New Delhi: The single biggest constraint to the rapid execution of infrastructure projects in India is land. Many official reviews and industry studies have confirmed that projects are usually delayed because of problems related to land acquisition.
There have been few problems when companies or individuals acquire land for industrial and infrastructure projects by directly negotiating with landowners. On the other hand, when the government applies the “eminent domain” principle and takes over land for a predetermined compensation, it has often led to confrontations such as that seen in Singur, West Bengal.
Industrial divide: An August 2008 demonstration against the setting up of Tata Motors’ Nano factory in Singur. The confrontation made the auto maker shift its factory to Gujarat. Indranil Bhoumik / Mint
Worse yet, India’s land acquisition Act is at least 100 years old and quite outdated. The government recently tabled two Bills in Parliament to amend laws on land acquisition and the relocation and rehabilitation of displaced people.
Mint’s deputy managing editor Tamal Bandyopadhyay, Infrastructure Development Finance Co. Ltd (IDFC) chief executive officer and managing director Rajiv Lall and six of the several experts who contributed to IDFC’s latest report, India Infrastructure 2009, discuss the issue. The experts are Sebastian Morris, Ajay Pandey, Ashok Singha, Rumjhum Chatterjee, Runa Sarkar and Bimal Patel. The focus of the report was land and problems related to land acquisition. Mint presents edited excerpts from the discussion in three parts. The first part provides an overview of the report and also looks at why there is opposition to some industrial projects and not others.
Tamal Bandyopadhyay: Rajiv, why don’t you tell us briefly what the report says?
Rajiv Lall: Land is absolutely central to infrastructure, especially in a country like ours with a billion-plus population and a pace of urbanization that is increasing quite rapidly. Under what circumstances can or should government be allowed to acquire land? There’s a huge debate about that, and one section of the report deals with that. And in so doing, it actually critiques a Bill that deals with land acquisition that is currently making its way through the Indian Parliament. I’ll add that this Bill dates back to 1894 and hasn’t been substantively revised since then. We are in the 21st century and yet the basis for land acquisition still relies on a piece of legislation that is more than a century old. That’s the first set of issues. The second set of issues deals with compensation. Assuming you have solved the problem of when and under what circumstances the government can or should acquire, if it does acquire, how and on what basis should that compensation be determined. The third set of issues deals with R&R: rehabilitation and relocation. The notion of compensation traditionally has been tied only to the loss of an asset whereas compensation really should be tied with the notion of livelihood of the person from whom the asset has been taken away. The fourth issue is—are there alternatives to government aggregation of land? And there are actually some ongoing experiments in India, especially in Gujarat, that this report talks about that provide credible alternatives to government intervention for solving the problem of acquiring land for a public purpose, and we would like to focus on that. And, finally, there is the issue of using land as a way of financing infrastructure. Leveraging land as a financial tool…
Bandyopadhyay: Recently we saw what happened in West Bengal. Tata Motors Ltd was acquiring land for the Nano project, in fact, the state government was trying to acquire land on behalf of the private entity, and the Trinamool Congress made it a major political issue. The project was eventually relocated to Gujarat. How do we disassociate politics from land?
Lall: Well, it’s very difficult to disassociate politics from land but I can at least offer a perspective. We have an administrative-legal-legislative apparatus that determines the titling of land in a particular way. That is extremely onerous, extremely outdated and leads to a whole bunch of distortions. It is so onerous it seems much more onerous today because there is much greater willingness from the part of private parties to want to aggregate land to do business.
So you take the case in West Bengal. If you ask the party concerned the private party will tell you, “If we were left to aggregate the land to build this particular plant, it would taken us so long that we would never do it. You want a plant in West Bengal, you, the government of West Bengal, please help us aggregate the land…” So the government started aggregating the land. But the basis on which they aggregated, the compensation that they paid to the parties concerned was politically unacceptable; hence, you have this conflict.
Bandyopadhyay: Ashok, you are one of the authors of this report and an expert on compensation. How do you come up with the compensation package?
Ashok Singha: When we value the compensation, we value the actual ownership and do not value the user-ship. How is land used and how has it contributed to the livelihood of that particular family? That’s one complication. The second complication is the locational value of the land. The third is the attribution—suppose the project is supposed to come in; so the speculative aspect comes into effect… That’s why it becomes very difficult to compensate on the basis of that.
Core concerns: The India Infrastructure Report 2009 was released on 24 July.
Sebastian Morris: I think we need to kind of come to the India-specific factors. Land, in the very best of economies, is not a perfect market. But in India, even the markets, as they would have been, do not exist… They’ve been highly distorted for a variety of factors. So, therefore, even though the law provides for market compensation, it’s a compensation of a highly distorted market which is guaranteed not to give any value to the farmer or whoever the poor guy is whose land is getting aggregated. Now, we need to understand this very carefully. First of all, there are a whole host of regulator arbitrages… Somebody cannot use this land for anything other than agriculture and he has to part with it. So once he parts with it, then it can be used for everything else. So the difference in the value simply jumps up and it all goes to the aggregator. Obviously, the person giving up the land feels cheated.
Bandyopadhyay: So let’s talk about the second aspect of it, which is the relocation and rehabilitation.
Rumjhum Chatterjee: There are five different ways of looking at that aspect. First, there is physical rehabilitation. I have paid something to give up my land and, therefore, I need to be compensated in some manner with another way to look at where I can be provided shelter. The second is that there is a social angle to it as well. People are living in communities and if communities are going to be rehabilitated, then we have to ensure that the social fabric doesn’t undergo too much change. There is also the psychological aspect of that side of change, which also needs to be taken care of. There is the fourth and probably the most significant one, which is economic rehabilitation…where livelihood becomes the key critical element to focus attention on. And the fifth is really to say that this compensation that we are making must be sustainable so that this kind of transaction is not a one-time (thing) and then gone completely. We have to make sure that there is sustainability built into the kind of income stream or revenue stream we can look at.
Bandyopadhyay: In the case of the Nano project, Tata Motors did do almost all of this.
Chatterjee: Did you know that the people in Singur thought that Tata was putting up a chemical plant there. So that really is the nub of the issue. ....They didn’t communicate.
Runa Sarkar: The way the Tatas were going about this was to tell the government to acquire the land. So essentially when we say communicate, who does the communication. Who is acquiring the land? And the contrast here is if you look at the Jindal plant (JSW Steel Ltd’s plant) at Salbuni, where the Jindals were communicating directly and they have been able to acquire the land. So at some level, one of the things the report talks about is the concept of social consent to operate. One is a regular consent. But, in addition, you need consent from the people involved, including the people that you have to rehabilitate.
Singha: The Jindals gave directly Rs6 lakh as compensation per acre. Rs3 lakh as long-term fixed deposit; Rs1.5 lakh as cash, they gave immediately, and another Rs1.5 lakh, they put in the equity.
Bandyopadhyay: So Tata Motors and JSW Steel are two studies in contrast?
Chatterjee: The key question is whose responsibility is R&R?
Ajay Pandey: When a private interest is involved and the government is seen acquiring the land, there is going to be in-build scepticism among those who are affected. Second, when the instrumentality of whatever processes are to be followed, including compensation and R&R, are with the government, whose track record is well known... There is also a set of people whose property isn’t affected but whose livelihood is. And if there is no communication, no overture, no effort by the land acquirer, that their concerns are mitigated, then the context is ripe for politicization. If there are too many losers from this particular situation and very few gainers, then obviously there is political opportunity for anybody to come in.
The second part of this discussion will look at the legislative aspect of land acquisition.