Business Today

Say no to coercion

Land acquisition for industry through coercion by the State is not feasible in a democracy, argues Dr Amit Mitra.

Print Edition: October 17, 2010

Land, unlike all other factors of production, such as plant, machinery, labour, technology, human capital and innovation, is simply not reproducible. No wonder, the classical economists of the 18th and 19th century spoke of "rent from land" as against "profits" from all other factors of production. This fundamental difference lies at the heart of today's debate on the use of the predatory powers of the State to acquire land from farmers and put it to other uses.

In recent times, the debate on land acquisition captured the nation's attention through the Nandigram and Singur protests led by Trinamool Congress chief Mamata Banerjee against the CPI(M) government. These led to a rethinking among all political parties on the issue of land acquisition from farmers and tribals. The immediate result of this was the formulation of the new Land Acquisition Bill to replace the century-old colonial Land Acquisition Act of 1894. The imperial British Act gave sovereign powers to the State to acquire land for "public purpose".

Mitra's take

  • State should not use coercion to acquire land; a major balancing Act must be evolved
  • The Haryana model of lump sum payment and annuity could work; but it vests power to the State to "cajole" farmers
  • Proposal to share 26 per cent of the post- tax profi t with displaced population would impose sizeable obligation on companies
The new Bill states that the government will not acquire land for private projects unless 70 per cent of the required land has already been purchased by the private sector promoter through direct negotiations.

The current Bill is merely amending the original colonial Act and, therefore, there is a strong point of view that we should have a new Act altogether. Rahul Gandhi, while visiting one of the disputed land sites, seemed to agree with his party's coalition partner Trinamool, stating that "a general view on the land Bill is that we (Congress-I and Trinamool Congress) are one on it". He flagged the issue of the extent to which private sector must purchase land before the government comes in to acquire the remainder.

What are the options for resolving these competitive demands of development, within an electoral democratic framework like that of India? Interestingly, this is not a problem faced in the "dictatorships of the proletariat". The Economist magazine reported that 90,000 mass demonstrations took place in China in 2006, many of which were against forcible acquisition of land by the State. Since then China has stopped reporting demonstrations.

One option for farmland acquisition by the government or the private sector has been acted upon by Haryana. Here, if the government acquires land from a farmer, it offers a market-based price as a lump sum payment and in addition it provides an annuity.

The problem with this model is the potential predatory power of the State to "cajole" farmers to part with their land. Keeping this potential predatory power in mind, Mamata Banerjee wants the State to have no role in land acquisition, leaving it to private players to negotiate directly with landowners.

Of course, a special case of this debate centres around land with mineral resources, mostly concentrated in tribal areas. Here, the picture is more complicated since land is not privately owned with clear property titles. Most often, tribal land is a part of the "commons".

The government is now proposing that 26 per cent of the post-tax profit should go to the displaced population, who will then have to sort out how to share this compensation across the community. If a company is not making any profit and has nothing to share, an amount equivalent to the royalty paid to the State will be paid to the displaced community. This proposal has already been debated and is likely to reach the Union Cabinet and become a law. No doubt, industry has grave concerns on attracting investments and inducting technologies in mining after meeting these sizeable obligations, in addition to corporate taxes and royalty payments.

Today, the nation is facing a challenging issue. On one hand, nine million new jobs will have to be created annually, the bulk of which will have to be in the industrial and manufacturing sector, requiring land for the purpose. On the other hand, coercion of the State in acquiring land, in a democratic polity, is simply not feasible. The silver-lining is that 40 million hectares of land in India are arable but not cultivated today. Obviously, a major balancing act, with a distinct human face, will have to be worked out in the world's largest democracy in the years ahead.

The author is the Secretary General of FICCI

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