For fairplay in land acquisition

The Allahabad High Court recently quashed the acquisition of 600 hectares of agricultural land, expropriated using the urgency clause and later handed over to private builders by the Uttar Pradesh government. Nearly 50,000 people, who had invested in flats in the proposed Noida extension, are baffled by the developments.

In the past three years, Noida-like protests by farmers against forcible land acquisition have raged in 40 out of 610 districts in India, bringing 40,000 acres of land, proposed to be acquired, under dispute.

In the policy vacuum created by the obsolescence of an antiquated law, several State governments have rushed to enact eclectic, divergent laws. Meanwhile, the proposed National Development, Acquisition, Displacement and Rehabilitation Bill is before Parliament.

PUBLIC PURPOSE

At the heart of contention is the definition of ‘public purpose'. Land can be expropriated compulsorily by the State from private holders only for a ‘public purpose'.

Accordingly, ‘public purpose' needs to be aligned closer in meaning to ‘public use' — provision of goods and services of a non-excludable nature to the general public. It's not that the ‘private goods industry', with its limited externalities, is unimportant.

What is not defensible is invocation of an eminent domain principle to obtain land — a scarce and valuable resource — forcibly from unwilling individuals, unfavourably placed in terms of bargaining power vis-à-vis private businesses.

An alternative, as suggested by the Ashok Chawla Committee on Allocation of Natural Resources, is that stretches of land — degraded land in particular, lying idle with the Centre and State governments — are inventorised with Geographic Information System (GIS)-enabled location mapping and parcelled into land banks exclusively earmarked for industry, thereby reducing the likelihood of prime agricultural land being diverted for industrial purposes.

Transparent auctions

Transparent, open auctions of land so identified may be organised to facilitate price fixing. This would preclude the possibility of land allotment at throwaway prices — an allegation that the political executive has often had to face.

Checks may be put in place to nip cartelisation attempts at such auctions. Once land identified has been allotted at such market rates, private land parcels that fall in the project area may be purchased by way of negotiated settlements with the land owners.

Considering the pace with which industrial activity is expected to rev up constructive policy-making on this issue is of the essence.

It is necessary to protect the interests of the disadvantaged, say, the tribal communities, as well as provide to the private client a support structure that clearly delineates a transparent, consultative process to define interactions between the project proponent and the land owners.

This framework, which may be drafted along the lines of International Finance Corporation's Performance Standard 5 (IFC PS 5), should entail participation of the project-affected at all stages of the cycle, in an interactive paradigm with the project proponent, with the local authorities possibly playing the part of a third-party facilitator.

As for compensation, the central idea would be not just arriving at ‘market rates', but also designing a ‘compensation schedule' that pays to the farmer, a long-term, inflation-linked income, which appreciates with the temporal appreciation in value of the underlying asset. Compensation for assets must be at their replacement cost and include consequential losses as well.

A basket of payment alternatives must be framed for the recipient to choose from — a percentage in lump sum at the time of sale plus annuities, a certain percentage of compensation converted to debentures of the company, fixed deposit-cum-annuities etc. and recipients should be clearly educated about the advantages of each.

DRAFT BILL

The Draft Bill proposes compulsory acquisition for private companies only when 75 per cent of the land owners submit a written consent in favour of the company.

Since projects may run into motivated resistance, it makes sense to acquire compulsorily only when private clients fail, despite demonstrably plum offers, to negotiate purchase of isolated pockets of land in a project area. But it is important that governments be legally disallowed to acquire land claiming ‘public purpose' only to sell it off later to private parties at ridiculous rates.

Moreover, if compensation issues are ever to be cleanly resolved, the systemic malaise afflicting land records management would need to be addressed, with eventual switchover to a conclusive property titling system.

Therefore, for private companies, government land in land banks should be allotted only by way of open auctions to industry.

As for private land, the government may desist from invoking eminent domain except in extraordinary circumstances, and instead, facilitate negotiated settlements with clear policy structures.

(The author belongs to the Indian Administrative Service. The views are personal.)