The ever energetic Jairam Ramesh has unveiled a new land acquisition policy for discussion. He has taken on the difficult task of changing an old law whose implementation has led to a sorry mess in Nandigram, Singur and NOIDA to mention only a few of the recent cases that have hit the headlines.

Our policy regime for managing land rights and land transactions is totally dysfunctional.  Greedy politicians in State governments have refused to transfer authority over land transactions to the local authorities because they want a cut of the land value gains that will inevitably accrue with rising population and prosperity. Encouraged by the impunity with which they could rake off money in urban land deals, a new trend is the direct involvement of politicians through their family members in urban land transactions. Even industrial corporations whose primary goal is not to profit from land deals and widely respected parts of the government like the army seem to have been corrupted by the lure of quick profits from unearned gains in land values.

We are confronted by a lethal combination of market failure and government failure. 

This is the minefield Jairam Ramesh has entered. There are three key issues about the Draft Land Acquisition Bill- the definition of public purpose, the provisions for compensation, relief and rehabilitation and how the proposed process engages the community.

Take the first issue.  The draft bill spells out public purpose more explicitly than the present act does. It also lays out an institutional mechanism for determining whether a proposed acquisition serves a public purpose as defined in the act and safeguards against speculative or excessive acquisition. It appears to exclude land acquisition for private purposes but it does allow acquisition on behalf of private parties for a public purpose and for infrastructure and industry, including public-private partnership projects, when "benefits largely accrue to the general public".  The draft bill requires that the private party has secured the consent of 80% of the landowners before it seeks the help of the Government in securing the balance requirement.

One cannot predict how the courts will parse the language used in the bill; but a lay reading suggests that the most of the cases that have hit the headlines lately would continue to remain eligible for availing of the procedures for acquisition with Government help. However it appears that land acquired by the government for one purpose, say an agricultural university, cannot be diverted for another purpose, say, a motor car factory.

The draft bill is a more helpful on the compensation, relief and rehabilitation issue. To begin with it combines land acquisition and relief and rehabilitation in one law which, presumably will make the rights of the displacees more readily justiciable. It includes amongst affected persons not just landowners but also rights holders under the Forest Rights Act and others whose livelihood depends on the land acquired. It specifies that the minimum compensation will be six times the market price for rural land and twice for urban land. The value of this stipulation has been questioned on the grounds that officially notified prices seriously understate the real market value. It also provides for long-term compensation, housing and infrastructure for displaced persons.

The market value of rural land used for agriculture would be well below the price that it could command in non-agricultural uses, particularly in areas adjoining large cities.  Getting such permission is fraught with all manner of bureaucratic hurdles and widespread corruption.  It is a major instrument used by unscrupulous politicians and bureaucrats for transferring the capital gains from the change in use to themselves and their developer clients.  The draft bill includes provisions, which would allow landowners to share in the capital appreciation after the acquisition; but the mechanism that can ensure this is not at all clear.

The engagement with the community has been stressed in the material put out with the bill.  But in more specific terms it is mostly a matter of public hearings and the obligation to prepare a social impact assessment, which sounds quite promising for social scientists in need of extra income! It also has the usual promises about transparency and full information disclosure.

The bill will not mean the end of land acquisition controversies.  The core issue is the fairness in the sharing of gains from the increase in land values that comes from regulatory measures like changes in designated land use and development measures like the construction of new roads and the provision of infrastructure facilities. 

When it comes to urban expansion Gujarat has shown the way with a century old town planning procedure that involves negotiations both with those land is needed for infrastructure, typically roads and urban municipal services, and those whose lands will go up in value when the infrastructure is built.  Not only do these procedures establish a certain degree of equality of sacrifice and reward but also raise resources for infrastructure development.

This type of negotiated solution between gainers and losers will be more difficult in irrigation or hydel projects and in mining and manufacturing projects where the costs in terms of land loss are borne in one place and the benefits accrue far away.  That is why, even in Gujarat, the Narmada project has had its share of land acquisition controversies. But when such projects involve some degree of urbanisation, “land-adjustment procedures” may help to ensure some measure of fairness.

The Government led land acquisition procedure survives because of the confused state of land records. The Government is the only land owner with unquestionable rights to land.  The rest of us are ‘khatedars’, occupants with land rights of varying degrees of firmness, which can be challenged by some other claimant at any time. If the Government acquires land and then hands it over to a private party, this party is safe from such claims. If we had a system of guaranteed title to land and reliable record of rights, this reason for preferring government led acquisition becomes less salient.

The draft bill will improve matters relating relief and rehabilitation.  It will give lawyers and judges a starting point for building some sound jurisprudence on the notion of public purpose.  But it does not address adequately the fundamental unfairness in the way in which unrequited gains in land value are shared.