New Delhi: Awards of compensation to people whose land was acquired under the terms of the new land acquisition law may not be fair since circle rates on which the awards are based barely take into account the impact of factors like inflation, says a new privately funded study.

The study released on Wednesday says that compenation based on circle rates—the minimum rate defined by all state governments at which a property can be bought or sold—is flawed as they do not “move in tandem with the inflation rate over the years, let alone adjusting for other determinants of pricing."

“If there is an error in the calculation of circle rates, then the new law only compounds that error in awarding compensation in multiples of that value," said Kaushik Basu, director of the Thought Arbitrage Research Institute.

The economic model used by the study conducted by the think-tank and the German Gesellschaft für Internationale Zusammenarbeit organisation that deals with sustainable development issues to determine compensation is based on factors like size of the holdings, the type of land, fertility of land and irrigation, level of industrialisation and urbanisation of the districts in which the land is located, and location factors such as distance of the land from a railway station, a major road and main town in the district, besides inflation.

To ensure that landowners benefit from the almost disproportionate increase in the value of land after the development of a large infrastructure or industrial project, the new land acqusition law guarantees compensation of four times’ the market value in rural areas and twice the market value in urban areas. Those who own the land and those whose incomes depend on it, are also to be compensated.

According to the study, compiled after examining 680,000 land records from four districts spread over three decades from 1980 to 2010, “one of the most important findings... is how location of a land holding plays a far more pivotal role than the quality or fertility of land, irrespective of whether the land parcel is in a rural or urban area."

One of the key conclusions of the study was that land acquisition by government agencies is undervalued. This was mainly because there was only one factor that had been considered in the impact of attributing to a general price rise or inflation is very limiting and that too often arbitarily, it says.

“The study shows that land sales in any region are mostly guided by economic and market considerations agnostic of the decade considered. There is a close correlation of land prices with variables including inflationa nd the size of land being sold and purchased," the report says.

According to Sinha, who is also the co-author of the report, land records in India were not digitised, which made it difficult for buyers to establish ownership. In many cases, there was no proper proof of ownership or sale through the decades, she said. “There will be many people who will claim that they draw sustenence from the land being acquired. How do you prove this? I dont think the law adequately addresses these issues," she said.

The government would be studying the report before offering comments, said an official of the rural development ministry, which scripted the land acquisition law. The official did not want to be named.