With India’s economic growth rate picking up, and more private capital flowing into industry, mining, infrastructure and real estate, the demand for land has grown. However, land acquisition is proving difficult, so much so that it has emerged as the single-biggest hurdle to infrastructure development. Why is it so difficult to acquire land for large infrastructure projects in India?
Difficulties in acquisition
Land ownership pattern: In India land records are poorly maintained, especially in the less developed states. Property titles are often disputed. For those trying to acquire land, it can become difficult to identify who the real owner is.
While agriculture accounts for only about 17 per cent of India’s GDP, about 58 per cent of its population depends on it for livelihood. When land is acquired, not just the owner, but sharecroppers and tenants also get deprived of livelihood.
In backward and forested areas, the tribals may not have formal title to land, but they have informal rights over it through having subsisted off it for generations. Again, in case of a takeover, identifying beneficiaries becomes difficult.
In India, average landholdings are small, so land acquisition for any large project requires negotiations with a number of people. Inevitably, someone holds out, either for a higher price, or because he does not want to give up his land at any price because of the loss of occupation and dislocation it entails.
Many of the land owners are uneducated, and hence are not well placed to take advantage of the opportunities that would come their way through development. So they don’t want to sell the land that has been their source of livelihood for generations.
Unsympathetic attitude of the Indian state: In the matter of land acquisition, the Indian state’s attitude is more akin to that of our erstwhile colonial rulers than that of an elected government that should fear people’s backlash. Often it tends to favour the private investors (on whose behalf it acquires the land) and rides roughshod over the interests of landowners.
In India Right to Property is not enshrined as a fundamental right. The principle of eminent domain — the government’s prerogative to take over private property for public purposes — is employed with abandon. The term “public purpose” is often loosely interpreted. Even the development of an amusement park or high-end condominiums at times qualifies as serving a public purpose by a pliable government machinery.
Changing ownership of infrastructure projects: Earlier, infrastructure development was undertaken mostly by the government. Now that is not the case. In the 12th five-year plan, 50 per cent of the government’s planned outlay is expected to come from the private sector. Thus, from being a public good, infrastructure is becoming a for-profit venture for which people will have to pay (often stiff) user charges. To expect farmers to give up their land at concessional rates for such ventures violates all notions of equity.
Moreover, many infrastructure projects are not viable in themselves. For instance, the toll collected from traffic on a highway may not suffice to offer an adequate internal rate of return to the developer. The government then offers additional land along the highway for the developer to develop real estate. The more land (at cheap rates) the developer can get, the better. Therefore, in connivance with politicians, he pushes for more acquisition rather than less. This effectively means that the farmer subsidises the development of infrastructure through the loss of his own livelihood.
Undervaluation of land: In most cases, the nub of the problem lies in land being acquired from farmers at low prices. The price offered by the government is usually based on the average value of recent transactions in the area on which stamp duty has been paid. Given the high stamp-duty rates, the value of transactions is often understated. So when the government goes by these rates, it severely underestimates the true value of the land.
Amended Act not good enough
Till now the government acquired land for infrastructure projects and then handed it over to the private developer. Increasingly such land acquisition by the government on the private investor’s behalf has come to be regarded as expropriation of a valuable resource from vulnerable sections of the society (small farmers and tribals), which is then transferred to the rich at concessional rates (and it goes without saying, with a few well-placed payoffs). After the hue and cry in Singur and Nandigram and in several areas where special economic zones (SEZs) were being developed, the government decided to amend the Land Acquisition Act of 1894. In an apparent concession, it has proposed (the amended bill has yet to receive Parliament’s nod) that hereafter the private player will have to acquire 70 per cent of land. Only once this target is reached will the government step in and acquire the balance 30 per cent on its behalf.
However, this amended law has many loopholes. The 70 per cent could include any government land that the government decides to hand over to the private developer. What is to prevent a corrupt government from taking over a community’s common land (which legally belongs to the government) to help the developer reach the 70 per cent target?
The definition of “public purpose” (for which government can take over land), instead of being defined more tightly, is now even more loosely defined as “any other purpose useful to the general public”.
Under the amended law, even if the developer has to pay somewhat more to buy land at market prices, he can still be confident that land acquisition will get completed. If a minority of land owners in an area refuse to sell, the developer can be confident that the government will take over their land on his behalf under the 30 per cent that it is supposed to acquire. In fact, knowing that they may have to sell to the government at low rates, even those farmers who feel inclined to resist will now sell to the developer. At least they will get a better price from him than from the government. Thus the level of state coercion increases, not decreases, with the amended legislation.
What needs to be done
State governments need to expedite computerisation of land records. Clarity regarding ownership will create a more transparent and liquid market for land transactions. They also need to lower stamp duty rates. Only then will buyers and sellers declare the true value of transactions, which will then lead to better price discovery.
Agricultural land costs much less than land on which a factory is being set up. After the developer has aggregated the land, he applies for change of land use. With one stroke of a bureaucrat’s pen, the value of the land grows several-fold overnight. Not surprisingly, the farmer who sold his land at a lower price (and lost a source of livelihood that would have served his family for generations) feels cheated. If his embitterment is to be avoided, then some part of the value escalation must be shared with him. Besides cash compensation, employment, shareholding in the project that comes up on the land, education for the children, etc. need to be offered to the original owners.
In future, the government can either continue to use the brute force of law to expropriate land from society’s vulnerable sections, or it can introduce laws that ensure compulsory, substantial and time-bound compensation to land owners. If it continues on its current course, don’t be surprised if more subaltern armed movements flare up across the country.