New land acquisition norms: Trying to blend economic development with social justice

Clear mechanism for price determination: Under the earlier policy, there was no clear-cut guideline on how the Government should fix the value of the land it wants to acquire. If the landowner didn’t agree on the price paid by the Government, his only recourse was to go to court. Now, the Government will have to acquire land at the market rate. This will be determined by taking into account the prices at which recent sale-purchase deeds have been registered in the area. In addition, the Government will have to pay landowners an additional compensation — varying from 60 per cent (of the market rate in normal circumstances) to 75 per cent (when land is acquired under emergency powers) — as part of the R&R package.

Livelihood issue addressed: Besides the one-time compensation for land, a job will be offered to one member of all nuclear families in the affected area. Not only landowners, but those dependent on the land for livelihood too, such as landless labourers, will be provided employment.

Land-for-land deal: What sweetens the deal further for landowners is that in some cases, part of the developed land will have to be returned to landowners. The farmers’ cooperative from that area will put the land in a special purpose vehicle (SPV) or joint venture along with the developer and, in return, acquire an equity stake in the project. This will enable landowners to benefits from the economic development taking place in their area for decades to come.

Gram Sabha’s consent: Developers wanting to buy land in an area will have to get the consent of the Gram Sabha for land acquisition. This will prevent acquisition by stealth, which has in the past resulted in land being acquired from gullible owners at low prices. Develop or lose the land: If the land is not developed within five years, it will revert back to the Government. This proviso has been put in to deter speculators from acquiring land. If they purchase land, they will have to make the additional investment and undertake SEZ development.

What next?

As is apparent, the new R&R policy offers a number of safeguards to landowners. But much will depend on how well it is implemented by the state governments. Feedback Ventures vice-chairman R S Subramaniam said, “A fair number of promises have been made in the policy regarding protecting the interests of landowners. Now, one has to see how effective the monitoring is. The fine print of the monitoring mechanism is also not clear. The policy talks about setting up a monitoring authority. The devil lies in the implementation.”

For the last six months developers, especially those coming up with large SEZs, had switched to the wait-and-watch mode. This meant that the huge sums they had raised for developing their SEZs were lying idle. Since the R&R policy was not in place, developers were unable to assess what the R&R cost would be. Now they will be able to go ahead with their projects.

The big question for developers is: what additional costs does this new, more generous R&R package impose on them? According to Subramaniam, “the cost of raw land is about 10 per cent of the total cost of a project. Even if this cost goes up by 50 per cent, the additional cost to the project will go up by about 5 per cent.”

Foreign developers and investors, who would like to partner large SEZ developers, had put their investment plans on hold because of the uncertainties surrounding the R&R policy. “Now they will begin to enter into SEZ development,” says Shiban Dudha, advisor (investments) to Delhi-based Raheja Developers, which is developing three SEZs amounting to 5,584 acres in the Gurgaon-Daruhera area.

Some ambiguities still. Ajay Nijhawan, convenor of the EPCES Panel of SEZ Developers, said, “The additional 60 or 75 per cent R&R compensation is mandatory for Government acquisitions only. This will introduce a substantial difference between the market price that the developer will pay and the overall price (market rate plus R&R compensation) that the Government will pay. Nobody will want to sell to the developer and everyone will want to wait for Government acquisition to begin. In that case, the developer will not be able to achieve his 70 per cent target. So the market price will have to be better defined, and will have to include any additional compensation paid by developers.”

Despite these few grey areas, the new R&R policy is definitely a step forward as it lays down a clear roadmap for all land acquisitions (of which there will be quite a lot in the coming years, given that the pace of industrialisation and development of infrastructure projects is set to ramp up in the country). What’s good about NPRR-2007 is that it has been tied closely to the Land Acquisition Act: the latter will soon be amended to incorporate the R&R obligations, making them binding on all Government acquisitions. Finally, now that the policy framework has been laid, the immediate need is to lift the freeze on land acquisition by state governments.

A fairer deal

• New R&R policy addresses most of the concerns that recently led to violent protests over land acquisition by Govt

• Govt will have to pay market price plus an additional R&R compensation for the land it acquires

• In some case, landowners too may be given a stake in the project

• Developers who had been waiting and watching will now be able to go ahead with their projects