: price of urban land

Some of the government’s ideas are useful, notably to reduce the use of social impact assessments. Some ideas are trivial, especially those that tinker with the ‘consent’ threshold. It is more important to devise a just and speedy referendum mechanism. Some of the government’s ideas are useful, notably to reduce the use of social impact assessments. Some ideas are trivial, especially those that tinker with the ‘consent’ threshold. It is more important to devise a just and speedy referendum mechanism.
Posted: August 1, 2014 12:23 am

By: Sanjoy Chakravorty

A new land acquisition law, the land acquisition, rehabilitation and resettlement act (LARR), was enacted 10 months ago by the UPA government with widespread support from almost all political parties, including the BJP. This new law is apparently going to be “amended” or “diluted” by the new NDA government led by the BJP. Since hypocrisy and opportunism abound in Indian politics, let us not waste time bemoaning yet another example. Let us instead focus on what the new thinking on land acquisition appears to be and what, instead, it should be.

At the outset, let me be clear that I do not have personal or inside knowledge on the “new” thinking. My information comes from the media, including this newspaper, which claims to have seen documents that outline the proposed amendments. That said, let us consider what is at stake here.

The LARR was created by the Congress in the mode of its other landmark laws on information, education and food — using a rights-based approach. It was a reaction to serious conflicts over land acquisition (especially in well-known cases in Singur, Nandigram, Niyamgiri, Kalinganagar and others), which had come after the injustice meted out by the state for several decades during massive land acquisition drives for India’s modernisation and development.

The primary objective of the LARR was less to enable land acquisition than it was to deliver “fairness” to the people affected by it. This is important: the core purpose of the law was changed. The LARR expanded the definition of project-affected people and genuinely expanded the rights, protections and compensations for people who lose land or livelihood as a result of acquisition. It was a purely political and fundamentally bureaucratic approach. And, at the same time, the LARR was designed with no recognition of the economics of land. Its creators appeared to have forgotten that eminent domain laws exist everywhere (not just in India) to provide public goods, not protect private interests. In attempting to redress the balance between public and private interests in land, the LARR went too far. It raised the price of land acquisition to unsustainable levels.

The price of land acquisition has two elements. One is the direct price paid for acquisition, and rehabilitation and resettlement (R&R). Think of this as the cash component of the acquisition price. The second element is an indirect price. This includes transaction costs (such as the cost of doing social impact assessments, running the massive new multiple-layered acquisition bureaucracy, and so on), continued…

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