Criticism of Land Bill lacks basis

It has become fashionable for the English language press to take up cudgels on behalf of industrialists; they run down any government move in favour of the common man as being either unsustainable or placing a huge burden on industrial houses. The National Food Security Bill, however, is an exception — it has been roundly criticised for valid reasons, though its intent is laudable.

Where is the need for the Central Government to spread its resources thin and offer humongously subsidised foodgrains to as much as 67 per cent of the population, when hunger stalks only 2 per cent? Besides, being substantially a non-merit subsidy, it has the potential to create white elephants, including a mammoth food bureaucracy. That would vindicate yet again the late Prime Minister Rajiv Gandhi’s contention that a substantial part of government expenditure is lost in the course of transmission to the intended beneficiaries.

A laudable exception

But the land acquisition Bill, which comprehensively deals with the problems engendered by the coercive acquisition of people’s lands, is altogether a different proposition.

When it comes to public-private partnerships or pure private sector use, the Government would use its good offices for aiding land acquisition only when 70 per cent of the affected owners give their consent, says the Bill. This is as it should be.

The compensation spelt out is double the market price for urban land and two to four times the market price for rural land; this, too, is unexceptionable, as are the other aspects of compensation towards rehabilitation and loss of livelihood.

A lot has been said and written against the amount of compensation for the land. Twice the market price in urban areas, it is bemoaned, will jack up the project cost considerably for the private sector. Really?

In the first place, why should anyone set up a factory or project in an urban area when the country has vast tracts of fallow land in villages and rural areas? Will State governments allow the setting up of factories in urban areas when the accent is on removing them from the scene and relocating them away from cities? Assuming it is somehow necessary to set up a project in an urban area, how will the land cost alone make the project unviable?

Song and dance

Much has been made of Gujarat Chief Minister Narendra Modi’s gesture to the Tatas, of allotting land for their Nano car project at almost nil price. The project, however, had some unique features.

The Gujarat government made the allotment from its own land bank, obviating the need for compensation and rehabilitation.

In general, one need not shed tears if a private party is made to pay fair compensation for the land it has acquired. Those familiar with project costing would know that land, more often than not, constitutes a minuscule portion of the total cost --- especially in modern factories, where the accent is on state-of-the-art technology and machines.

It is amazing that we do not worry about the fleecing tactics of foreign suppliers of machinery, nor think twice about helping their promoters in the devious game of kickbacks, but knit our brows in concern when it comes to payment of compensation to common people.

It is not as if the heightened cost of land is going to be borne by the private sector company. On the contrary, one can rest assured that the cost would be recovered many times over in due course from the customers.

There is a first mover disadvantage when lands are sold first — the early bird does not get the worm. Instead it has to content itself with whatever the wily buyer with his enormous muscle power is willing to offer. It is when the cluster effect kicks in that the value of land in the locality goes up.

Since it is difficult to ask the buyer to pay for the appreciation in the wake of improvement of infrastructure and other facilities in the locality, the Government must be commended for applying a rule of thumb — twice the prevailing market rate in urban areas and two to four times that in rural areas.

Just hot air

Thus the claim that high land price vitiates the project is just hot air. The Indian elite has a bad habit of hailing profit-making by industrialists and company promoters as brilliant moves, but being critical when common folks make some money.

A pharma company’s promoters were showered with encomiums for making Rs 10,000 crore by handing over controlling interest to a Japanese company.

But if the Government comes to the aid of common folks -- who do not have the guile of the industrialists -- by ordaining an attractive price for their precious possession, there is protest. This is simply not fair. In land acquisitions, more often than not, it is the laity and the gullible who are caught in the crossfire.

They do not have the knowledge or the staying power to take on the resourceful interlocutors from the private sector. One must therefore hail the Bill as being truly in the interest of the common man. It is a landmark legislation that addresses the twin issues of land acquisition for growth and compensation and rehabilitation in an even-handed manner.

(The author is a New Delhi-based chartered accountant)

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