The effects of Land acquisition laws in Rural India

1.       Overview

2.       Focus on Opportunity

3.       Pitfalls in Land Acquisition and Classification of Land

4.       Buying & Selling Land in Rural India

5.       Rehabilitation and Resettlement

6.       CRZ Rules and its consequences

7.       Mining and Dams, Rights and Wrongs

8.       Transitioning to a Market Based Economy

9.       The Tenant Advantage

10.     Conclusion

1.     Overview:

For India to progress she has to:

-          Enact policies that jettison the bad practices of the past,

-          Strengthen prevailing good practices and,

-          Introduce new policies that accelerate the rate of growth in an environmentally responsible manner.

For the purpose of this article, progress is defined as; providing opportunities for all and adherence to pragmatic environmental guidelines. The most important issue is a balanced approach that improves the Quality of Life for all, while addressing the needs of the stake holders involved, namely; the citizens, the affected people, the government, the investors and businesses.

2.     Focus on Opportunity:

At the individual level opportunities translate to education for the youth, training for the unskilled, jobs for the willing and entrepreneurship for the able. It is projected that a Million youth will be entering the workforce every month for the next Ten years. Providing abundant opportunities for the One Hundred Twenty plus Millions over the next ten years,  requires Urbanization and Industrialization. There is a debate on whether this is the appropriate approach for India. The prevailing conventional wisdom supports this assertion. The detractors are primarily idealists, who partake in the fruits of modernization while proposing alternatives that they themselves are unable to demonstrate. India is at an inflection point and India’s only hope is proceed in Urbanization and Industrialization as fast as possible, to realize the “demographic dividend”. Not doing so will result in a “demographic disaster”.

3.     Pitfalls in Land Acquisition and Classification of Land:

India’s current land acquisition laws are a major impediment for Urbanization and Industrialization. The Land Acquisition Bill is a long time coming, the jury is out whether it will provide some relief. However there needs to be an over arching strategy that enables progress to accelerate in an environmentally responsible and inclusive manner.

Not all land deemed agricultural is suitable for agriculture and not all areas deemed Forest has an abundance of trees or wild vegetation. The emphasis of the laws has been on restricting who can own agricultural and forest land as opposed to stipulating what can be done on the land. Shortcomings in governance have resulted in rampant violations of land utilization, while curtailing ownership. The pragmatic solution is to shift the emphasis to strict environmental guidelines which can be monitored and controlled. Furthermore, stiff penalties can be instituted for violating land use guidelines and since that can be enforced, it would serve as a deterrent and remedial actions can be taken.

For instance, every small town in India has a main thoroughfare with a hodgepodge of gullies and lanes leading to dwellings and surrounding farms. As the town expands, surrounding agricultural land is converted to non-agricultural (NA) land and growth occurs in a haphazard manner. Town expansion is not unique to India. What is lacking is a good town planning process, wherein the town expansion grid is laid out with easements, and set backs for roads, pavements and bicycle lanes. As part of the conversion process, the land owner is made to surrender the portion specified in the town’s master plan. This is a WIN/WIN/WIN solution, wherein the owner realizes the appreciation of the land (which is often significant) when converted to NA, the town acquires land for infrastructure at no cost and the town folks benefit.

4.     Buying and Selling Land in Rural India:

Buying and selling agricultural land in Rural India is riddled with additional stipulations that require the buyer to have an agricultural certificate or own agricultural land. Furthermore in some States there is an income cap that has to be met to qualify as a buyer. Indian citizens without these qualifications are unable to acquire agricultural land. Because of these restrictions, land values are artificially depressed and farmers are not able to realize the true Free Market Value (FMV) of their holdings.

The work around these restrictive laws and stipulations for U&I is accomplished by the government acquiring the land and then selling it to a developer or industrialist. Valuation of the land in these acquisitions is the major source of contention. The people themselves are to blame for this. The government appraisal of the land termed “Market Value” (MV) is in many instances set to lower than 20% of what the land is actually sold for i.e. The Open Market Value (OMV). The buyer is quite happy to register the land at or slightly above the MV ascribed by the government and in doing so saves a significant amount on Stamp Duty which is shy of 7%. This results in a WIN for the buyer and a LOSS for the government.

When government acquires the land, the compensation to the owner is based on the prevailing government evaluation i.e. the MV. The government sets the acquisition price at twice or thrice the MV. But in instances where the MV is lower than 20% of the OMV, even 5 times the MV does not fetch the current OMV to the owner. The Government then sells the land to the purchaser i.e. Developer/Industrialist “officially” at a price that is higher than the acquired price, which is still lower than the OMV. However, the purchaser is made to part with an amount that is the OMV or thereabouts with the difference between what the actual cost to the purchaser and “official” sales price pocketed by corrupt bureaucrats and politicians. When the owners find out that the land was sold to the purchaser at the price recorded “officially”, all hell breaks loose. This is a Lose/Lose situation wherein owners are unable to realize the true value of their holding, the government is shortchanged, the purchaser at times pays less than the OMV and a windfall is realized, by the corrupt bureaucrats and politicians. What is needed is policy that results in, and ensures a reversal of the current situation.

For example say:

• The Open Market Value (OMV) is 100.
• The Market Value (MV) set by the government is 20.
• Government pays the owner 40 and proudly claims we paid 2 times the MV.
• The government then turns around and sells to the purchaser - Developer or Industrialist for an “Official Price” of 50 and shows a 20% profit.
• However the Actual Cost paid out by the purchaser is the OMV i.e. 100 or at times less, maybe 90 or 80.
• The difference between the Official Price and what the purchaser’s  Actual Cost is pocketed by the intermediate corrupt maggots.

There are many ways to circumvent this situation. One is for the government to reduce the amount of Stamp Duty which is currently about 7%. To use the above example, The Stamp Duty paid on the MV purchase price of 20, falsely declared by a buyer, will be 1.4. If the government reduces the Stamp Duty to say 2%, and the land is registered at OMV of 10, the government will realize 2. Buyers will be motivated to declare the actual price paid and pay the 2%. In addition all land transactions should be posted in a public registry and available to the public.

One hurdle still remains and that is the classification of land allotted for development. It has to be classified as NA. This could be factored into the Master Plan of the Town, Taluk or District. Town guidelines will have to be constantly updated as Towns expand. A policy could be established that each Taluk should set aside a certain percentage of their land for Development (Housing and Industry) and this could be rolled up to the District Level. Non-arable and non-forested land could automatically be allowed for conversion to NA and be made available as areas for development. The price negotiations can then be left to the buyers and sellers. This policy has been instituted effectively in Gujarat, where owners of non-arable land have benefited significantly.

An additional step each district should take is to develop Industrial Parks that entrepreneurs could lease, to set up small scale businesses. The Maharashtra Industrial Development Corporation has many such successes set up around cities. This program could be expanded in a smaller scale to smaller towns.

5.     Rehabilitation and Resettlement (R and R):

RandR is the most controversial and often botched up aspect of Land Acquisition. The requirement of a Social Impact Study is only as good the follow through in its implementation and the ability to modify the approach as and when what is actually experienced warrants it.

Transactions concerning private land should be treated differently from acquisition of public land. In many cases privately owned land has been encroached upon by squatters and the rights of the owners are subordinated to that of the squatters. R&R in this situation should be the responsibility of the government with incentives provided to the acquiring parties involved to assist in the R&R of the squatters.

More importantly is land acquired for Dams and Mining. This is covered in a following section. The big question confronting India is whether it is fair to continue on the path of progress on the backs of the marginalized poor who are affected.

Compensation to displaced persons should be based on their prevailing income level along with appropriate incentives that encourage rehabilitation. Lump sum payments and land grants are often frittered away, with the displaced person being worse off than prior to being displaced. This is often the case of good intention going bad.

Rehabilitating a person who has lost their livelihood/current way of life is an uphill task. The adults are usually entrenched in their ways. Change in this context is a generational issue. The young have to be educated. There has to be strict laws prohibiting the sale of liquor that is accompanied by jail terms for people engaged in the selling of liquor. R&R provides a good opportunity to provide internships to urban youth to work closely with the affected people.

6.     CRZ Rules and its consequences:

CRZ (Coastal Regulation Zone) rules that oversee coastal development are yet another instance of imposing extreme controls that strangle development of the coast. Instead of promoting good practices, discouraging bad practices and providing a path to achieve the former for existing violations, the situation is such that violations are frequent and the very intentions of the laws are not realized.

Under the updated 2011 rules, coastal land has been classified into four zones:

• CRZ I will  comprise ecologically sensitive areas like mangroves and mudflats;
• CRZ II will  comprise developed areas;
• CRZ III will consist of underdeveloped areas, not  classified ecologically sensitive; and
• CRZ IV will comprise territorial waters from the low tide line to 12 nautical miles into the sea.

Restricting development in zones designated CRZ I makes eminent sense. CRZ IV pertains to jetties and ports and would require licensing and clearance. However, CRZ II and CRZ III could be governed through establishing and enforcing environmental guidelines. The government could even add a “develop at your own risk” clause to insulate it from storm damage and ocean erosion i.e. “Acts of God”.

Requiring an open space from the high tide line to the building of High Rises makes sense, but making the distance 500 meters is rather extreme.

CRZ II and III rules severely restrict the development of tourism on the coasts of India and with that opportunities tied to tourism is eliminated completely.

7.     Mining and Dams, Rights and Wrongs:

The rights to mine natural resources and constructing Dams add another layer of complexity to the land acquisition situation. Dams are government undertakings, while Mining involves private party participation. To the average citizen these are engines that drive progress. What is ignored or brushed aside are the hardships borne by the affected people and the environmental impact.

Past practices continue to be pervasive in present projects. The modus operandi in many cases is literally to bulldoze the way to get the job done with no regard for the welfare of the affected people coupled with abject disregard for the environment. Furthermore, promises made are broken and as a result there are protests due to skepticism.  Those protests are responded to by lathi charges, resulting in death at times. It is alarming that the people who promote and execute these projects are presumably members of civil society. However, how they proceed, amounts to legitimized thuggery driven by extreme “laalach” in the name of progress.

Mining and Dams by their very nature are controversial activities with conflicting agendas between stakeholders. The big question confronting India is whether it is fair to continue on the path of progress on the backs of the marginalized poor who are affected. In all fairness there are many in civil society who work continuously to bring such issues to the attention of the press and public. However, more often than not, this leads to a confrontational approach where each party digs its heels, refusing to budge. As a result instead of working towards a negotiated resolution, the issues get buried into accusations and counter productive debate.

There is a saying that the needs of the many far outweigh the needs of the few. Mining and Dams are examples of those activities that meet the needs of the many who rely on the output of these projects. Besides, they also provide a wide spectrum of opportunities from unskilled to highly skilled individuals. While it is impossible to address every issue of every stakeholder, each stake holder has to agree to sacrifice or give in a little so that an optimal agreement is arrived at. It is therefore imperative that a balanced workable solution be arrived at. What can be and should be achieved is a “Compromise Solution” since a “Consensus Solution” is well nigh impossible.

At risk is the environmental impact that has to be factored into the discussion. Environmentalists are the stake holders who serve as custodians of the environment, with the other stakeholders being the Miners/Developers, the Government, the Inhabitants of the area and the owners (if any) of the land itself.

To arrive at a Compromise Solution all parties have to accept that development is inevitable and everyone has to commit to a workable solution. Also on a case by case basis a comprehensive solution will require “give and take” from all parties concerned. With that in mind the following is a partial list of what has to be factored:

-         The environmental impact should be minimized as much as possible.

-         Concerns of the inhabitants should be addressed. Besides relocation assistance, they need to be rehabilitated, which is no simple task. Rather than giving them a big payout, which is frittered away, a monthly payout is the preferred option.

-         Owners (if any) must be compensated fairly

-         Additionally, in the case of Mining:

o       Restoring the environment has to be factored into the operational costs. It may take many years for the environment to be restored, but with proper actions such as grading, the planting of trees or ground cover, it is possible

o       Miners should achieve a viable rate of return on their investment

o       Government should receive a fair share by way of revenue

8.     Transitioning to a Market Based Economy:

Another factor to be taken into consideration for India to progress is to transition from a Socialist driven populist economy which strangulates the pricing of goods and services to a more pragmatic “market based” economy that serves all classes of people. With respect to land, one such solution is to structure the laws that govern an SEZ differently in that the pricing of essential resources such as electricity, water, LPG, diesel, petrol & property taxes etc. are priced based on economic and commercial rationality as opposed to Political or Societal pressures.  Only members of the lower economic classes in an SEZ should be eligible for specific subsidies that cover essentials.

9.     The Tenant Advantage:

An artifact of the laws and the legal process that owners are painfully aware of is that the balance of power is tilted in favour of those who occupy the land, be it through a lease or through encroachment. In India, possession is 9.99 tenths of the law and evicting the occupants is a lengthy arduous time consuming process. The problem with this situation is that it encourages miscreant behaviour, wherein the encroacher uses the law and the at times, the patronization of politicians to deny the rightful owner the privilege that they legally possess. Furthermore, lawyers take advantage of this and proceed to lengthen the process resulting in an extended and guaranteed source of income for themselves. 

10. Conclusion:

The major flaw regarding land in India is a focus on who can own land based on its classification, as opposed to land use. Emphasis is given to protect land encroached by the landless, rather than promoting an abundance of affordable of rental options and opportunities. The desired objective ought to be to remove burdensome restrictions on land ownership and acquisition and ensure good environmental practices. This will go a long way in realizing opportunities for the “demographic dividend” and prevent a “demographic disaster”.

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