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An uneven field

The draft land Acquisition and Rehabilitation Bill is a step in the right direction. But it still requires reworking. Pranab Bardhan writes.

india Updated: Aug 16, 2011 13:06 IST

The rural development ministry has put out a draft of the proposed National Land Acquisition and Rehabilitation and Resettlement (LARR) bill for public comment. There is no doubt it is a big improvement on the 1894 colonial law that was long overdue for repeal; in particular, it is intended to be far more farmer-friendly. Yet, in several respects the Bill is patently inadequate, both in its objectives and the mechanics of implementation.

First, on the controversial issue of whether the land is to be necessarily acquired by the State or left to the market for private transaction between the buyer and the seller, the bill seems to leave things open. Those who argue for the former say that left to the market, on the seller side numerous small sellers will be no match in bargaining for a good price when confronted with a large corporate buyer (or its touts), and on the buyer side the (administrative and time) costs of transacting with thousands of tiny sellers particularly in densely populated parts of the country may be prohibitively high, so on both grounds the involvement of the State may be necessary (but the bill makes the conditions quite stringent for this).

Those who argue for the market point out that State involvement always brings political complications and agitations and high-handed (and possibly corrupt) bureaucratic behaviour in dealing with farmers, and it is cleaner and more straightforward to leave things to the market. I am personally in favour of the former position, since land market in India is not like any other market of economics textbooks, and it often involves the manipulation and strong-arm tactics of land speculators and the land mafia in collusion with the politicians. The State, after all, is, or can be made to be, politically accountable. Since in view of the recent politically explosive events on the land acquisition question in different parts of India politicians and officials often do not enjoy the trust of farmers, I'd delegate the task of administering and implementing the land laws to an independent quasi-judicial 'Land Regulatory Commission' (with periodic public hearings and accountability to the legislature). This to me is a much better way of dealing with the problems than either a State commissioner in charge of overall administration or the district collectors deciding on the awards, as envisaged in the proposed LARR bill.

I suppose the bill wants to leave the matter to the discretion of the state governments, where different states may want to follow different modes. The current West Bengal government, for example, has expressed preference for the market process, with minimum involvement by the government. A prisoner of its recent electoral rhetoric, it does not realise that if things are left to the market, corporate business will usually prefer going to less densely populated parts of the country where the transaction costs of negotiating with numerous small sellers are much less.

On the matter of leaving things to the states, the LARR bill does not show an awareness of a tension between two other conflicting issues. On the one hand, deciding on a compensation of not less than six times the market value of the rural land acquired or Rs 2,000 per month as a uniform annuity for resettlement as the bill suggests, ignores the gross unfairness of such one-size-fits-all formula in a country of widely varying land values in different areas. On the other hand, if things are left entirely to the state governments then there may be a race-to-the-bottom competition for attracting private capital, and in this richer states (like Gujarat) can outbid the poorer ones (like West Bengal or Orissa). A pre-announced per acre value for different zones of India (coordinated on the basis of negotiations between the states and the Centre) may be helpful here.

Other potential issues with the provisions of the bill include:

(a) If in anticipation of land acquisition, land speculators carry out large pre-emptive buying of land from less-informed individual farmers, will the latter be included in the definition of 'project-affected families' long after their land sales to the speculators?

(b) Shouldn't there be the option of long-term land lease by the farmers instead of just outright sales?

(c) The distinction between public and private purpose is vague: if a private company buys land for commercial development where large numbers of jobs are created, does that count as public purpose?

(d) Multi-crop irrigated land left out of bounds of land acquisition in the bill may work against some densely populated states (again, for example, in West Bengal this will leave out some areas where infrastructure is also better; corporate capital then may prefer other states where infrastructure is generally better instead of moving to infrastructurally backward, largely unirrigated, lands of West Bengal, say, Purulia). We have to give up on agrarian populism and consider the fact that the surplus generated from the non-agricultural use of land may be many times the current productivity even in multi-crop irrigated land, a surplus which can then be potentially redistributed to the ex-farmers.

(e) Who certifies the 'livelihood losers' from land sales (say, unregistered sharecroppers and landless workers who have been working on the land)? Anyone around may claim this, so the panchayats should be involved in a public and transparent certification process. Since in the case of acquisition the consent of 80% (which I believe in any case is too high, giving undue power to some recalcitrant minority of people) of not just land-owners but also of these, often more numerous, 'livelihood losers' is made necessary in the bill, this certification will be crucial. Also, instead of mandatory employment (irrespective of qualifications) for one member per affected family, a more sensible policy will be a publicly-subsidised scheme of skill formation and job training.

(f) The proposed resettlement package includes the offer to landowners of shares up to 25% of the compensation amount. This ignores the low risk-bearing capacity of the small farmers as share values fluctuate. Instead I have suggested in the past that the company shares should be put in a professionally-managed pension fund, that will generate a steady flow of annuity income for a retiring farmer. If the shares of several land-buying companies are put together in this pension fund, the purpose of risk-pooling and hence lower cost for the government may be served. Similarly, a betterment levy on all nearby land which will gain from value appreciation may also be put into the fund.

The LARR bill is a step in the right direction, but it still requires a great deal of reworking.

Pranab Bardhan is a professor of economics at the University of California, Berkeley.

The views expressed by the author are personal.

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