India Inc should welcome the Land Acquisition, Rehabilitation and Resettlement (LAAR) Bill, now on course to becoming law. The earlier version of the Bill had several onerous and impractical provisions. These included one that forced companies, even in cases where they privately purchase over 100 acres in rural areas or 50 acres in urban areas, to undertake rehabilitation and resettlement activity. Moreover, in cases of Government acquisition for private firms, consent from at least 80 per cent of ‘project affected people’ was mandatory. Equally irrational were the provisions that fixed compensation at four times the ‘market value’ in all rural and twice this for all urban areas (without distinguishing between undervalued and already expensive land) and laid down that not more than 5 per cent of irrigated multi-crop land in any district can be acquired. This would have effectively shut out industrialisation in areas such as Punjab, coastal Andhra and western Uttar Pradesh.

The Bill passed by the Lok Sabha last week corrects many of these flaws. The land size threshold for applying R&R conditions for private land purchases has been left to the discretion of States. The flat four times market value formula has been relaxed, with States given the flexibility to fix the multiplier in relation to the distance from an urban centre. The ‘market value’ itself would exclude any outlier transaction that does not reflect on the actual prevailing rate. The percentage of irrigated farmland to be acquired for non-agricultural purposes will now also be decided by the States – which is how it should be. The informed consent provision will be limited to only 80 per cent of actual landowners and not all ‘affected people’ (sharecroppers, farm labourers, etc). Even this proportion has been lowered to 70 per cent in the case of land acquired for public-private-partnership projects.

After factoring in all these dilutions, the LAAR Bill strikes a reasonable balance between our larger economic goals and landowner rights. The latter, unlike in the past, are now aware that the value of their agricultural land is much higher when put to a different use. Since the existing circle rates don’t capture this value, it is only fair they are paid more than the ‘market rate’. At the same time, fragmentation of holdings and absence of clear titles makes acquisition of contiguous tracts a costly and time-consuming affair for private firms. This makes some form of state involvement in land acquisition for projects, including private ones, necessary. The good thing about the LAAR Bill is that it provides a basic framework for such acquisitions, without which industry simply cannot come up. However, the definition of ‘public purpose’ when applied to Government land purchases for private companies should be expanded beyond infrastructure projects to include any manufacturing or service sector activity offering significant employment generation potential. The law must be amended to expand the definition of ‘public purpose’, if it is going to be truly effective.

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