The land question

The Parliamentary Standing Committee on Rural Development has recommended that the Government must not acquire land for private companies or for public-private partnership (PPP) projects, even if intended for so-called public purposes. The arguments offered, on the face of it, are persuasive. Land is a factor of production just as labour and capital. When the State is not in the business of acquiring the latter two on behalf of private parties, why should it do so in respect of land? If companies want land to set up manufacturing facilities, they might as well negotiate directly with the owners concerned. Moreover, when the laws in the US, Europe or Japan do not provide for land purchases by the State for private enterprise, why should India be any different?

Actually, the problem is precisely that. Unlike in the abovementioned advanced capitalist democracies, land records in large parts of India are outdated and inaccurate. The absence of clean titles exposes buyers to the risk of sellers not having complete, unencumbered rights to the property being transferred. So, even if an industrialist were willing to pay more than the fair market rate for a piece of land from its presumptive owner, the very possibility of other claimants to the same property makes such transactions problematic. It is very often for this reason alone that private promoters prefer not to buy themselves and go through the State instead. Such land, freed of all claims once it is vested with the State, can be subsequently transferred without legal hassles to the investor. This is, no doubt, a patently anti-market route. One cannot disagree with the Parliamentary panel that it represents an abuse of the eminent domain power of the State. But in the current system, there are few alternatives either.

The Land Acquisition, Rehabilitation and Resettlement Bill, now in Parliament, is certainly an improvement over the existing arrangements. It permits governmental land purchases for private companies or PPP projects, so long as these involve “production of public goods or the provision of public services”. Also, such acquisition requires consent of at least 80 per cent of the displaced families. Since public goods have largely to do with highways, ports, power plants, schools and other physical or social infrastructure, it automatically excludes land for constructing hotels, malls, resorts or even car and consumer appliance factories. But in the long run, there is no need for the exercise of eminent domain even for projects deemed as serving “public purpose”. These, too, should give way to market-based transactions, without the Government acting as broker. That can, however, happen only with fully-computerised, up-to-date land records and title registrations conferring conclusive, as opposed to presumptive, ownership of property. The absence of a transparent land market ultimately only affects ordinary farmers and genuine industrialists, while benefitting thugs and venal politicians. The Government should make up its mind on whom to support.

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