Business Today

New ground rules

Sanjiv Shankaran        Print Edition: July 22, 2012

On a hot May afternoon, a visibly tired Jairam Ramesh walked into a press conference on the revised Land Acquisition Bill . The kurta-clad Rural Development Minister slumped into a chair and shut his eyes, waiting for journalists to trickle in. The daunting prospect of shepherding the polarising Land Acquisition, Rehabilitation and Resettlement Bill, 2011, through the Cabinet and Parliament may have been weighing on his mind. In the media interaction that followed, what stood out was the pragmatic stance Ramesh adopted. He pointed out that the existing land acquisition laws were framed in the 19th century and that its overhaul was imperative if economic growth and urbanisation was to get a boost.

Ramesh's behaviour on that day was very different from that during his interaction with the media on September 7, 2011, the day he first tabled the revised Bill in Parliament. With the Uttar Pradesh (UP) assembly elections still to be held, Ramesh had said: "I am a political animal. This Bill is as much about land acquisition as about politics." But after the lacklustre performance of the Congress in UP and a marked slowdown in growth, grandstanding has given way to pragmatism.

"Whatever law we present will facilitate economic growth," Ramesh said at the May briefing, raising hopes that a solution to the biggest hurdle before infrastructure development was in sight.

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The essence of the problem is that the prevailing law is not able to bridge the gulf between buyers and sellers on a range of issues, the biggest of which is compensation. Close to 70 per cent Indians are linked in varying degrees to the rural economy. And fuzzy land records complicate acquisition of land for infrastructure projects. Ramesh's Bill, for the first time, combines three aspects: acquisition, resettlement of displaced people, and their rehabilitation.

The Bill tries to improve upon the existing law by increasing the compensation to be paid by industry, widening the list of beneficiaries eligible for compensation, and making it compulsory for private companies to get the consent of 80 per cent of those who will be displaced in the process.

"Land acquisition is a vexed problem," says Sandip Somany, Joint Managing Director, Hindustan Sanitaryware, and President, PHD Chamber of Commerce and Industry, an industry lobby group. "This problem has the potential of corroding India's growth rate." Data compiled by business lobby Confederation of Indian Industry shows that as of April 15, 2012, 21 industrial projects, each with an investment exceeding Rs 1,000 crore, were stalled on account of issues that included land acquisition. Investments worth Rs 2.93 trillion are stuck, with Jindal Steel & Power's Rs 42,375 crore steel project in Chhattisgarh being the largest of them.

Sotiris A. Pagdadis, who moved to India from the US in 2011 to set up PricewaterhouseCoopers' infrastructure practice, believes the problem is bigger here than in most other countries. "From my global experience India probably presents the most challenging environment," he says. After its introduction last year, the Bill was studied by a non-partisan parliamentary committee. The panel's biggest beef with the legislation is that it does not want the government to play any role when private companies acquire land. In theory that sounds fine. However, ground realities suggest otherwise. The private sector's dilemma was articulated by B. Muthuraman, Vice Chairman of Tata Steel, in his (recent past) role as CII President.

"Agglomerating land from numerous owners is not a task that the corporate sector can do effectively, especially in the absence of land records and with small, scattered land holdings." His views are echoed by Vinayak Chatterjee, Chairman of infrastructure consultancy Feedback Ventures. "Land is a factor of production. The state can't say, 'We are walking away'," he says.

Ramesh has clarified that the state was not going to walk away. "The state must have a role in land acquisition," he said at the press conference,. "Faster industrialisation and faster urbanisation are both inevitable and desirable," he added, explaining the logic underpinning the government's stand. The next step for the government is to decide which of the standing committee's recommendations it should accept. They are not binding, but support for legislation in Parliament requires the government of the day to bring the committee on board.

Most of the recommendations could be accepted, Ramesh felt. He was confident he could build support in his own Congress party, as well as other parties, for state involvement in land acquisition even when private companies are acquiring the land. His confidence stems from the role state governments, regardless of party affiliation, have been playing in building land banks to facilitate industrialisation. Negotiating details, however, could prove tricky.

Fortunately, India might still have time to work things out. "On account of the global economy cooling, India has a little more of a window to get its act together," says Pagdadis. "The government has to find a way to depoliticise the land issue."  

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