Introduction
A lot of
confusion has been created during the discussion of the Land acquisition law
and its amendment. This note tries to clear the confusion by identifying key
issues in the form of principles needed to create a competitive land market and
fair and equitable compulsory acquisition.
Principle 1: Free Land Markets
The sale,
purchase, leasing in or out or renting of land between two or more private
parties (owner of land or buyer, lessee, renter) shall not be controlled/restricted
by Government. Land is the primary asset
that a farmer owns (besides animals & some equipment), and controls &
restrictions reduce its value. State Governments should amend/abolish all laws
& rules that restrict the right of private parties to freely enter into
legal contracts relating to land (except those relating to “forests” and
“tribal areas”). They can however require a registration process for all such
contracts, ideally through a digital registration system cum e-governance
portal set up for this purpose.[i]
Principle 2: Urban Areas & Land Use
The State Governments
have (& will retain) the right to notify Urban Municipal Boundaries and to
specify “land use” within these boundaries as part of municipal planning &
development. All extension of municipal
boundaries and specification of land use must be done through a transparent
public process that provides information, on proposed extension of urban
boundaries and/or proposed “land use” changes, to all affected parties. Once
the land use change has been notified, owners of land will have the rights
specified in P1, limited only by such legally specified & promulgated “land
use” restrictions.
“Land use” as commonly understood applies
only to private use of land, but effective and efficient land use planning
requires that use of land for physical and social infrastructure be defined. Efficient
and early definition of areas for this purpose can eliminate a lot of heartburn
and corruption.
Principle 3: PURA
Outside these “urban”
boundaries (P2), there should be no restriction on “land use.” However, as the
extension of urban facilities to village may require some “land use” planning,
a limited provision could be kept for specifying land use for village
infrastructure (roads, sewers, drains) only, within village boundaries and for
sewage disposal outside it.
Principle 4: Auction of Land
All government
owned land must only be sold through a process of transparent auctions and only
after the “land use” has been defined and notified under P2. Govt. can freely enter land market as a
private party and purchase land from private parties, but the conditions under P1 and P2 will
apply equally to the Government when it acts as a “private” purchaser.
Principle 5: Compulsory Acquisition
Government can compulsorily
acquire land (or land use rights) for, “location specific”, “public goods” and
“public goods infrastructure”. These
terms must be defined carefully taking full cognizance of their economic
definition and meaning. These include
Dams, Ports, Airports, Highways, roads, rail & subway/metro lines,
electricity transmission & distribution lines, land lines for broadband,
sewers, drains & water pipes.
While planning for land acquisition for such public goods
infrastructure, the starting point must be “land
reconstitution”, with or without “land
pooling” depending on the nature of the project and its location. Thus
building a new highway requires acquisition of a belt which may be 10 meters wide
(say). “Land reconstitution” would mean lands owners up to 1000 meters from the
center line loose 1 meter for every 100 meters they own instead of one farmer
in the middle losing all 10 meters. If the land is of uniform quality, it would
just mean pushing back the boundary of each plot a little further away from the
center line, if quality of land varies a lot, it would require “land pooling”
before “reconstitution”. By sharing both
the costs and the benefits of the highway, all become net gainers, with no need
for additional compensation above market price (which will in any case rise
after the highway is ready).
A compulsory land
acquisition law must contain only the obligations of the acquiring government
towards the owners of the land, including any legal-contractual obligations
they have viz that land. It must neither duplicate environmental and other
laws, nor be used as a tool for meeting Govts’ welfare commitments (subject to
the exception given in P6).
Principle 6: Dams and Mines
If compulsory
acquisition results in destruction of a number of villages above a specified
total population, through submergence (e.g. for large dams) or excavation (eg.
open cast mines), a social relocation plan must be prepared by the government
and approved by a majority of people in the affected villages. As the people
who gain from the acquisition (dam, mine etc) do not get to vote, the only
objective of the approval is to ensure that the social plan is good enough to satisfy
a majority of the negatively affected population.
Principle 7: New Cities & Industrial Estates
The lack of land
records and clear definition of titles to land in India, makes it difficult to
build new cities and large industrial estates in areas that were previously
non-urban, and which therefore require comprehensive planning of urban
infrastructure and transport. The construction of such public good infrastructure
according to the approved plan is always “location specific”, even though there
is a greater flexibility in locating social infrastructure (schools, medical
facilities, police stations, etc). There is therefore a dilemma; parts of the
land come under the definitions given in P5, but other parts don’t.
The ideal market
approach would be to plan the new town/city and declare the new pattern of land
use, including the precise location of physical and (perhaps) social infrastructure.
Thereafter, Principle 5 would apply to compulsory acquisition of land for location
specific public goods and Principles 1 & 2 to all other land, in the newly designated
town/city or industrial estate. The former set of land owners will loose, while
all the rest will gain enormously and will need to be taxed to compensate the
former. A fair compensation to the former would be the “market value” of the
land next to the infrastructure, post-declaration on new “land use”, plus a
premium of 25% to 50% for the inconvenience of having to shift location to this
newly purchased land. Note that such a “competitive market value” can only
emerge if principles P1, P2 & P5 are enshrined in law.
For a new
town/city, this procedure requires a high level of competence and speed on the
part of State Urban Planning departments. This problem could be solved by Govt
carving out the areas for the new town/city and contracting out the detailed
planning to private parties. Once this is done the new land use patterns would
be notified, after which the procedure would work as in P1 to P5 above.
Conclusion
Principle 1 is the
foundation on which the entire edifice of an efficient land market and
equitable land acquisition procedures rests. The “Land Acquisition law” builds another
layer of bureaucratic rules and procedures on top of pre-existing State and
Central controls on land markets, thus adding to the jungle of controls. We
need to reverse the process by first eliminating the jungle of controls on land
markets and building a fair and equitable “land acquisition law” on top of a
free markets for land.
[i]
The Land acquisition law puts another bureaucratic structure called a social
impact statement even on land sales between private parties. Though ostensibly applicable
above a certain threshold, experience shows that it will introduce additional
red tape and delays in all land transaction and multiply the already high
levels of government corruption.
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