The Group of Ministers deliberated on the right to fair compensation and transparency in the Land Acquisition, Rehabilitation and Resettlement Bill 2011 and arrived at a consensus on October 16, 2012. We do not have the details of the final changes to the land bill as agreed by the Group of Ministers but would like to share the industry’s concerns at this juncture before it is presented to the Cabinet for approval.
A fundamental concern is with regard to the cut off date for the applicability of the Land Bill. FICCI had written to the Group of Ministers that the legislation should be applied only on a prospective basis. A retrospective application would adversely impact the confidence of investors and create a perception of unpredictability of economic policies. While the Land Bill could be enacted after the Cabinet approves it, the legislation must come into effect only prospectively and with advance notification of the cut-off date. This is critical to ensure that projects currently under implementation are not adversely affected.
The government’s role in land acquisition by industry is necessary. Any developing country, in order to become developed, needs to transition from being an agrarian economy to an industrial one. In a densely populated country like India, the government must have a facilitating role in land acquisition for industry. In some cases where large pieces of land need to be acquired, there may be a problem of a marginal number of land owners who hold out. The Land Bill in its present form could prove to be a dampener to industrial growth and, in particular, could completely jeopardise the development of the Indo-Gangetic plains, which encompass Punjab, Haryana, Uttar Pradesh, Bihar and West Bengal. These areas are among the most densely-populated regions of the country and the passage of the Land Bill would result in denying the people of this area the opportunity of participating in the industrial growth of the country.
It is important to convert the perceived advantage of our 500 million youth below the age of 25 into a true demographic dividend. The aspiration of a better life and new employment opportunities may be brought to naught if the very foundation of industrial development—the availability of land—is jeopardized What is more worrisome is that such a denial could lead to social tensions and unrest. The Bill in its present form would stop the gradual shift in the labor force we are seeing today from agriculture to industry and services in its tracks. It is highly undesirable that we condemn agricultural labor to low-paying, unskilled jobs.
The Bill also requires a clear definition of ‘public purpose’. As we understand it, land requirements for large projects, such as the National Investment and Manufacturing Zones and the Delhi-Mumbai Industrial Corridor, would be included in the scope of ‘public purpose’. This is a very welcome step and needs to be clearly notified in the legislation. Otherwise, the state governments will not be able to acquire land for such zones and thereby render the whole concept of development through such zones ineffective.
Applying rehabilitation and resettlement (R&R) provisions for private purchase transactions (not acquisition) defies economic logic. We understand that the Bill seeks to provide R&R to affected families even for private purchase of land above a particular size to be fixed by state governments. Land prices determined by market forces and agreed between the buyer and seller must be kept outside the R&R provisions.
Market-based transactions in the price of land not only captures the market value of the land but also reflects the expectations of the land owner in terms of expected future benefits from the land. Any additional amount to be factored in as a part of compensation is, therefore, unnecessary. We believe that this would distort the market mechanism of arriving at the value of the land. Even in case of acquisitions, the proposed formula for market value of land and R&R provisions would put an unfavorable burden on the competitiveness of industry.
As proposed in the Bill, it would become mandatory for the acquirer of land to seek the consent of 80% of the affected people who would be potentially displaced. We understand that this provision is now proposed to be diluted to 66%. This is a welcome change though the task of seeking consent would still remain onerous.
At the same time, it is necessary to convey certainty of land use changes. In order to ensure that land owners get a market value for their land, we have suggested that land use changes be notified well before the acquisition. This would enable a fair evaluation of the land, including its future use. Ambiguities in this respect will severely impact price negotiations and may present a distorted picture in many cases.
FICCI would like to reiterate that a comprehensive and holistic view is needed before the Bill is passed, for, otherwise, the ramifications may cost the nation dear.