Why it is easier to acquire land in Gujarat & Punjab than Bihar, Kerala & Bengal

Dec 8, 2015

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Land acquisition has been a tricky subject in the country of late. The issue has been discussed threadbare in the media over the last few years. But one point seems to have been missed out on. I came across this rather basic and very interesting point in Sanjoy Chakravorty's book The Price of Land-Acquisition, Conflict, Consequence.

In this book published in 2013, Chakravorty uses data from the 2005-2006 agriculture census. I will use data from the 2010-2011 agricultural census in this column and make the same points that Chakravorty is making.

The basic point that Chakravorty makes is that it is easier to acquire land in states where the average landholding is larger in comparison to states where the average landholding is smaller. As Chakravorty points out: "In Kerala, where 96 per cent of all landholding are marginal, the average marginal holding size is 0.35 acres [the actual number is around 0.34 acres. The writer seems to have rounded it off to 0.35 acres]. In Bihar, where almost 90 per cent of all holdings are marginal, the average marginal holding size is 0.62 acres."


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How do things look if we were to use data from the 2010-2011 agricultural census? The above paragraph would read like this: "In Kerala, where 96 per cent of all landholding are marginal, the average marginal holding size is 0.33 acres. In Bihar, where almost 91 per cent of all holdings are marginal, the average marginal holding size is 0.61 acres."

As we can see the numbers haven't changed much between 2005-2006 and 2010-2011. Chakravorty further points out: "In both these states [i.e. Bihar and Kerala] the marginal holdings make up little over half of all agricultural land area. In Tamil Nadu, Uttar Pradesh and West Bengal, over 75% of all landholdings are marginal. It may be very difficult to bring these lands to the market."

In Bihar farmers with marginal landholders own 57% of all agricultural land. In Kerala, the number as of 2010-2011 stands at 58.6%. In Tamil Nadu, Uttar Pradesh and West Bengal, 90%, 79% and 82% of all landholdings are marginal.

What this means is that the moment a large amount of land needs to be acquired for an infrastructure project or setting up a factory or a mine, a large number of landholders need to be dealt with. In many cases, some arm of the government (state or central) wants to acquire land for private businesses. And this is not easy.

Further, many other states like Gujarat, Rajasthan and Punjab have larger average landholdings. As Chakravorty writes: "From the smallest landholders(marginal farmers in Kerala, averaging 0.35 acres per holding) to the largest (50 acres in several states, even larger in some), it is not difficult to see how a price such as Rs 10 lakh per acre can be perceived very differently by different landholders based on the size of their holdings. For example, an average large landowner in Gujarat would be paid more than Rs 4 crore for his land (because the average large landholding size in the state is over 41 acres), whereas the average marginal landowner in Kerala would be paid Rs 3.5 lakh."

How do things look if we use 2010-2011 agriculture census data? The average large landowner in Gujarat owns around 52 acres. Hence, at Rs 10 lakh per acre he would be paid Rs 5.2 crore. In fact, even if we look at marginal landowner in Gujarat things are much better. The marginal landowner in Gujarat owns around 1.2 acres. At Rs 10 lakh per acre the payment is Rs 12 lakh. In Kerala, the average marginal landowner owns 0.33 acre as per the latest agriculture census, and this amounts to a payment of Rs 3.3 lakh. In Bihar with an average size of 0.61 acres, the payment would be Rs 6.1 lakh.

In fact, Punjab is another state where the average marginal landholding is significantly large. The average size in case of marginal landholding in Punjab is 1.5 acres. At Rs 10 lakh per acre, this would involve a payment of Rs 15 lakh. The average size of a landholding in Punjab is around 9.3 acres. And at Rs 10 lakh per acre, it would involve a payment of Rs 93 lakh.

Given this difference in average landholding size, it is easier to acquire land in parts of the country where average the landholding size is larger because that ultimately leads to higher payments. As Chakravorty writes: "Based on this information on land distribution alone, it is possible to conclude that land acquisition is likely to very difficult in some states; Kerala, Bihar, and West Bengal top this list. It is also likely to be significant challenge in Tamil Nadu and Uttar Pradesh, and to a lesser extent, in Andhra Pradesh and Assam."

In fact, information is available even at a district and sub-district level. Given this, identifying parts of the country where land fragmentation is lower and hence, land acquisition should be easier. Nevertheless as Chakravorty puts it: "This is not hard to do because the information already exists. Having this information should make the task of identifying land for acquisition easier, but to the best of my knowledge, has never been done."

This is not surprising given that there was very little resistance to forceful land acquisition carried out by the government up until very recently. But now that is no longer possible, hence, more out of the box solutions need to be looked at.

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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6 Responses to "Why it is easier to acquire land in Gujarat & Punjab than Bihar, Kerala & Bengal"

Rajesh

Dec 10, 2015

Hi,
I don't think it has anything to do with large payment or small payments to farmers / landholder. Price of the land depends on the basis of infrastructure around or how fertile the land is.you are right that no.of land holders will be very high in Kerala for same acerage of land compared to Gujarat but price per acre does not change. How can you compare 3.5 lac to 92 lac when the areas you are talking about are different. Totally baseless argument.

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Bala V

Dec 9, 2015

The "its easier to acquire land in Gujarat" may be true for Industrialists with proximity to administration. On the ground, even when the owner wants to sell, it cannot be sold to non-gujaratis / non farmers. The agricultural land bought at rates you mention are converted to Non Agricultural (NA) for which some "facilitation" is required. Post this conversion, the land price goes up 10 times or more, giving the incentive to keep all this business tightly secure within a select group. Not only does this encourage foul play, but it disallows the original farmer getting a fair price for his land. And why should a piece of land be converted to NA if one wants to use it for farming...but is not a native or farmer by birth? As can be seen in other comments, MNCs and industrialists with deep pockets, do get an easy route to land...but for individuals, who want to take to land...its a struggle with babudom and broker coterie...

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R Tayal

Dec 9, 2015

Dear Vivek, As usual your articles offer very refreshing & unorthodox explanation of various economic events, land acquisition in this case. That is why I look forward to reading your articles. Having said that, what you (and Chakravorty) have tried to infer in this particular case, is more a hypothesis than a clear cause-effect relationship. Otherwise how does one explain the significant industrialization of Tamilnadu & Andhra (including present day Telangana) over the last 10-15 years?

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Sundaravaradan S

Dec 8, 2015

Hi,

Reg Marginal Farmers....

May be....Govt may announce that, at any time,whoever wants to sell his land can contact Govt and sell his land at notified price...(No SUDDEN announcement)!(No Politics). Govt can sell the Land to larger co-op Society...

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Neil

Dec 8, 2015

Another aspect with respect to Kerala is the unit price of land. Given the huge inflow of money into the state, land is at a premium. So market rates would be much higher than government rates and wouldn't provide a replacement option. What you said is correct.. This is just one more local factor.

Btw I like reading your articles and agree with most.. Just that most are long term views which the common man rarely appreciates as he struggles to get by today or meet his immediate needs

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MANJUNATHAN BELLUR

Dec 8, 2015

Contrary to the theory of the author , In tamil nadu where marginal holding is more than 90% , land acquisition has been possible for many MNCS and with much ease . This has happened mostly in north tamil nadu where large stretch of lands are Dry lands with little scope for agriculture . In my opinion , it may be easier to acquire dry lands compared to wet lands as farmers have little incentive to hold on to their land .

Manjunatahn Bellur

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