How not to land in a controversy

First let us consider the legislative and operational framework relating to land acquisition. We have the Land Acquisition Act, which is enacted by the Central government. Each state has its own laws that draw authority from the Central act. In terms of operation, they have the powers to acquire land and decide on compensation. The only distinction comes in cases of tribal and non-tribal land. Further, the Centre has a resettlement and rehabilitation policy, which looks at taking care of the affected people post-acquisition, because the Land Acquisition Act looks only at compensation for the land being acquired.

Let me illustrate three real instances of land acquisition and categorise the problems broadly. Take DS Construction’s Gurgaon roadway project, which is still underway. The NHAI, which had awarded DS Construction this project, slapped a penalty on the company for the delay. DS Construction countered this by claiming that all the land was not handed over by the NHAI in time. The NHAI insisted that the delay was caused by slow work. Then there is the Tata Steel’s project at Orissa’s Kalinganagar. The state acquired the land required by the company for the project and also paid compensation to the local people who sold it. The company paid the state the market rate for the land thus acquired. But the local people still feel cheated. As for Reliance Industries’s SEZ in Chandigarh, this was a big-ticket investment of Rs 40,000 crore for over 25,000 acres. The state’s SEZ Bill requires the state to acquire 25% of the land for SEZs in the National Capital Region. The examples cited here show that while the government can take tough decisions and help to partly resolve some issues, others are just too big and would require the complete clean up of the property market. This needs political will, which is not so forthcoming from today’s politicians.

The broad guidelines must ensure that the government (state or Centre) intervenes for land acquisition only for projects of national importance or for stand-alone infrastructural projects when there are no substitutes. Also agricultural or arable land should not be sold for development purposes. And land must always be sold at market prices. Last, but importantly, the government and private sector developer must try and involve the affected persons in the prosperity of the region after the project has been executed.

In India, arriving at a fair market price is very difficult, especially since most land transactions involve a mix of black and white money. The last sale price of land at the Land Recording Officer would typically show a much lower value vis-a-vis the real transaction value. This can only be corrected through effective tax administration, bringing morality back among citizens and incentivising honest taxpayers. The government must have a sense of the real market value of the land through its own transparent mechanisms. Also, the state must have a back-to-back arrangement of making payments to the affected people, if the private developer has paid the market price and further funds for resettlement and rehabilitation of the affected people.

The government or its agencies must award projects only after land procurement is complete. While the private sector may not be enthusiastic about such a decision, it is really worth waiting for a while rather than getting embroiled in a legal quagmire in the midst of project execution. At present, the government lets the private developer start work on a project, and simultaneously works out land procurement.

The challenge for the government and the private sector is to ensure that the affected parties also reap the benefits of development. The people will otherwise feel cheated since no sooner they sell the land at a price decided by the state, the prices of adjoining areas shoot up due to economic activity in the region. So what the private developer can do and the government must ensure, is to make development inclusive by giving the affected people a stake in the project.

The writer is resident editor, Delhi, for ‘Financial Express’ pv.iyer@expressindia.com