The Hindu Business Line : Industrial projects: Easing land acquisition pains

How can economic zones be created with minimum inconvenience to those who lose their livelihoods as a result of such land acquisitions? Once a robust regulatory framework is in place, the government should steer clear of the acquisition process as far as possible and companies must stop clamouring for subsidies, says SURESH SRINIVASAN.

Implementing a robust regulatory framework is crucial to help achieve seamless land acquisition.

Of late, India has been seeing intensive activity in the emerging Special Economic Zone (SEZ) and industrial parks. Close to half a million hectares are being acquired for SEZs and other commercial projects. Such a magnitude of land acquisition has not been seen in the past.

But a worrying aspect is that there have been widespread delays in land acquisition for many projects — be it for Tata’s car plant, the numerous projects of the National Highways Authority of India (NHAI), the thermal power projects in Maharashtra, or steel companies in Orissa. Many hydroelectric projects in Sikkim, Arunachal Pradesh and Himachal Pradesh have also been shelved.

One wonders where the problem lies. Is it a problem of inadequate land acquisition laws? Or is enforcement the issue? Are there issues with land valuation guidelines? Is agricultural land being depleted because of SEZ projects? Is the government interfering too much with the land acquisition process?

Being the democracy it is, India has its share of State-level politics as well, that has often clouded and complicated the issue of land acquisition. Cutting through the maze to pinpoint one single cause for this problem has thus become extremely difficult.

Development, at what cost?

The Commerce Ministry has taken the view that development of such economic zones is vital for achieving the targeted high economic growth rate. Economies such as China have spearheaded their development process through creation of a number of SEZs over the last two decades. Undoubtedly, such economic zones are islands of intense economic activity that, over a period, help diffuse economic development and progress throughout the country.

India has an imbalance in terms of its GDP composition — close to 55 per cent of its GDP comes from the services sector. Of the remaining 45 per cent, industry contributes only 28 per cent, and agriculture 17 per cent.

We need to see the emergence of a robust and vibrant manufacturing sector that will not only set right this anomaly but also help generate more jobs in the rural areas. This will go to ease the pressure on the urban infrastructure.

SEZs and industrial parks are precisely the means for achieving this and are likely to be catalysts in spearheading industrial growth. Hence there can be no argument as to whether we need them; they are inevitable.

But a key question that begs an answer is: How can such zones be created with minimum inconvenience to those who lose their livelihoods as a result of such land acquisitions? Can large companies use economic progress as a pretext to forcibly acquire land from the owners?

On the one side, we are witnessing acquisition delays, thus reducing the pace of economic development. And, on the other, we have seen instances of companies that have acquired land forcibly with the support of local governments.

Regulatory Framework

The efforts of the Government in strengthening the country’s regulatory framework in tandem with increasing economic activity need to be commended. Instances where forcible acquisition can be made have also been minimised. Key provisions relating to compensation payable, which is now calculated based on a formula that is expected to be close to the prevailing market rates, have been streamlined . The full payment of compensation has to be made upfront and strict timelines have been stipulated for the completion of the entire land acquisition exercise.

The Rehabilitation and Resettlement Policy of 2007 approaches the issue of land acquisition based on the ground realities — it is not one person or a family that is dislocated, but a whole generation.

The policy advocates that in addition to the monetary payment, there should be an overall compensation package that will include resettlement allowance, rehabilitation of the landowners through provision of employment, offering appropriate training in skills acquisitions and providing access to bank loans.

The policy also recommends that landowners be seen as equity partners in the project and be allotted shares. Hence, the regulations are robust, but what could be lacking is the spirit among the stakeholders to abide by them.

Striking a fair deal

How can a right deal, fair to all the stakeholders, be struck? Valuation of land has remained a contentious issue. The price of land in India is higher than comparable benchmarks in developing countries such as Malaysia, Thailand and Korea. Companies acquiring land need to come to terms with this fact and be ready to pay more.

In the past, companies have demanded subsidised land, and there are instances where the governments have obliged. Subsequently, the governments have found it difficult to meet their commitments. Many non-government organisations (NGOs) hold companies responsible for acquiring land below market prices, by roping in the local government machinery on their side.

With the system moving towards a ‘free market’ economy, companies should ensure that their conceived projects are viable on an arm’s length, ‘standalone’ basis without the support of subsidies.

Once companies get into this frame of mind, they may possibly start considering market rates for the land they acquire.

This will also ensure long-term sustainability of the whole process. If not viable at market rates, companies should not move forward on specific projects. Although there is an impression that creation of SEZs increases urbanisation and eventually depletes farmlands, there is no statistical evidence supporting such a view.

Success stories

The picture is not altogether gloomy, though. States such as Andhra Pradesh and Tamil Nadu have been frontrunners with a successful track record in implementing large SEZ projects with more or less hassle-free land acquisition.

Their success seems to be due to the seamless land bank they have built over a decade. And controversies have been avoided as these were largely dry lands. Further, though the governments largely stayed out of the land acquisition deals, they did ensure that the owners received fair compensation.

In the past, the opposition parties have tried to gain political mileage out of land disputes.

Such actions not only affect the companies and the landowners concerned, but also damage the country’s reputation as an investment destination.

On balance, a robust regulatory framework is crucial to help achieve seamless land acquisition. Also required is a strong will on the part of the government not to interfere in the acquisition process; companies, on their part, should not drag the government into the process.

NGOs, political parties and the media will need to act as ‘watchdogs’, which would ensure bringing about transparency to the whole process of land acquisitions.

(The author is a management consultant. blfeedback@thehindu.co.in)

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