The govt needs to sort out the land acquisition mess quickly - The Daily Reckoning
The Daily Reckoning by Vivek Kaul
On This Day - 25 February 2015
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The govt needs to sort out the land acquisition mess quickly A  A  A

- By Vivek Kaul

Vivek Kaul
Until 2013, land acquisition in India was governed by the Land Acquisition Act, 1894. The Act, given that it was originally written during the days of the British Raj, in one of its later forms said: "Whenever it appears to the [appropriate Government] the land in any locality [is needed or] is likely to be needed for any public purpose [or for a company], a notification to that effect shall be published in the Official Gazette [and in two daily newspapers circulating in that locality of which at least one shall be in the regional language], and the Collector shall cause public notice of the substance of such notification to be given at convenient places in the said locality."

It further pointed out that: "whenever it appears to the [appropriate Government] that the temporary occupation and use of any waste or arable land are needed for any public purpose, or for a Company, the [appropriate Government] may direct the Collector to procure the occupation and use of the same for such term as it shall think fit."

This Act was used by governments over the years to take over land from the public. In many cases, land taken over by the government was later handed on to private parties who made a killing in the process.

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In 2013, the Congress led United Progressive Alliance(UPA) government brought in The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. This made the acquisition of land difficult for private companies, which were till then used to the government acquiring land for them.

The Act required the prior consent of at least 80% of those affected by the land acquisition. In case of public-private partnerships, 70% of those affected needed to give prior consent. This brought land acquisition to a standstill.

The Bhartiya Janata Party led National Democratic Alliance(NDA) after coming to power brought in The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Ordinance, 2014. President Pranab Mukherjee signed this ordinance on December 31, 2014. As per this ordinance, projects related to many sectors have been exempted from 80% prior consent or 70% prior consent (in case of public private partnerships) of those affected. (For an excellent comparison between the 2013 UPA Act and 2014 NDA ordinance read Anand Ranganthan's piece here).

Every ordinance needs to be placed before the Parliament. The land acquisition amendment bill was placed before the Lok Sabha yesterday. The opposition parties have ganged up against the government. The Congress party staged a walkout. Not requiring consent of those affected , along with other changes that the ordinance brings in, is being seen as an effort to give back-door entry to the corporates.

What messes up the situation further is the fact that the Bhartiya Janata Party supported the Act when it was first passed in 2013. As Jairam Ramesh, who as the rural development minister pushed the 2013 land acquisition Act, recently said in an interview: "The standing committee made 28 recommendations out of which 26 were accepted. The standing committee was chaired by Sumitra Mahajan who is now the speaker [of the Lok Sabha]. Sushma Swaraj made some amendments on the floor of the house which were accepted. Shivraj Singh Chouhan suggested some amendments which were accepted."

So, the Bhartiya Janata Party actively supported the passage of an Act, which it now wants to amend. And given that it does not have enough seats in the Rajya Sabha, it won't be able to push through the amendments in the Parliament, unless it calls a joint session of the Parliament.

Nevertheless, it needs to be pointed out that a fair system of land acquisition needs to be put into place. India needs to create many jobs for the youngsters entering the workforce. For that to happen, factories need to be set up. And for factories to be set up, land is required.

The Economic Survey for the last financial year points out that between 1999-2000 and 2004-2005 the employment as measured by the usual status method increased from 398 million to 457.9 million.

After this, the job growth just came to a complete standstill. Between 2004-2005 to 2009-2010, the employment increased by just 1.1 million to 459 million. The first term of the Congress led United Progressive Alliance was a period of jobless growth, despite the gross domestic product(GDP) registering solid growth.

The situation improved over the next two years. Between 2009-2010 and 2011-2012, the number of employed individuals increased by 13.9 million to 472.9 million. Hence, the employment growth between 2004-2005 and 2011-2012 was at a minuscule 0.5% per year.

This situation is indeed worrying and needs to be set right. As Mihir S Sharma writes in Restart-The Last Chance for the Indian Economy: "13 million Indians will join the workforce every year from now on till 2030...But, if these young people have to absorbed, then jobs must grow at least 3 per cent a year-almost twice the rate at which they have since liberalization."

Further, other than creating jobs for more than a million youngsters who are entering the workforce every month, the country also needs to move people away from agriculture. Agriculture, forestry and fishing form around 18% of the total economic output of the country. The India Brand Equity Foundation, a trust established by the ministry of commerce and industry, points out that agriculture "employs just a little less than 50 per cent of the country's workforce".

This is a situation that needs to be corrected. Also, what is worrying that "at last count, only 17 percent of them-less than one in five!-subsisted entirely on money from their farm. The remainder all did some extra work, off it," writes Sharma. Hence, factories need to be set up, so that enough jobs can be created to move people away from the farm, where working is not monetarily rewarding enough.

A tricky issue is the acquisition of arable land for the purpose of setting up factories. The question often asked is why can't companies acquire barren land for setting up factories. Only if it was as easy as that.

The first thing that needs to be pointed out here is that India has a lot of arable land. As Akhilesh Tilotia writes in The Making of India: "India's arable area as a proportion of its land area is at 48 per cent(159 million ha/329 million ha) which places India as the country with the highest arable area in the world."

And if people need to be moved away from agriculture this land needs to be used for other purposes. As Tilotia puts it: "If India needs to move towards an economy not dependent on agriculture but having a healthy mix of manufacturing and services, a reasonable part of its land will need to move beyond agriculture."

But why can't barren land cannot be used for setting up factories? As Sharma explains: "barren, less fertile, less productive land is frequently further away from population centres and road networks."

Also, an effort needs to be made to explain this to farmers to get a buy-in. In India, no government has tried explaining economic reforms to people. Another question here is, whether people want to continue to farm, given that average holding size of land has come down over the decades.

The State of the Indian Agricultural Report for 2012-2013 points out that: "As per Agriculture Census 2010-11, small and marginal holdings of less than 2 hectare account for 85 per cent of the total operational holdings and 44 per cent of the total operated area. The average size of holdings for all operational classes (small & marginal, medium and large) have declined over the years and for all classes put together it has come down to 1.16 hectare in 2010-11 from 2.82 hectare in 1970-71."

Given these factors, it is important that the Modi government sort out the land acquisition mess quickly.

Vivek Kaul is the Editor of the Diary and The Vivek Kaul Letter. Vivek is a writer who has worked at senior positions with the Daily News and Analysis (DNA) and The Economic Times, in the past. He is the author of the Easy Money trilogy. The latest book in the trilogy Easy Money: The Greatest Ponzi Scheme Ever and How It Is Set to Destroy the Global Financial System was published in March 2015. The books were bestsellers on Amazon. His writing has also appeared in The Times of India, The Hindu, The Hindu Business Line, Business World, Business Today, India Today, Business Standard, Forbes India, Deccan Chronicle, The Asian Age, Mutual Fund Insight, Wealth Insight, Swarajya, Bangalore Mirror among others.

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8 Responses to "The govt needs to sort out the land acquisition mess quickly"

Ram Dargad

Mar 1, 2015

How is job growth measured? The job growth was seen poor during UPA era, though GDP growth was impressive. One explanation is- as poverty reduced, a lot of rural women, who came out of poverty, stopped working, thereby reducing the no of employed. As enrollment in secondary schools & colleges increased, it reduced the ratio of employed to total population..

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sivaramanenator

Feb 26, 2015

TRUE. But Desperate Congress & opposition parties want to create a Vote-Bank by fanning up farmers. And ANNA & Kejerival have jumped into the fray to create Mass-discontentment: In this confusion would it be possible!

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Sarat Palat

Feb 26, 2015

In India we have lot of land not suitable for agriculture and living. Why can't this land could be used for factories ?

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Velmurugan

Feb 26, 2015

While a healthy mix of Manufacturing and services is required, agriculture cannot be shunned. Rather than taking the agricultural land, factories can come up in barren land, even though they are far from populated areas. Let the Govt/privtae companies create townships in those areas which shall also boost infrastructure. For, once you lose arable lands you cannot get them back when you need to increase your foodgrain production in the future. With the increasing population and purchasing power, this is a must and we still need to eat only rice & wheat & pulses when we get hungry and not computer chips and virtual terra bytes.

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CAPT GANESH

Feb 26, 2015

The intention of aquiring private arable land for setting up factories and other more productive economic activity, does not always translate into that. We need to underdstand that as a nation with a large population significant investment needs to be made in "smart farming"where the farmer or persons who intend to get into farming, use more productive ways. Just shunning agriculture away as a less productive activity is a very dangerous thought.

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Rishi

Feb 26, 2015

The previous goats came out with SEZ policy many years ago in which huge tracts of land were taken from farmers and given to rich industrialists to develop for creating industrial parks. It was supposed to generate millions of jobs. What is the current status of these SEZ? In Haryana, Reliance has been asked to return thousands of acres given to them for peanuts because they did not do anything. Same is the case in other states. Huge land is locked up in these SEZ- why are they not being used?

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Dinyar E. Edulji

Feb 25, 2015

While the case is being made out that to create employment factories have to be built and hence acquisition of Land is of prime importance. The argument that at the current rate of land as envisaged in the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 no Company is ready to put in the money. But, is the Government putting any binding conditions on the Company that they should create so many million jobs, if they acquire such land at low prices? As can be seen to what happens in the US all the jobs are not being moved to robotics for being competitive and hence there has been loss of jobs (as per your own admission) even though they have lot of land and factories are coming up. So is this not the case of one of stealing the money from the poor and putting in the hands of the rich and further creating the poor and rich divide. I do not agree to this form of acquisition and fully agree with what is already envisaged in the act already passed by the Government that to which had the stamp of approval of the BJP.

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DR.P.L.NAWALKHA

Feb 25, 2015

Petty minded approach and functioning of politicians ,elected,nonelected,including HYPOCRITE Anna Hazare is vivid. These forces are bent upon to show down NaMo, CEO PRIME MINISTER , marching for DEVELOP INDIA. iT IS SAD DAY

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