Land policy vital for Modi’s manufacturing dream

Author: Geethanjali Nataraj and Richa Sekhani, ORF

Land acquisition is becoming risky and uncertain in India. Delays, protests and resistance on the part of the displaced — as have been observed in Bengal and Odisha — have curtailed investment in India’s infrastructure sector. Environmental clearance is also causing delays and cost blowouts in infrastructure projects, which is linked intrinsically to land acquisition.

While the land acquisition process is problematic for the poor, there has been little attempt to understand the current situation and find solutions for the private sector. This is a result of both the slow-moving, bureaucratic government machinery, which has been responsible for delays in land acquisition, and the monopoly of governments implementing a suitable land acquisition law, which balances the needs of both the entrepreneur and the farmer.

The previous government finalised on 18 April 2013 a ‘broad consensus’ on the controversial land acquisition bill, paving the way for its consideration and passage in parliament. The bill affected farmers and entrepreneurs differently. It proposed that for setting up private projects and for public–private partnerships (PPPs), land could only be acquired with the consent of 80 per cent (for rural areas) and 70 per cent (for urban areas) of the families affected. Compensation was fixed at four times the market rate for rural areas and two times the market rate for urban areas. The bill was praised by some but others reviled it as a complex piece of legislation.

In 2014, with the BJP-led National Democratic Alliance government driving its development agenda, there was a new initiative to introduce reforms in land acquisition procedures. With a push for ‘Make-in-India’ manufacturing growth and infrastructure development, the government made necessary amendments during the December 2014 parliamentary session. The 2014 bill created five special categories of land use: defence; rural infrastructure; affordable housing for the poor; industrial corridors; and PPPs. In cases where governments owned the land, PPPs would be exempt from the 80 per cent and 70 per cent consent clauses in the 2013 bill, as well as the Social Impact Assessment (SIA) requirement. According to the government the amended bill has done away with the consent clause as proposed by the 2013 bill. These were expected to promote the Make-in-India initiative, which seeks to boost domestic manufacturing.

The 2014 law passed by the BJP replaced the clause ‘private companies’ with ‘private entities’, which includes companies, corporations and non-profit organisations. It also removed restrictions on acquisition of land for private hospitals and educational institutes. But the 2014 bill faces resistance from both the opposition and BJP’s allies in parliament. Opponents of the bill said it was ‘anti-farmer’ and ‘anti-poor’, mainly because of the removal of the consent clause and the SIA.

But on 9 March 2015, after heated debate on the right to fair compensation and transparency in land acquisition, the lower house of parliament approved the new land acquisition bill. This was largely a result of the nine amendments introduced by the Union government. The new bill removed exemptions for social infrastructure projects in PPPs and clarified that the land acquired for industrial corridors would only be limited to one kilometre on either side of highways and railway lines.

The new law has also provided compulsory employment to one member of the family affected and has proposed a streamlined grievance mechanism for those who lose land — which includes district level complaints. Amendments have been made to ensure that there is consent from the panchayat (village council) before acquiring tribal land. These amendments will make it easier to acquire land for select projects and expedite pending infrastructure projects. They have successfully moderated some of the restrictive provisions in the original law of 2013. The bill will be helpful in promoting business and reducing the cost of acquiring land for industry by as much as 40 per cent of the total cost.

It is essential now that the bill is implemented as soon as possible and the issue is not further politicised. It is central to the government’s infrastructure development agenda, and the government would find it difficult to execute its Make-in-India policy without improving the legislative framework for land acquisition.

The law therefore represents a crucial plank of Modi’s economic agenda to turbocharge Indian growth.

Geethanjali Nataraj is a Senior Fellow at the Observer Research Foundation and Policy Lead at Knowledge Partnership Programme, DFID-IPE Global.

Richa Sekhani is a Research Assistant with the Observer Research Foundation, New Delhi.