Land Ordinance: A debate between development and justice.


Last week, the Union Finance Minister announced an ordinance to amend the Land Acquisition Bill that his party, the Bharatiya Janata Party (BJP), had helped vote into law a mere 15 months ago. It had been in force for less than one year. That law, the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act (LARR), had been pushed through by the United Progressive Alliance (UPA) in its dying days. It had many detractors. Private industry said that it was the biggest obstacle to growth. Most State governments, including several Congress-led ones, thought it was unworkable. Thus changes in the law were only a matter of time. Let’s start with the basics :

The law was designed to be just to people. Being a party which says that justice is its priority, Congress claimed that the price of land matters to the land loser but not to the land acquirer. As a result, LARR raised the price of land acquisition to unsustainable levels as claimed by industrialists. But industrialists are always pro profit right? They are vicious people who want to suck every single penny available to be sucked !! Well that is not the truth. The prices are actually unsustainable.

This price is not simply the money paid for acquisition and rehabilitation and resettlement. That is just one component of price, its direct component. There is a second component, an indirect price. This includes

(a) Transaction costs, which include the cost of doing social impact assessments, conducting referenda, running the massive new multi-layered acquisition bureaucracy, etc.

(b) Opportunity costs, which arise from the time taken to conclude an acquisition — doing social impact assessments, conducting referendum, etc. — time during which capital is not invested, infrastructure is not created, and production does not take place. If all the steps defined in LARR were accomplished in the allotted time, each acquisition would require about five years; in practice, it could take a lot longer.

The Modi government’s ordinance — unlike the UPA government’s law — is based on the principle that price matters to both the land-acquirer and the land-loser. Their interests are opposed, because the land-acquirer would like to pay the least he or it can get away with, and the land-loser would like to get the most he or it can manage. So, how does the ordinance solve this problem? Quite simply, as a matter fact, by splitting the direct and indirect prices for acquisition and keeping the direct prices unchanged while attacking the indirect prices. The changes are:

(a) For the land-acquirer, the ordinance tries to lessen, as much as it can, the indirect price of acquisition, the transaction and opportunity costs that have been listed. This it does by weakening or removing the requirements for social impact assessments and referenda.

(b) For the land-loser, the ordinance not only retains all forms of compensation and resettlement and rehabilitation, but also grows the number of land-losers eligible for these lucrative pay-offs by bringing into the ambit of LARR, 13 categories of acquisition that had been excluded earlier. These include the Land Acquisition (Mines) Act, the Atomic Energy Act, the Railways Act, the National Highways Act, and the Metro Railways (Construction of Works) Act. These inclusions were indicated in LARR, but are accomplished in this ordinance.

It seems that the ordinance is actually a balancing act between development and justice right? Let’s see what, aside from partisan politics, could go wrong?

(a) The assumption that everyone responds to price is incorrect in India. There are priceless pieces of land that no amount of money can buy. The Niyamgiri hill region in Odisha where the Vedanta mining project ran aground is an example. Without referenda it may be very difficult to identify priceless land; which means that deadly face-offs over acquisition will continue to flare up.

(b) The social impact assessment was meant primarily to take stock of the non-land-owning project-affected population. Compensating non-owners is a vital and non-negotiable element of LARR. How that will be achieved without the social impact assessments remains unclear.

(c)  The price of urban land has reached such levels in the most dynamic urban regions of the country, that just doubling it (even without the added transaction and opportunity costs) may make many public projects unaffordable and private projects uncompetitive (especially in a globalised economy). New, creative methods that make stakeholders out of landholders must be devised, perhaps by following the better outcomes of some of the experiments being attempted in some States.

The questions which remain debatable are:

Is this ordinance a better way than LARR?

Is there a better way than this? (What about finding State-level solutions rather than these top-down, one-size-fits-all strategies devised by the Centre)

What we need are good intentions combined with clear analysis and hard, detailed work. Are these in good supply?

The debate between development and justice is a long one and land acquisition is one manifestation of it. All political parties have vowed to fight this ordinance as they are claiming that the justice is being undermined. The question we, at know India, ask our reader is

Keeping the debate on the manner in which this law has been amended aside, what do you think of the amended law?

If you are supporting a party, try to find out the rationale of their argument on this ordinance. We are pretty sure that we have provided enough information to comprehend their stand on the issue. Try to add more in the comments if we have missed something.


“Improving an unworkable law” by Sanjoy Chakravorty (the author of The Price of Land: Acquisition, Conflict, Consequence.)

Press Bureau of India.

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