Business Today

No man's land

Puja Mehra        Print Edition: August 7, 2011

In Hindu mythology, the river Yamuna is the sister of Yama, the god of death. Legend has it that bathers in the Yamuna's waters are freed from the torments of death. But the 165-km-long Yamuna Expressway from Greater Noida to Agra is fast turning out to be the kiss of death for farmers who till the land along its banks.

The farmers initially cooperated with the Uttar Pradesh government, selling off their fertile lands for the expressway. But it was a different matter when the government sought to acquire more land to build urban clusters along the expressway too.

This time they resisted. It has now emerged that over the past two years, Chief Minister Mayawati's government forcibly acquired around 6,500 hectares affecting a population of about 1.3 million.

Some of the farmers went to court and in a series of judgments, both the Supreme Court and the Allahabad High Court have struck down a number of acquisitions. A crucial feature of the judgments has been their questioning of the manner in which the government exercised its powers under Section 17 of the Land Acquisition Act, or LA Act. Section 17 bars those affected by land acquisition from filing objections.

An archaic law's journey

1894: Land Acquisition Act passed

1998 Oct: Union Ministry of Rural Development initiates amendment process

2007 Dec: Land Acquisition (Amendment) Bill, 2007 introduced in Lok Sabha

2007 Dec: LA Bill referred to the Standing Committee on Rural Development

2008 Oct: The committee submits its report to Parliament

2008 Dec: Many of the recommended amendments approved by UPA government

2009 Feb: LA Bill passed a day before the dissolution of the 14th Lok Sabha

2009 Feb: LA Bill is tabled in the Rajya Sabha but not cleared; it lapses
This colonial Act, passed in 1894, is at the heart of the debate over land currently raging in the country. Industrialisation and infrastructure building require large quantities of land, and delays in acquiring it could affect GDP growth as well as investor sentiment. The list of industrial ventures stalled in recent years across the country, due to locals refusing to sell, is long. Take, for instance, the plight of South Korean steel major Posco: Karnataka Chief Minister B.S. Yeddyurappa announced on July 13 that the proposed Rs30,000-crore Posco steel project would have to move out of Gadag district of the state if farmers refused to sell their land. Similarly, Posco's Rs 54,000-crore steel project in Orissa's Jagatsinghpur district has been stuck for six years now because of land acquisition issues.

"For job creation you need new industries to come, new industries need to acquire land and you (the government) need to facilitate land acquisition," says Kris Gopalakrishnan, CEO and MD of Infosys. "You also have to make sure they pay proper compensation. We have to have a balance."

Those being displaced, however, look at the problem differently. Surely they have rights over the land they own? Often in the past these rights have been treated cavalierly. The number of people displaced by projects since Independence is a whopping 60 million, according to the National Advisory Council, or NAC, the advisory body that monitors implementation of the UPA's manifesto.

A Bill amending the old land acquisition law is slated for introduction in the forthcoming monsoon session of Parliament after an earlier version lapsed following the dissolution of the 14th Lok Sabha in 2009. Former Union Rural Development Minister Raghuvansh Prasad Singh has no doubt on whose side the new law should be. "From being proindustry it has to become profarmer," he says.

The appointment of MIT-educated Jairam Ramesh as the new minister for rural development promises a balance - he is not a typical politician, is known for his uprightness and has no lobbies to please. Immediately after taking charge, Ramesh called a series of meetings with the NAC and other stakeholders to thrash out a solution to the burning issue.

BT examines key issues the amended legislation must address.

Should the state buy land for private companies?
There is little resentment among those affected when the government buys land to build a bridge or a road. But when land is acquired for a private company, the government is seen as taking sides - favouring the rich against the poor.

The LA Act 1894 empowers governments with what is called Eminent Domain (Read: Rajeev Dhawan's column). The state has the power to take away private property for public use by paying just compensation, even if the owner does not want to sell. The Act does not specifically include acquisition of land for a private company as a 'public purpose'. However, in the past few decades, state governments have been able to use the power of Eminent Domain to buy land for private industry by interpreting public purpose to include "development and industrialisation".

 How land is acquired for companies at present and what could make it tougher

Land is identified by the company

Step 1
Notification from state government saying identified land is required for public purpose
In future: Firms may have to acquire bulk of land they need directly without government help

Step 2
Objections are filed by owners and others with the district collector within 30 days
In future: Villagers could get up to six months to file objections

CAVEAT
States often acquire land within 15 days of publication of a notice bypassing this step
In future: Tighter urgency clause to stop this practice

Step 3
Notices from the collector sent to land owners inviting compensation claims

Step 4
The collector conducts an enquiry on objections fi led. No award can be made sans enquiry

Step 5
Government takes possession of land

Step 6
Compensation paid based on market value of land, including interest payable for delays
In future: Compensation to go up significantly and include an original owner share in case of land value escalation

Land is transferred to the company


Pradeep Dhobale
Pradeep Dhobale, Executive Director, ITC
For instance, in July 2006, the West Bengal government notified under the 1894 Act its intention to acquire about 1,000 acres in Singur in the following words: "Land is likely to be needed to be taken by Government/Government Undertaking/Development Authorities, at the public expense for a public purpose, viz employment generation and socio-economic development of the area by setting up of Tata Small Car Project".

The subsequent controversy in Singur over land acquisition from farmers, many of whom were made to unwillingly part with their fertile land, triggered the debate over whether the principle of Eminent Domain should be used to get land for private companies. The Supreme Court made its position clear in March 2011. "Any attempt by the State to acquire land by promoting a public purpose to benefit a particular group of people, or to serve any particular purpose at the cost of the interests of a large section of people, especially of the common people, defeats the very concept of public purpose," the apex court ruled.

The lapsed Land Acquisition Amendment Bill 2009 had proposed that the government should step in on behalf of a private company only if the latter had already acquired 70 per cent of the land needed on its own, but was facing problems in getting the rest. Ramesh has declared this position will be reviewed in the new Bill. Some ministers of the UPA favour a marginal role for the government in land acquisition.

 An industry-friendly state's pro-farmer policy

Gujarat Chief Minister Narendra Modi
Policy shift: Gujarat Chief Minister Narendra Modi (sitting, second from right) with industry captains at the Global Investors’ Summit 2007. Gujarat has drafted a new policy which puts the onus of land acquisition on private companies
During the Vibrant Gujarat Summit in 2003, detergent manufacturer Nirma proposed a cement plant at Mahuva in Bhavnagar district. The `450-crore project was to include a 50-mw captive power plant. Eight years on, Nirma is yet to begin work on the 1.91-million-tonne-per-annum cement plant because the acquisition of 268 hectares required for the project has run into opposition from farmers.

While the protesting farmers and the Union Ministry of Environment and Forests have maintained the land identified for the project is wetland, the state government has classified it as wasteland. The project now faces relocation as the Centre has filed a report with the Supreme Court opposing the land allotment on the ground that it is an environmentally sensitive wetland that supports cultivation in the area.

This was the trigger that prompted the Narendra Modi government to rework its land acquisition policy earlier this year. According to the reworked policy, the state will not forcibly acquire farmland for private projects. Says Principal Revenue Secretary P. Panneervel: "The new land acquisition policy is not only farmer friendly but also addresses the welfare of those who give up land for a public utility." He says henceforth the state will not get involved in any land acquisition for private projects.

"The investor has to deal with the landowners himself.'' The government will acquire land only for public utilities but only with the landowner's consent and after providing him with a host of compensation benefits. Gujarat's stand is much like that of Mamata Banerjee's, who had prompted the UPA I to include a similar proposal in its Land Acquisition Act Amendment Bill 2009 (that lapsed with the dissolution of the 14th Lok Sabha). In May, Home Minister P. Chidambaram spoke of the need for a new policy - either reviving the lapsed Bill or introducing fresh legislation in the monsoon session. As land is on the Concurrent List, states can have own policies but will have to be in consonance with the Centre's law, Jairam Ramesh, Union Minister for Rural Development, has said. "They can build over the provisions contained in the Centre's law."

-K.R. Balasubramanyam


"If the government acquires farmland, the owners lose the option of bargaining as the price is fixed by the state," explains a member of the Group of Ministers headed by Agriculture Minister Sharad Pawar that examined the Bill in 2008-09.

A working group of the NAC, however, has recommended that land for private projects should be acquired primarily by the government. Towards the end of May, the NAC proposed that in the case of projects where more than 400 people were affected, private companies should be barred from buying land directly from farmers. "The problem with asking private companies to buy at least 70 per cent of their land requirement on their own before going to the government to acquire the remaining 30 per cent is that different farmers will get different prices for their land," says NAC member N.C. Saxena.

Few companies are keen on acquiring land on their own, though their reasons are different from the one cited by Saxena. "There is no denying that a farmer should get a fair value for his land, but it is just not possible for one company to talk to hundreds of farmers and collate the land," says Pradeep Dhobale, Executive Director, ITC. "It just cannot happen without government intervention."

 
Protest against Nano plant in Singur
Protestors set on fire a Nano model in Singur
A land slide victory


West Bengal is a classic case of politicisation of the land acquisition problem. Singur and Nandigram stand like symbols of the Left's doom in the state after a 34-year rule. They are also the trigger points for the call for a change in the country's 120-year-old land acquisition law. The Tatas subsequently had to relocate their small car project to Gujarat and may now have to return 40 per cent of the 1,000 acres acquired in Singur. The state government has taken possession of the premises after the passing of the Singur Land Rehabilitation and Development Act, 2011. But for now, the Supreme Court has stayed the order to return the land till the Calcutta High Court gives its final verdict on an appeal filed by Tata Motors opposing the step.

Trinamool chief Mamata Banerjee declared soon after her entry into Kolkata's historic Writers Buildings as Chief Minister that while she had invited industrial houses such as the Tatas to invest in the state, her government would return the land taken from unwilling farmers. The announcement may deter companies from setting up large plants in the state for which hundreds of acres are required.

Becharam Manna, Trinamool MLA from Haripal near Singur told BT some weeks ago: "There are around 400 acres inside the boundary (of the plant) that belong to farmers who did not accept their compensation. My first priority is to return this land and only then can we think of setting up industries." Banerjee has asked the Tatas to start production in the part of the plant they have been allowed to retain. The problem, however, is pockets of disputed land are scattered all over the site. This has made even the land the Tatas have been allowed to keep unusable.

Upcoming projects in West Bengal are going to have to adjust to the new policy for acquisitions. The Trinamool government has laid down some guiding principles for land acquisition in its vision statement that will make it increasingly difficult to acquire large tracts for big factories. The many conditions include a ban on acquisition of land that is cultivated or owned by small farmers. Nearly 80 per cent of the landowners in Bengal are small farmers. "Investments is a matter of confidence, infrastructure and opportunity. The opposite exists in Bengal.

Infrastructure needs to be beefed up to build confidence for investments," says Sanjiv Goenka, Chairman of the Kolkataheadquartered RP-Sanjiv Goenka group.
 
- Sunny Sen


The Confederation of Indian Industry, or CII, too has rejected the proposal of shifting the onus of acquisition to companies. It has suggested that state governments should continue to acquire and aggregate fallow and barren lands for use by industry by setting up state land bank corporations. "There needs to be a provision for setting up land bank corporations to facilitate acquisition and disbursement of land for industrial use; digitisation of land records and also zoning of land as these will be key for systematic development of industrial land," says Chandrajit Banerjee, Director General, CII.

Issac A. George
Issac A. George, Chief Financial Officer, GVK Power & Infra
Ground realities that make a case for the use of Eminent Domain by the government include a holdout problem when unless some people agree to sell their land, a project cannot materialise, or where only a specific piece of land serves the purpose in question such as for mineral extraction. The shoddy state of India's land records also creates a need for the government to step in. (See Where Does the Title Stop?) Companies that have tried to acquire land by themselves have often ended up in disputes involving unclear ownership titles, or have had to face holdouts by locals, invariably at the behest of activists.

Even then, the danger is that the government's increased involvement in land acquisition can spur a politician-businessman nexus. Already, the land mafia across the country is creating a new class of moneyed politicians.

How to give farmers a fair share
The Union Ministry of Rural Development's background research before it readied the now-lapsed Land Acquisition Amendment Bill 2009 brought to fore some hard-to-ignore ground realities.

For instance, officials in the ministry discovered that compensation in at least 80,000 cases of forced land acquisition in Rajasthan has been pending since Independence. Land had been taken from farmers for defence use. Many of the cases contesting the acquisition are still in the Supreme Court. "One of the complaints was that a golf course for the defence forces had come up on land acquired from the farmers," says Rita Sinha, who was Secretary of the Department of Land Resources when the survey was carried out. "Even if they win, the farmers will probably be paid at the 1947 land rates or eight annas (50 paise) an acre."

 
Ram Prakash
Ram Prakash, at his home in Bhatta village of Gautam Budh Nagar, UP
Rob Ram to pay Shyam

"I saw an advertisement in the newspaper for plots at Rs 62,000 a square metre in the area where my farm is situated," says Ram Prakash, a farmer in Bhatta village of Gautam Budh Nagar in Uttar Pradesh. In February this year, Prakash had finally accepted the state government's terms of compensation for acquiring the land. Prakash says he and other local farmers had been holding out but were forced to fall in line - they got Rs 711 to 880 per sq metre with no rehabilitation and resettlement, or R&R, benefits or future income streams. They received Rs 63 lakh for nine bighas they jointly owned. "It was a choice between losing our land for nothing and accepting whatever was being offered," says Prakash, who later filed an objection with the district officials and still has possession of the farm.

Farmers such as Prakash are upset with the UP government pocketing the mark-up between the compensation it paid them and the Rs 62,000 a sq metre it has advertised for. "I realised Rs 63 lakh for nine bighas is a pittance as I scouted for a plot to buy in Delhi," says Prakash. The farms in Bhatta, like all others in the 1,200 villages on the Yamuna Expressway corridor are highly fertile and canal irrigated, producing three crops a year. Bhatta's farm is near the motor racing track in the proposed Jaypee Sports City. "I am being forced to sacrifice my land to enrich the Jaypee Group," says Prakash.

The horrors of the forced acquisitions along the Yamuna Expressway came to light after Congress General Secretary Rahul Gandhi's intervention in early May. As the issue snowballed into a crisis, Chief Minister Mayawati announced a new land acquisition policy on June 2. However, the new policy still does not give owners a share in case of escalation in the land value. It says the role of the government will be that of a facilitator and companies will have to buy land from farmers directly once 70 per cent of the farmers approve the terms and conditions. The package will include an annuity of Rs 23,000 an acre for 33 years (with an annual increase of Rs 800 an acre) in addition to an option for taking back 16 per cent of their land developed for the project. Though people from Bhatta were party to the decision, many like Prakash will missout on the promised benefits as it is being implemented prospectively.

-Puja Mehra


The real issue is not the price paid for the land acquired. Even if farmers get Rs1 crore per sq metre they will be resentful if they find five years after they sold that the price of the same land has escalated five times. Yet, escalation is unavoidable as land prices in India tend to be depressed. For agricultural land to be used for non-agricultural purposes such as manufacturing or real estate development, a 'non-agricultural use clearance' from the local authority or state government is needed. It is only after such conversion that the land's price begins to rise.

Reliance's SEZ in Haryana
Reliance's SEZ in Haryana is caught in a land acquisition quagmire
For instance, when the UP government acquired 157 hectares in Shahberi village, Noida - subsequently struck down by the Allahabad High Court in May - it said the land would be used for industrial purposes. But within 11 days, the land use was changed to residential. The state government paid farmers Rs850 per sq metre but sold the land to builders at Rs10,000 per sq metre.

3lakh hectares required by 2030 to enable 8 to 9 per cent GDP growth rate. This is twice the amount acquired between 1985 and 2005

2% or less of total project cost is typically spent on land acquisition

80% of projects delayed or facing cost overruns due to land acquisition issues

80% minerals and coal lie in tribal areas where locals refuse to give up land

1.3% of GDP growth lost every year due to poor land records

Sources: Government of India, Centre for Science and Environment estimates, CLSA

Rahul Gandhi
Rahul Gandhi (in Greater Noida, UP) restarted the land acquisition debate
The consensus is that farmers will feel less alienated from the growth process if they are given a share in the value created from their land. "We have to develop a methodology where both agriculture and industry are winners in a transaction," says Issac A. George, Chief Financial Officer, GVK Power & Infrastructure.

The amended LA Act Bill that lapsed had proposed that land should be valued on the basis of its intended use at the time of acquisition, and 80 per cent of the gains from its sale to private players should be handed over to the original owners. An alternative suggested by the NAC is that every time a piece of acquired land changes hands for the next 20 years after it was bought from the farmer, 25 per cent of the gains should be shared with him. The idea sounds great, but implementing it may not be easy. "How will I keep track of the change of ownership? There is also the power of attorney route (by which land can effectively change hands without any sale being registered) ," says a district magistrate in Rajasthan, requesting anonymity.

Chandrajit Banerjee
Chandrajit Banerjee, Director General, Confederation of Indian Industry
"Tracking the second and third sale in each case will be a Herculean task," says George. Such an effort, he feels, will also encourage concealment of true value of properties and generate more black money. He also urges a look at the flip side. "What if the land is sold at a loss? Can the farmer be asked to share the loss," he asks.

Expenditure on land purchase, says George, will have to be part of the capital cost; once a company goes into operations it cannot keep debiting from its capital cost. Whatever the acquisition cost, it has to be charged as a capital expenditure in the initial years before commercial operations begin.

 
Mumbai airport slums
Slums near the Mumbai airport
Where does the title stop?


Companies acquiring land through direct negotiations with landowners run litigation risks, especially since most holdings are small, requiring them to deal with a large number of owners and squatters. The problem of poor land records and widespread disputes could be eliminated if the government uses Eminent Domain to buy land on behalf of companies. Even this may not work in all cases, especially where slums have been regularised. One such case is Mumbai's Chhatrapati Shivaji International Airport.

In May 2006, the Airports Authority of India, or AAI, transferred the 1,976-acre airport to infrastructure major GVK for its modernisation. But 276 acres had already been encroached upon and housed 275,000 to 325,000 slum dwellers who needed to be relocated. (The airport modernisation project is a public-private partnership initiative, making this acquisition a shade different since AAI will continue to own the land.) The state government, however, is yet to give the go-ahead to the shifting of the slum dwellers to new tenements built for them.

Similar problems are faced by even the biggest names in Indian industry, like Reliance. Reliance Haryana SEZ, a special economic zone company owned 90 per cent by Reliance Industries and 10 per cent by the Haryana State Industrial Development Corporation, started buying land in 2006 to set up an SEZ spread over 25,000 acres. To date, less than one-fourth of that target has been acquired. Insiders say about 8,000 acres were bought from 3,000 sellers at an average price of Rs 25 lakh an acre - five times the market price in 2006. Sellers also get an annuity spread over 33 years, amounting to a cumulative Rs 16 lakh an acre over that period. Says a former company insider on the condition of anonymity: "The revenue records in the area are disorganised, and there are many joint owners of the same land." Nearly a thousand partition cases were filed in the tehsils falling under just one district, Jhajjar, to separate the rights of co-sharers.

Navigating through land records can also be tough for acquirers. Even the registrar's office is not empowered to certify title claims. Registrars only record property for revenue purposes: what is registered is not the title but the deed of the transaction. Even these records are incomplete. So far, only 14 states have online records of rights and 16 have computerised mutation.

-E. Kumar Sharma & Josey Puliyenthuruthel



Additional reporting by E. Kumar Sharma and K.R. Balasubramanyam

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