Land Acquisition: Cost of acquisition of land from Industrial Perspective

All these controversies related to land acquisition have made it a political issue but nonetheless all these amendments in the land acquisition laws have failed to please the population

The most common belief that agriculture is the mainstay of the rural folk has lost its sheen over the years in India. In the past few years there was a shift towards alternative employment. During 90’s the peasant community started moving out of agriculture en masse to other alternative livelihoods which ultimately resulted into the structural transformation of the rural areas as well as cities. This structural transformation has not only eased migration of the rural work force to developed urban centers but also has encouraged migration to tier-I and tier-II up-coming cities (Urbanization of rural areas). This structural transformation has been followed by almost all the states. The State Government started acquiring the agriculture land by using the Land Acquisition Act, 1894 as a tool, the Provisions of ‘public purposes’ and ‘urgency clause’ have been invoked so that land acquisition could be eased. However in the backdrop of a slew of controversies and social unrest confronted at various places including Singur, Nandigram in West Bengal, Raigad in Maharashtra and various other parts of India relating to grabbing of land and due to the formidable challenges of food security, food inflation, stagnating agricultural growth and exports, the Government of India introduced the Land Acquisition Bill, 2011 so that more effective measures of compensation and rehabilitation could be provided to the displaced persons. All these controversies related to land acquisition have made it a political issue but nonetheless all these amendments in the land acquisition laws have failed to please the population. The amendments in the land acquisition law including Land Acquisition Bill, 2011 and the Standing Committee which submitted its report on May 17, 2012 on the same are trying to enact a law which is pro-agrarian. The lum-sum amounts of proposed compensation and strict policies of Rehabilitation and Resettlement have become a pain for the industries and private companies and in a way discouraging the investments in infrastructure sector. The present article focuses on the comparative study of cost of acquisition in the presently operating Land Acquisition Act, 1894, the Land Acquisition Bill, 2011 and the report of Standing Committee on the Land Acquisition Bill. Cost of Acquisition of Land: The cost of acquisition of land comprises following: 1. Cost of land 2. Cost of Compensation 3. Cost of Rehabilitation and Resettlement 4. Cost related to overcome other hurdles 1. Cost of Land: Under LA Act, 1894 Under Land Acquisition Bill, 2011 Standing Committee Report, 17th may, 2012 The value of registration of sale deed in that particular area at the time of notification of Land Acquisition i. Circle rate for the registration of the sale deeds or agreement to sell in the area where the land is situated; ii. The average sale price for similar transaction Whichever is higher The multi-member land pricing commission for determination of market value 2. Cost of Compensation: Under LA Act, 1894 Under Land Acquisition Bill, 2011 Standing Committee Report, 17th may, 2012 cost of land + value of land attached to land or building + compensation as in the opinion of collector should be awarded + solatium equivalent to 30% of market value In Rural Areas: Cost of land + value of land attached to land or building + compensation equivalent to two times of market value + solatium equivalent to 100% of market value In Urban Areas: Cost of land + value of land attached to land or building + compensation equivalent to one time of market value + solatium equivalent to 100% of market value Standing committee proposes the establishment of multi-member pricing commission so that market value at present rate could be awarded and the rest of compensation shall be applicable as according to the Land Acquisition Bill. The Comparative Cost of Acquisition of Land: Suppose: • Market value of a land = Rs.100 • The value of asset attached to the land or building = Rs.100 Then the cost of compensation:- • According to LA Act, 1894: 100 (market value) + 100 (value asset attached to the land or building) +50 (compensation presumed to be appropriate by the collector) + 30 (solatium) = 280 • According to LA Bill, 2011: In Rural Areas- ? 100 (market value) + 100 (value asset attached to the land or building) + 200 (compensation presumed to be appropriate by the collector) + 100 (solatium) = 500 In Urban Areas- ? 100 + (market value) + 100 (value asset attached to the land or building) + 100 (compensation presumed to be appropriate by the collector) + 100 (solatium) =400 The new bill proposes to increase the cost of compensation by 4 times in rural areas and 2 times in urban areas. The Standing Committee on Land Acquisition Bill further proposes for establishment of multi-member pricing commission for determination of market value which is to be the current market value of the land as against the value of sale deed as provided in the original Bill. There is likelihood of huge difference between the base rate and the current market value of land and if such is accepted there would have been considerable increase in the cost of compensation payable to the affected persons, burdening the industry and private companies. Such proposal has been criticized by the industries and private companies because the same has been putting a great burden of heavy compensation and cost of rehabilitation and resettlement on them. The proposal put across a great lacuna by favouring the one section only. Since the proposal already proposes to pay the present market value of the land it is unreasonable to put additional compensation equivalent to two times and one time of market value in the rural and urban areas respectively. Furthermore in areas e.g. rural areas which are adjacent to urban areas, the concept of 2 times in rural areas and 1 time in urban areas may lead to wide difference in rates whereas the actual rates may be equal or near equal. It also proposes to pay 100% solatium in addition to abovementioned compensation. The original LA Act makes it mandatory to pay 30% solatium on market value in case of acquisition of land. The increase of it to the extent of 100% could not be justified by presenting the arguments of rehabilitation and resettlement since the industries are already paying the market value and a great compensation and also offering the rehabilitation and resettlement to the displaced. Such amendments to the existing land acquisition laws if carried on would jack up project cost and deal a blow to industrialization and urbanization. There should be a balance between needs of industry for smoother land acquisition and interest of landholders. Cost of compensation in the matters of urgency: Under LA Act, 1894 Under Land Acquisition Bill, 2011 Standing Committee Report, 17th may, 2012 80% of the compensation amount before taking possession of the land 80% of the compensation amount before taking possession of the land + 75% of market value of land 80% of the compensation amount before taking possession of the land + 75% of total compensation including solatium The effect on cost in matters of urgency on the basis of rates as presented in the abovementioned example: • Under LA Act: 80% of the Compensation before taking possession of land = 224 • Under LA Bill: 400 (80% of the Compensation before taking possession of land) + 75 (75% interest on the market value) = 475 • Standing committee recommendation: 400 (80% of the Compensation before taking possession of land) + 300 (75% interest on the total compensation including solatium) = 700 The new Land Acquisition bill, 2011 as well as standing committee recommendation if carried on will burden the industry with a great heavy duty of compensation which most of the industries would not be able to bear. The heavy compensation by implying the multiplier and solatium as well as R&R conditionaliites would make it difficult for the industries to facilitate investments in cases where land acquisition is needed on the urgent basis. The pre-conditionality of payment of 80% of compensation before taking possession is still reasonable but additional payment of 75% of the market value or the compensation as the case may be would definitely discourage the industry from investing because such a huge amount of cost and that to before carrying on the project is totally unreasonable if seen from the perspective of investors. In addition to such compensation following damages shall also be paid to the affected persons: • Damages sustained by the person interested for the standing crops and trees; • Damages sustained for severance of land from other lands of the land owner; • Damages to the person interested for any injury affecting his other property, movable, immovable properties and his earnings; • Damages for shifting residence or place of business and reasonable expenses for shifting; • Damages caused by diminution of the profits of the land between time of publication and possession; • Interest @ 12% per annum on the market value from the date of publication of notification to date of award or the date of taking possession whichever is earlier. 3. Cost of Rehabilitation and Resettlement: The Land Acquisition Bill in addition to the abovementioned compensation proposes the cost of Rehabilitation and Resettlement which shall be mandatorily be provided to the affected persons. The provision of R&R shall be applicable- 1. In case of purchase or acquisition of land equal to or more than hundred acres in rural areas and equal to or more than fifty acres in urban areas through private negotiations with the owner of the land 2. Government acquired land on the request of private companies for public purposes. Even in case of partial acquisition by government R&R shall be applicable on the entire land. For say, where the private sector directly purchases 80% of the required land from the land owners and requires the intervention of the government to acquire the balance 20%. The benefit of R & R will have to be paid with respect of the entire land. No R&R in case the private company purchases less than 100 acres of land in rural area or less than 50 acres in urban areas. The Rehabilitation and Resettlement includes: • Cost of land and building for Resettlement of displaced and Project Affected Families. • Cost of development of infrastructure facilities at the resettlement sites. • Subsistence grant for displaced. • One time resettlement amount. • Transportation cost of displaced person. The Standing committee recommends that the R&R provision shall be subject to the conditionalties of concerned State Government which shall make provisions of R&R facilities. It further recommends that all the monetary allowances should be linked to consumer price index so that these are upgraded automatically. 4. Cost related to overcome other hurdle Apart from these costs there are other expenses as well which are necessary to make to land fit for use e.g.: • Restriction on use of agricultural land for non-agricultural purposes; • “Costs” in acquiring change of land use (CLU) certificate; • Stamp Duty and Registration expenses for purchased land and Resettlement land; • Land ceiling restrictions; • Cost of undertaking of social impact assessment study. Conclusion: By considering the stagnate economy of country in the present time, the more and more investment in the infrastructure sector is required but the present Bill on Land Acquisition has completely failed to consider the needs and requirement of the industries and private companies, the Bill is very much pro- agrarian in its nature. No doubt that there should be the rehabilitation and resettlement program for the project affected families but the cost of such program should not be such so as to discourage the industries in facilitating the investment in infrastructure sector. Furthermore the onus of rehabilitation should not be on the buyer but on the government. The Cabinet has now referred the new Right to Fair Compensation, Resettlement, Rehabilitation and Transparency in Land Acquisition Bill, 2012, to the GoM for further consideration because such bill has found to be not-satisfactory so far as needs of different sections is concerned. In the opinion of members of parliament, if the bill is enacted in its original form then most of the industrial and infrastructure projects will be stalled affecting the economy of the county. The author of this Article is Nidhi Soni who can be reached at nidhisoni@tcl-india.net