Subhashis Mittra
The much-talked about land reforms bill, which will replace a muddled law dating back to the 19th century, is being dubbed more as a vote winner for the ruling United Progressive Alliance (UPA) because it will give farmers up to four times the market rate for land bought for industry and infrastructure.
The government says the bill will help speed up industrial investment by making rules clearer, but business houses have expressed doubt saying the new law will thwart efforts to revive the floundering economy.
Industry body FICCI has said the passage of Land Acquisition Bill will not only push property rates significantly but also delay land acquisition by four to five years, thereby making industrial projects financially unviable.
“With the passage of the Bill, not only the cost of land will go up significantly, but the process of acquiring land will also get stretched by four to five years,” FICCI said.
“This certainly does not augur well for India’s manufacturing sector. As we all know future jobs can be created if we are able to give necessary push to manufacturing in India,” it said.
The Bill seeks to provide just and fair compensation to farmers while also ensuring that no land can be acquired forcibly, and will replace the archaic Act of 1894.
The Bill proposes compensation that is up to four times the market value in rural areas and two times the market value in urban areas.
While explaining the salient features of the bill, Finance Minister P Chidambaram said, “We believe that the land bill strikes a fair balance.”
“Land has to be made available, but while land is being either purchased or acquired to make land available for industry, we must also keep in mind that those who are deprived of land are in most cases deprived of the only asset they have,” he said.
For the first time the bill is set to bring transparency in the process of land acquisition, compensation and rehabilitation as a matter of right.
A key legislation, the bill calls for taking the consent of 80% of land owners for acquiring land for private projects and of 70% landowners for public-private projects.
The bill’s pricing rules would oblige developers to pay up to four times the market rate for land in rural areas and twice the rate in urban areas. Displaced people must also be given homes and jobs.
The Land Bill is said to have provisions to associate affected families with development activities. The bill also tries to lay down a transparent process for land acquisition for industrialisation, development of essential infrastructural facilities and urbanisation by giving adequate financial compensation to the affected people.
“This bill will protect farmers and the rights of farmers,” said Dushyant Naagar, the head of a farmers’ lobby group in Uttar Pradesh, India’s most populous state. He predicted that the generous pricing would help unclog project bottlenecks.
Other farmers’ groups, however, say the bill does not provide adequate compensation. Businesses say the new rules will raise costs and could even slow down acquisitions because of a requirement that four-fifths of all landholders concerned in a sale give their consent before any land is acquired for a private project.
For joint public-private projects, 70 per cent of landowners must consent. “In the present scenario of economic crisis, this bill will further hit investment and growth of industrialisation, employment and infrastructure,” said Vikash Sharan, the director of the Indian unit of Posco, a South Korean steelmaker.
Posco has faced years of protests from farmers opposed to a steel mill in Odisha that would be thecountry’s largest single foreign investment project.
Farmers protesting against what they see as unfair land acquisitions have stalled projects in recent years.
In a statement, business lobby group the Associated Chambers of Commerce and Industry of India (ASSOCHAM) said getting consent from 80 per cent of land-holders “will be very difficult, if not impossible.”
Rating agency Crisil said the Land Acquisition Bill will lead to an increase in the gestation time of projects and overall costs.
With the rehabilitation and resettlement clauses of the Land Bill, Crisil Research expects land prices to increase as the expectation of land owners will be higher.
“The land acquisition process will be longer and project gestation period will increase. Currently, the proportion of supply (which comprises projects of over 50 acres) to total planned supply in the top 10 Indian cities is 25 per cent,” it said.
The new rules will apply retrospectively to cases where no land acquisition award has been made and to those where land was acquired up to five years prior, but no compensation was paid or no possession took place.
Real estate developers say the passage of the Bill could push up property prices by as much as 30% in projects where land is yet to be acquired.
While developers agree that the Bill will increase transparency in land deals, they say the higher compensation to land owners could make several real estate projects unviable. While large projects of over 50 acres will become difficult to execute, even prices of smaller parcels of land that do not come under the purview of the Bill could double, they add.
“The process of acquiring land for projects will become tedious, especially in the case of large land parcels,” said Lalit Kumar Jain, chairman of Confederation of Real Estate Developers Association of India. Developers say the worst hit could be low cost and budget housing projects. “The idea of low cost housing was to get cheap land. If land prices shoot up, so will the prices of the finished product,” said a leading builder.
According to the Bill, affected “families” would include farm labourers, tenants and workers who have been in the area for up to three years before the land acquisition. Such persons will have to be given a job or compensation of Rs 5 lakh, an allowance of Rs 3,000 a month for a year, besides other allowances as part of the rehabilitation and resettlement (R&R) package.
This means that a private company acquiring land will have to first seek the consent of 80% of the land owners before approaching the government to acquire it. Once cleared, it will have to offer an R&R package, too.
One of the amendments to the Bill allows a buyer to lease land, instead of buying, as suggested by BJP leader Sushma Swaraj. “For the real estate industry, the addition of R&R component will be a big financial burden,” said Sanjay Dutt, executive managing director of South Asia at Cushman & Wakefield.
The Bill has drawn protests from developers, who maintain they always ensure full consent of the seller in any land deal. “A willing buyer and a willing seller should be exempted from the Act, as in such cases there is always 100% consent and the best market price for the land is paid,” said Rajeev Talwar, group executive director at DLF.
While the corporates and real estate are not enthused about the Land Acquisition and Resettlement Bill, it is to be seen how the measure translates into votes in the coming Assembly and Lok Sabha elections.
If ‘garibi hatao’ was Indira Gandhi’s winning slogan, Sonia Gandhi hopes ‘aam aadmi, aapka paisa aapke haath’ and ‘aapka zameen aapka’ will be the winning slogan in 2014 too as the party believes that the Land Bill along with the Food Security Bill will be the game-changer in the next Lok Sabha polls.
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