Land acquisition: Give the law a new lease of life

  • Kalyan Singhal
  • Updated: Mar 31, 2015 22:36 IST

During the last 67 years, wrongful land acquisitions in India have transferred wealth worth trillions of rupees from the poor to the rich.

While the lives and the families of poor farmers who lost their land have been ruined, land acquisitions have created a large number of crorepatis with black money.

Land acquisitions have also destroyed the environment substantially, and they are a major driver of the Maoist movements in the country. Now, the NDA government is set to promulgate a fresh Land Acquisition Ordinance before the present ordinance lapses on April 5, with the Cabinet Committee on Parliamentary Affairs taking a decision to recommend to President Pranab Mukherjee that the Rajya Sabha be prorogued.

While the Opposition says that the land ordinance is anti-farmer, the Centre feels that it will bring development to rural India.
While governments and industry need to acquire land, serious efforts must be made to mitigate the negative impacts such moves can have on the poor. My proposals are meant to mitigate these outcomes.

If the government is to draw up a new land acquisition law, it should take into account the following five recommendations:

First, the land should be leased in perpetuity and not sold. The lessors should continue to own the land in perpetuity, and they should be paid market rent in perpetuity at the rates prevailing at the time of payment, and these rates almost always increase with time. For 99 years, the lessors and their descendants should not be allowed to sell the right to collect the rent.

Second, if the land acquisition is for mining, the occupants of the land should also be paid a percentage of the gross revenue from the sale of minerals.

Third, when signing the lease, the lessee should also pay the lessor an amount equal to two times the market price at that time based on the current use of the land (the ‘circle rate’) to compensate for such losses as rendering their economic skills useless; destroying their social network and their families’ familiar surrounding infrastructure; making future options for a living uncertain; and violating their emotional attachment to their land.

Fourth, long-term compensation should be given to farm employees in two parts: A one-time compensation for resettlement similar to that for the farm owners and monthly payment of lost wages for about 20 years.

Fifth, the land acquirers should restore the environment directly or indirectly. To the extent that the environment cannot be restored, the acquirer should do twice as much in the nearest possible region. For example, if one tree is destroyed to build a dam, the government should plant and nurture two trees nearby.

The additional costs included these recommendations are still insignificant in relation to the total costs of the projects on the acquired land and represent a small price to be paid for developing the economy.

A DNA study recently published in the prestigious Proceedings of the (US) National Academy of Sciences reports that displacement in India can reduce life expectancy (

Furthermore, the market price of land skyrockets with a change in the land’s zoning status after the government acquires the land, and the beneficiaries are likely to be the rich and the middle class.

Most of those who lose their land become partially employed landless labourers whose incomes drop sharply and often survive on such government programmes as MGNREGA. Others migrate to cities where they and their children are permanently consigned to poverty and the squalor of slums. My proposal would curtail an ongoing transfer of wealth from the poor to the rich.

Most of the landowners whose land is taken away do not have the money to litigate the issue in courts. Many land acquisitions result in damage to the environment and thus take resources away from future generations.

Many of the laws that existed before Independence might have become unconstitutional, but we have not reviewed those laws. Whenever these laws affected the rich, they have gone to the Supreme Court to have them overturned. The poor do not have the money needed for going to the Supreme Court. We should explore whether the acquisitions of land between 1950 and 2013 under the 1894 land Act were unconstitutional and need to be nullified.

The government’s right to acquire land for public purposes is not the same thing as its right to buy the land. Leasing would remove this confusion and also make it easier to acquire land because it would reflect true costs to all parties. Beyond the public purpose, the Constitution does not allow the government to take property from a private entity and give it to another profit-seeking private entity. Thus, something in democracy dies every time the government takes away land from the poor and powerless and gives it to the rich and powerful. Leasing would also mitigate this problem.

The proposed law would reduce economic distortions in land acquisition and would also be fair to all parties involved. It would remove objections related to the environment and displacement of people. According to the pro-development World Bank, the annual environmental loss in India is almost equal to its economic growth. The gain for this generation realised by consuming fixed resources equals the loss to the future generations.

The proposed law would also substantially weaken the Maoist and Naxalite movements, which are partly driven by land acquisitions on distorted economic terms.

A substantial part of the wealth created by land acquisition is black money. This proposal would reduce the black money and mitigate all the related consequences, like the import of gold for hoarding and sending money abroad illegally.

Kalyan Singhal is McCurdy Professor of Operations Management, Merrick School of Business, University of Baltimore
The views expressed by the author are personal

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