Assignment:

An Essay on Land Acquisition Policy & Process in India

Author: Richanand Mishra (Roll no: 24, Student at AIIM, Ahmadabad)

Introduction: Currently, India is on a development track & to continue in the same way billions of money is being put ever year to upgrade the capacity of our economy. What I am referring to is The need for Infrastructure. Infrastructure comes either by upgrading the existing or by creating new physical assets. New assets require land and land and land. Whether it is roads, railways, ports, housing etc.; we need fresh land for expansion of each. Therefore, it becomes important for a nation to have a proper policy & process to channelize the land from one use to another. Let us have a look over the existing policy & processes that we have in our country for land acquisition. History: The need for mass land acquisition came at the time of Company rule in India. It came in the last 100 years of the British domination where they wanted to get best out of colonial powers. Like the need today, they also needed huge Infrastructure. Construction of various physical assets like Canals, Dams, Ports, Roads & Railways was of utmost importance. Land ownership was fragmented then and there were farmers, zamindars, maharajas etc, who owned land at various places & in varied sizes. The need for big chunks of land for public purposes led to the evolution of land acquisition acts. As Calcutta was the capital of British India, the genesis of land acquisition in India lies in the Bengal where Bengal Regulation Act (I) was implemented in 1824. This was replaced by Act (I) of 1850, by which the provision for land acquisition was extended to Calcutta town for obtaining lands for public works without any legal problems. By 1857, various laws on the subject of land acquisition were consolidated as Act IV which was applicable to the whole of British India. Finally, the Land Acquisition Act of March 1894 replaced all previous laws relating to land acquisition. India after independence was on a revamp mode. The national government had, at that time adopted a policy of heavy industrialization largely under the domain of the public sector. Private companies and multinationals were functioning under strong governmental control
1

through intimidating licensing systems. There was an enormous increase in infrastructure development and industrial activities by the state. Again, there was need for mass land acquisition & therefore, the Nehru government choose to use the Act of 1894 as base with various amendments as the time passed. It must be noted that in both events as described above, the state needed land at a cheaper cost & therefore, they framed rules which only looked reasonable and facilitated smooth acquisition process. The abolition process of zamindari system also helped in. But, the question remains that what looked reasonable in colonial India is still reasonable now? To evaluate this question same, let us go through the system that we have for land acquisition. Current Procedure: Land acquisition can be done mainly in 2 ways: (i) By Market Route: This way leads to direct interaction of the purchaser to the land owner. Purchaser asks for the land & negotiates the price for it. Therefore, as the nature of transaction remains voluntary, there is little or no social discontent. But, this route becomes cumbersome & time-consuming due to problems like unprecedented price demand from the owner, hold-outs & unavailability of land records. Therefore, buyers tend to influence government & compete with land acquisition requirements to make their purchase done by the use of eminent domain power of the state. (ii) By use of Eminent Domain powers: The project proponents in India, these days, are increasingly relying on this method and states are cooperating, so much so that it has become the norm. This is not surprising given that state governments are competing with each other to attract industrial and infrastructure projects to their respective states. As the title suggests, the land acquisition is done using the Land Acquisition Act (LAA) of 1894. Following sequential steps are followed: Step 1 Notification: Process starts with the issuance of a preliminary notification, published in the Official Gazette and two daily local newspapers. After this, land owners are asked to hold any investment to their land, preventing them from making full use of their lands and getting an appropriate return. Step 2 Filing of Objection: Once the notification is done, land owners & other stakeholders are asked to file objections. The objection can be only on the provisions as

described in act. Collector, in charge of process, hears all objections & then submits a report to the government for final decision. 1. Notification

7. Compensation

2. Filing of Objection

6. Possession

3. Declaration

5. Enquiry & Award

4. Notice to parties

Step 3 Declaration: Based on report submitted by the collector, the government issues a declaration which becomes evidence that government needs land for public purpose (or for a company).

Step 4 Notice to parties: Then, the collector informs the landowners about the governments intention of possession of their land and invites claims with respect to measurements and value of land.

Step 5 Enquiry and Award: These claims are then addressed by the collector & final award is made. Landowners not satisfied with award can still go to district court with their claims.

Step 6 Possession & Compensation: After award, competent authority takes the possession on behalf of government by paying the valued compensation. Compensation is usually paid at the market value of land, prevailing on the date of the preliminary notification. For any delay in compensation, an interest of 12 % per annum is also given. In view of the compulsory nature of the acquisition, a solatium equivalent to 30 % of the market value is also provided.

The act also has provision for acquisition in emergency. In this, usually number of steps & time limits get reduced. (ii) Compliance to other laws In addition to Land Acquisition Act of 1894, there are several other laws which need to be followed, depending upon specific purpose of land. Some of them are: The National Highway Act (NHA) of 1956: The LAA covers land acquisition for every kind of public purposedams, industry, hospitals, educational institutions, housing, official and commercial buildings, airports or railways. Until 1956, land for all highways was acquired under the LAA. But since the enactment of the NHA, 1956, land acquisition for national highways is carried out only under this Act. The NHA applies only to the national highways, which are under the jurisdiction of the Central Government and not to state highways, where land must be acquired under the LAA. It is to be noted that the land acquisition under NHA is quite different from land acquisition under LAA. There is difference in the execution pattern; time limits at various stages; compensation pattern and resettlement & rehabilitation benefits. Introduction of NHA for road works adds to the delay in acquisition of land for roads & highway project. The changed conditions in NHA for administration control, valuation method etc creates more confusion. Since NHA requires appointment of independent team (not state official) for supervising land acquisition, the dependency of this team on local official for details such as maps etc. creates role conflicts & delays. For speedy acquisition of land, it is suggested that (a) competent authority should mobilize and update records for villages coming under the project, as they are identified; (b) computerized records of rights should be in the public domain; (c) effective systems should be created for better delivery and (d) enhanced land acquisition and resettlement institutional capacity is made at the design stage only.

The Forest Conservation Act of 1980: This act was setup by government of India to regulate the diversion of forest land for non-forest purposes. The act provides regulatory mechanism for unavoidable use of forest land for development purpose. Mainly, there are 2 stages of clearances (1) By state / UT giving only inprinciple
4

approval by stipulating certain conditions. (2) By regional offices of Ministry of Environment and Forests (MoEF), State Advisory Group (SAG), Forest Advisory Committee (FAC) and others after fulfillment of stipulated conditions. One of the major issues in development of acquired forest land is the time taken in obtaining the forest clearance. The conditions stipulated by the Ministry of Environment and Forests (MoEF) and the state forest departments, at times, appear unreasonable and difficult to meet. These conditions vary on project to project & state to state as there is no uniform guidelines set by states for evaluating the impacts. Amendments at State Level: It is to be noted that facilitating land acquisition is one of the three main aims of state-level land legislations in India, the other two being regulating administration and development and introducing land reforms. State also plays a significant role in the rehabilitation and resettlement (R&R) of those involuntarily displaced by land acquisition. A review of the amendments at the state level reveals that the states have adopted the LAA of 1894 with essentially procedural changes. These changes are in the process of preliminary notification, criteria for determining market value, compensation rights, rules for inaction etc. National Rehabilitation and Resettlement Policy (NRRP) lays down the objective that R&R benefits to be made available to the Project Affected People (PAP) and it is the state governments that are required to operate this provisions of the policy. The Policy of 2007 provides that the appropriate state government may appoint an administrator for Rehabilitation and Resettlement, who is an officer not below the rank of District Collector, to oversee the R&R plan. The administrator is vested with the power of overall control and superintendence of the formulation, execution, and monitoring of the rehabilitation and resettlement plan. Thus, it is evident that the entire R&R mechanism lies on the discretion of the appropriate state government. Also, NRRP of 2007 has introduced the concept of Social Impact Assessment (SIA) of projects. The Policy states that whenever an area is declared as an affected area, the appropriate government shall ensure that a Social Impact Assessment (SIA) study is carried out in the affected areas in such manner as may be prescribed by law.

Criticism: The Land Acquisition Act of 1984 is a draconian law which was enacted by the colonial rulers for their own use. The essence of the same was not understood by the new leaders of independent India & was carried further in our democracy. The act has led states Eminent Domain to be used forcibly for acquiring private lands in the name of public purpose, whose meaning is still undefined. Excessive discretionary powers is with the collector and government which are subject to their interpretations. The compensation offered to the displaced persons remains below the market price as the price is determined by the local collector / officials on the basis of the sale and purchase prices obtained from land transactions that have taken place in the vicinity. The latter always represented gross undervaluation by the parties in the transaction to avoid paying the registration charges. In other words, the compensation amounts paid under the Act failed to capture the real value of the land. Also, a landowner cannot approach the court directly to object against the award (that is, on matters related to the measurement of his land or the amount of compensation); he has to seek a reference from the collector only for doing so. In most cases, the authorities routinely invoked the urgency clause to dispose voiceless citizens but the process of payment of compensation remained tortuous and time consumingm making it unreasonable in the view of landowners. The act has various flaws as there is no time frame set for the declaration, possession & compensation. This puts the landowners nowhere as they are not allowed to make full use of land after the notification. A mere interest of 12% will not ensure the future livelihood given that the landowners with low income remains well aware that his/her mean for survival will go away. In practice, collector & other owners disallows the use of land completely & uses the same for some other use till the time governments takes final decision. The act does not provide a level playing field as a public sector party faces less problems in acquiring land than a private sector one. Given the current situation where the government is encouraging private participation in the infrastructure sector, this provision goes other way around.

New Amendments 2007 Bill: There are significant changes that has been proposed in the 2007 Bill with regard to (a) the purpose for which land may be acquired, (b) the amount of compensation to be paid, (c) the process of acquisition, (d) use of the land acquired, (e) dispute
6

settlement mechanisms (f) Public Information and (g) Acquisition by private industry. These are briefly explained below: Purpose: As state before, land may be acquired for a range of uses such as village sites, town or rural planning, residential purposes for poor or displaced persons, planned development (education, housing, health, slum clearance) and for state corporations. Land may also be acquired for use by private companies for the above purposes or if the work "is likely to prove useful to the public" i.e. with use of Eminent Domain under LAA. The new bill has a narrowed list which defines Public Purpose: (a) for strategic naval, military or air force purposes; (b) for public infrastructure projects; and (c) for any purpose useful to the general public given that 70% of the land has been purchased from willing sellers through the free market. This definition of Public Purpose is not comprehensive; but is better than what is being used vide LAA of 1894. Compensation: The LAA of 1894 requires market value to be paid for the land and any other property on it (buildings, trees, irrigation work etc) as well as expenses for compelling the person change place of residence or business. It explicitly prohibits taking into account the intended use of land while computing market value. The new bill requires payment of the highest of three items: the minimum value specified for stamp duty, the average of the top 50 percent by price of land sale in the vicinity, and the average of the top 50 percent of the land purchased for the project from willing sellers. For computing recent land sale, the intended land use is to be used. Which means if a agricultural land being acquired for an industrial project, the compensation for the same shall be paid at the price of industrial land. This process of land valuation is very much close to the market value process wherein both the parties mostly agrees for values based on (a) price for which land will be used & (b) the prices prevailing in the vicinity. Process of acquisition: Several changes are proposed, including the requirement of a Social Impact Assessment (SIA). Any project that displaces more than 400 families (200 in hilly, tribal and desert areas) will require an SIA before the acquisition is approved. This additional condition forces the project proponents to think about the social impact in their initial plan itself. This leads to proper budgeting of the projects & eventually, prevents these proponents to not go for any shortcut, less expensive methods. It discourages the project stakeholders to look for Eminent Domain way.
7

Use of land acquired: The new bill requires that the land acquired to be used for that purpose within five years. If this condition is not met, the land reverts to the government (it is not returned to the original land owners). This constraints land receiving agency to act for the objective for which the land acquisition took place. Also, if any acquired land is transferred to another entity; 80 percent of the capital gains need to be shared with the original land-owners and their legal heirs. This provision makes sure that the use of land will directly determine the compensation even after the actual sale. Dispute Settlement: In accordance with LAA of 1894, all disputes are currently being resolved by civil courts, which results in delays. This new bill sets up Land Acquisition Compensation Dispute Resolution Authority at the state and national levels. These authorities will have the power of civil courts, and will adjudicate disputes related to compensation claims. The formation of new dispute resolution authority should speed-up the process as 70% of backlog cases with courts are in respect of land acquisition only. This will also isolate the judgment process as the collector who executes the acquisition process at the root level will not have any influence in judgments. Power to Collector: LAA of 1894 gave collector a fair power w.r.t how the valuation is to be done. At times, government just listened to the collectors report without even cross-checking the real facts. This led to use misuse of powers by the local collector. This new bill has defined a procedure for collectors in matters of market value assessment which is the payment of the highest of three items: the minimum value specified for stamp duty, the average of the top 50 percent by price of land sale in the vicinity, and the average of the top 50 percent of the land purchased for the project from willing sellers. Also, the new law will make it mandatory for the collector to provide access to summary of transactions to public. Acquisition by private party: There would be significant change in the way the private sector would be acquiring & using lands. They will have to purchase at least 70 percent of the required land from willing land owners (presumably, at fair market price). Also, the compensation amount for the remaining (up to 30 percent of land) could be significantly higher than the old method. This would be at a premium to the average paid to the willing sellers, and it would be based on intended industrial or commercial use (which usually commands a higher price than agricultural land).

Conclusion: Land acquisition is a process which is meant for the development of the society. The whole idea of land acquisition, by giving Eminent Domain power to the government, was supported because everyone felt that development of society is more important than development of an individual. We must not forget that, land acquisition is possible because people decide to sacrifice his or her comfort for the development of society. Since, these sacrifices are not being used for what it was meant to, landowners are feeling cheated where they would have been proud. The intangible & tangible benefits associated with the land use can never be replaced with equity to all through any acquisition acts. It is the perceived fairness of the process that matters. LAA of 1984 has lost the same; people feel that this is a biased procedure mainly due to unwanted practices done by executors of the act in all these years. The future aim should be bring back the fairness touch in acquisition process by changing the rules & its execution pattern. I sincerely hope that the upcoming bill will eradicate some of the major problem of old act & hence, will create an effective, reasonable & fair system.

--- x ---

(No. of words: 3180, Font used: Footlight MT, Size 12pts, Line Spacing 1.5)

References:
Evolution of Political Economy of Land Acquisition - by Sanjukta Ray and Shreemoyee Patra Eminent Domain Powers: Rationale, Abuse, and Way Forward - by Nirmal Mohanty; Boxes by Mandar Kagade and Nitin Desai Regulatory and Policy Regime of Land Acquisition: A State-level Perspective- by Videh Upadhyay and Chandrima Sinha; Box by K. Balagopal Land Acquisition Process for National Highways: Issues and Recommendations - by V.K. Sharma and Tarun Choudhary Obtaining Forest Clearances under the Forest (Conservation) Act, 1980 - by C.D. Singh Use of Eminent Domain: Process and Its Critique - by Tarun Choudhary; Box by Ramakrishna Nallathiga. Various websites such as Wikipedia.com, Business.gov.in, Indianexpress.com etc.

--- x ---

10