There appears little need to enforce a rehabilitation package when there is a willing buyer and a seller. A monitoring committee would do in such cases.

Few will deny that that the draconian century-old Land Acquisition law drawn in 1894 needs a replacement. The question is whether the replacement — The Draft National Land Acquisition and Rehabilitation and Resettlement Bill, 2011 (Land Acquisition Bill) — has managed to address the crying need to compensate farmers/land owners fairly without upsetting the investment climate needed for industrial/economic development.

In a move to perhaps make up for decades of slumber, the Bill appears to go all out to help the land owners fix a price and receive a rehabilitation package. It has, however, neither satisfactorily addressed ways to cut back on the time involved in land acquisition nor does it seem to have kept in mind the financial feasibility at least in the case of large-scale infrastructure and other projects.

Need for better laws

The abandoned Tata Nano project in Singur, the Greater Noida land acquisition controversy and the delays in constructing the Yamuna Expressway are proof enough that the existing land acquisition law in the country has been a failure.

Land owners badly needed a law that would offer a redressal system for disputes/acts of coercion, a fair compensation package and suitable rehabilitation. Corporates, on the other hand, were in dire need of a process-oriented system that would not only reduce the time involved in land acquisition but also provide safety for their massive investments, without entirely altering their payback estimates.

‘Fixing' market value

While no law can be expected to be a panacea for all evils, the new Bill appears to leave almost everyone disappointed with corporates being the most dissatisfied. And here's why.

For the land owners, the Bill has fixed a compensation package that would be four times the market value in rural areas and twice the value for urban land. The market value is defined as the land value for the registration of sale deeds in the specific area or the average of sale price for similar land in the vicinity, ascertained from 50 per cent of sale deeds registered during preceding three years, whichever price is higher.

The problem is that there are limited land transactions in rural areas, besides much of it being done in cash. Quite a few even put-off registration procedures. The infrequent transactions mean that the last market price may be way away from the current price.

Two, the development as a result of acquisition may entirely change the land value in the area. The Greenfield Hyderabad airport project in Shamshabad resulted in the government reportedly paying Rs 4 lakh per acre for land to local farmers. On launch of the project, prices in the area were said to have touched Rs 1 crore an acre. That's more than four times!

Three, the Bill does not also make a distinction between willing parties (perhaps those who no longer make a livelihood from their land) and those who are using their land and are compelled to part with it.

State projects to suffer

If this be the case with the land owners, the government, may not be better off with the new Bill. For one, while NHAI projects do not come under this purview, the Bill does not explicitly exclude state projects. Other infrastructure projects, whether irrigation, electricity, and so on, are also not excluded.

According to Ms Shradha Vaid General Manager, Corporate Advisory Board at Feedback Ventures, while projects costs will go up across industries, in the case of public-private-partnership projects, the ability of the Concessionaire to pass on costs remains doubtful. Besides land price, the rehabilitation and resettlement package (R&R) would significantly push the cost of infrastructure projects. Whether, the added costs would deter private players from bidding for projects will be a worry for state/central ministries.

Yet another clause in the Bill talks of returning the land to the owner (seller) if the same is not utilised within five years. State governments typically buy land en masse, with a long-term view. The Tamil Nadu or Gujarat Governments have been able to allot land for FDI projects quickly because of their land holding.

Besides, it may not even be feasible to return, say the thousands of acres acquired under the Andhra Pradesh Jalayagnam programme or the MIDC's (Maharashtra Industrial Development Corporation) reportedly 80,000 acres of land accumulated over a decade or two. The best solution would be to ensure that land is stipulated to be put in use for ‘public purposes' within a more reasonable time-frame.

Two willing parties

The last and most important issue in the Bill is bringing non-government transactions too under its purview. Private players buying 50 acres or more of urban land tracts and 100 acres or more in rural areas would be required to comply with the R&R package stated in the Bill.

Under the Bill, the land owners will be entitled to a new house, relocation costs, employment for one family member, Rs 2,000 per month for 20 years and 20 per cent of capital gains, every time the land is sold within 10 years. That is a big deal indeed!

However, the issue here is why should the Bill enforce a package when there are two willing parties — to buy and sell the land? Real-estate players such as DLF set an example of private players successfully negotiating with thousands of farmers to acquire 3,500 acres of land in Gurgaon with the company claiming that there was not even a single litigation. According to the management, the compensation paid to the farmers was sufficient to not only pursue their livelihood by buying farm land elsewhere but also to buy themselves a house.


Even as the debate on how much is too much goes on, it may be time to seriously look at the some of the inclusive models employed both by farmers themselves as well as the buyers of land. The Magarpatta City in Pune is a classic example of 123 farm households pooling 400 acres to form a private company that developed a town — for commercial and residential purposes. These farmers, besides holding shares in the company, earn dividends, rent and income from contract work in the city. More importantly, they hold the title to their land, an emotional booster.

If that is an initiative from the farmers, many developers, including Godrej Properties, have been using joint development models, with the developer sharing up to a third of the profits/income from these projects with the landowners (joint developers as they are called). This model is especially beneficial in urban areas where land cost is not cheap; it helps avoid direct land dealings and locking up capital.

(This article was published on October 1, 2011)
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