State and land

Print edition : January 10, 2014

The Price of Land: Acquisition, Conflict, Consequence, By Sanjay Chakravorty, Oxford University Press, 2013, Pages: 273, Price: Rs. 825.

A Village Awaits Doomsday, By Jaideep Hardihar, Penguin Books, 2013, Pages: 217, Price: Rs. 299.

In Greater Noida, Uttar Pradesh, where land acquisition has taken place for development work. Photo: V.V. Krishnan

On the new Land Acquisition Act which seeks to favour landowners at the cost of society at large.

THE Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill, 2013, passed by Parliament during its monsoon session, received President Pranab Mukherjee’s assent on September 26 and will come into force on a date chosen by the government before December 26.

The new law replaces the Land Acquisition Act of 1894, which, it was widely felt, required changes in order to strike a balance between the need for land for development and other public purposes and the need to protect the interests of persons whose lands are acquired. At least, that was the officially stated reason for taking a relook at the 119-year-old Act.

The Union Ministry for Rural Development initiated the process of amending the Act way back in October 1998. But it took around 10 years for the government to place a Bill in the form of the Land Acquisition (Amendment) Bill, 2007, and its corollary, the Rehabilitation and Resettlement Bill, 2007, before Parliament. Although the two Bills were passed by the Lok Sabha, they did not pass muster in the Rajya Sabha, and, as a result, they lapsed when the term of the first United Progressive Alliance (UPA) government came to an end in 2009. In the light of various criticisms against the Bill, the UPA, during its second term, introduced the Land Acquisition, Rehabilitation and Resettlement Bill (LARR), 2011, which has been enacted now with a longer title and a few changes.

Sanjoy Chakravorty, Professor of Geography and Urban Studies at Temple University, Philadelphia, United States, and the author of the excellent book under review, The Price of Land: Acquisition, Conflict, Consequence, was not at all optimistic about the enactment of the LARR Bill, which received his critical attention. The book was completed around the time when the Parliamentary Standing Committee released its report on the LARR Bill and suggested significant changes. Because of the uncertainty surrounding the enactment of the Bill, the author found it more useful to examine the ideas that form the Bill’s foundation, which provide a framework for reference or a default position for discussions on reforming the land acquisition law in India.

The most important of these ideas is the one on the price of land acquisition. As he puts it, land price is the key to the origins of acquisition conflicts, and therefore, it is the key to resolving those conflicts.

According to the author, there are three groups of stakeholders in any acquisition situation from a development perspective. They are current users of the land, its future users, and the public. He also adds that for decades, land was so inexpensive to acquire that it was possible to write it out of the production function, and that as recently as 2000 it was possible to acquire hundreds of acres of rural land paying no more than Rs.50,000 an acre (one acre = 0.4 hectare). He estimates that under the planned acquisition system, it will not be possible to acquire land anywhere in India for under Rs.25 lakh an acre. That is a 50-fold increase in the effective price of acquired land in a decade. In many instances, he believes, the increase will be even higher, perhaps even hundredfold.

The author makes the reader realise that the officially stated reason for a reassessment of the 1894 Act conceals the real one. He explains that the Indian land market now is fundamentally different from what existed a decade or so ago. Certainly, it is far removed from the land markets of earlier decades where the state acquired land with impunity because (a) it had the power to do so and (b) it could afford to do so.

In other words, the diminishing power of the state to acquire land stems from the diminishing ability to pay for the acquired land because of very dramatic changes in the real estate market and land prices. Both these together have necessitated a new law to continue to enable the state to acquire land.

The author submits that the pricing mechanism of LARR (as the current Act was previously called) is based on an arbitrary multiplication of market price and that this will severely constrain urban development, the provision of public goods, and industrialisation. The constraints, he says, will not only be spread evenly among States but additionally disadvantage States that are land poor and/or more urbanised. There will be a new class of windfall gainers—specifically landowners whose income (after relief and rehabilitation is taken into account) will multiply up to 25-fold in many settings, he says. To quote him: “This will seriously hamper the provision of public goods and economic growth. The political problem of resistance to land acquisition will go away—which is what the lawmakers want, no doubt —but an even bigger economic problem will be created.”

The value of this book lies in making the reader realise the hidden costs imposed by the new Act on ordinary citizens. The new system sought to be created by the Act imposes a social tax to pay those affected by future land acquisition and purchase. The author shows that every citizen of this country will pay this social tax: directly, by paying for the goods and services in which the cost of land is included; and indirectly, if the extraordinary land acquisition costs slow down economic growth and urbanisation and the provision of public goods.

Reservation price

For the average reader, the author tries to simplify the problem thus: “Every landowner has a reservation price for his land, a price below which he will not sell unless under duress. This reservation price is not based on the productivity of the land, but on a host of other reasons (discussed in detail in Chapter 9). As long as the market price does not match the reservation price, the land should remain unsold. If it is acquired at below reservation price, the compensation is inadequate and imposes a cost on the landowner; this was the old system. If the land is acquired at above the reservation price, the landowner is overcompensated and this creates a social cost; this is what the new system will do.”

The gap between the reservation and market prices varies from region to region, he says. Type A regions are those where there is no gap between reservation and market prices. Type B regions are those in which the gap is narrow and is narrowing further because of the recent rise in land prices. Type C regions are those about which there is little market information because there is limited market activity (for reasons discussed in Chapter 9) and a sizable but unknown gap between reservation and market prices. This situation exists in many remote rural areas, especially the least urbanised regions of the poorer States.


LARR, the author says, has been designed with Type C lands in mind, whereas a significant proportion of land transactions takes place in Type A and Type B lands—in urban and near-urban regions. LARR will overpay for those lands and impose sizable social costs for limited private gains —windfalls for those whose land is acquired. The heaviest burden of those costs, the book suggests, will be imposed on India’s urban and leading agricultural regions, that is, Type A and B regions.

As the author admits, it is easier to be critical about a policy than to offer alternatives. Yet, the author believes that it is best for the States to figure out their own solutions to pricing of land. The reason, according to him, is that land is a State subject under the Constitution and the conditions of landownership and distribution vary widely between States; land markets and property rights vary so much that a centralised solution is bound to be inefficient.

Several State governments indeed share the author’s view. Madhya Pradesh, Himachal Pradesh, Meghalaya and Nagaland argued before the Parliamentary Standing Committee that land acquisition legislation should be left to the States and that by creating a national law the Centre was overstepping its limits. The only justification for a Central law appears to be that in the competition between States for private investment, a “race to the bottom” may create incentives for States to minimise the compensation for acquisition. But the author argues that such apprehensions can be balanced by the threat of a political gridlock or backlash.

The windfall payment to landowners is troubling also because it does little in comparison for the truly disadvantaged, that is, the displaced who are landless, he says. In Chapter 8, the author states that Adivasis and Dalits generally own the least land because they do not have a tradition of private ownership or because they have been systematically deprived of ownership through caste discrimination.

A compensation system that rewards owners at rates that are many times higher than for non-owners punishes the egalitarian practices of Adivasi communities and those who have historically been marginalised by these owners and their forebears, he contends.

The author is extremely critical of the paternalistic approach inherent in the LARR Bill. He is clear that the Central law should not determine the price-setting process, and even if it does, it should not involve a formulaic multiplication of any kind. Clause 27 of the new Act, contrary to his advice, deals with the determination of market value of land by the District Collector, who has to follow the specified criterion, which includes three options and choose the highest value. Such value, the provision says, shall be multiplied by a factor specified in the First Schedule to the Act.

This paternalism is expressed most vividly in the bureaucratic apparatus envisioned to implement the Act: an administrator; a commissioner for rehabilitation and resettlement; an R&R committee; a national monitoring committee for R&R and a land acquisition, rehabilitation and resettlement authority. The Act devotes a lot of space to this new bureaucratic architecture and its workings and the social impact assessment process that must be undertaken for every significant acquisition, which the author rightly questions.

The reader cannot but share the author’s central philosophical puzzle in this paradox: if the state created the problem (in terms of vast displacement of people by its forcible land acquisition in the past), why is more of it the solution? He asks, “If the old state was predatory and rent-seeking, why should the new one be anything else? Will more of it make it less predatory?” The author apprehends that the total cost of land may rise to such levels that many projects, private and public, will simply fall through. If the point of overpayment to landowners is to avoid resistance and reach deals quickly, the point of the bureaucratic design seems to be its exact opposite, he argues.

Ceiling laws and tenancy laws have had little positive effect anywhere, with the possible exception of Kerala and West Bengal, the only two States that were serious about implementing them, the author suggests. The evidence presented in the book makes it clear that the new Act’s effect will also be negative because it is a redistribution mechanism that favours landowners at the cost of society at large.

The Price of Land is well-structured into three parts, starting with the present, and then dealing with the past and the future, giving the reader an opportunity to familiarise himself with the entire gamut of issues which have a bearing on land acquisition in India. The book will be of interest to both specialist and non-specialist readers.

Project displacement

The second book under review, A Village Awaits Doomsday, by Jaideep Hardihar, a Nagpur-based journalist, is an account of his travels in 2001 to different parts of the country where people were being displaced by some project or the other. Driven by curiosity as to what happened to such people, he recorded his observations in the form of a book, without entering into the debate over whether or not a project was needed.

His travels convinced him that rather than better compensation, the displaced people were keen on getting land in return for land. With the new Act putting a premium on higher prices for land and compensation for displacement, one wonders whether the time has indeed changed in a decade since he travelled.

In reporting in great detail the painful process of being uprooted—emotional, economic, health and psycho-sociological issues being the uppermost in such a process—the author laments that the unabated plight of the displaced never gets the attention it deserves amidst the rhetoric of development or noisy debates over the projects. Recounting instances of resistance to unjust land acquisition across the country, and the violence it has led to, he wonders why every political party adopts a hypocritical stance on the issue.

In Part A of the book, the author records his observations through his interaction with project-affected people as he travelled across the villages to be displaced in the States of Maharashtra, Madhya Pradesh, Karnataka, Uttar Pradesh and Jharkhand.

In Part B, he has devoted considerable space to the discussion of the issues involved, including the legal and policy conundrums, which will interest the lay reader.

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