Companies, Indian and foreign, have discovered that there are still no developed markets for land. Under the Constitution, land can only be legislated upon by the states. In the past, this paradoxically helped entrepreneurs get away by paying less than the fair value of land by the simple expedient of cronyism. Till 2013, states used the Land Acquisition Act of 1894 to acquire land at rates for industry that forbade price discovery. It meant that if a parcel of land was to be acquired and the value of adjacent parcels of land rose in expectation, this rise was to be discounted in the calculation of the value of the land (the acquisition of land for the Tata Nano factory in Singur, West Bengal, which unseated the Left Front government after 34 years, is a case in point).
As the private sector began to take centre stage in manufacturing
after the end of the Licence Raj, this elimination of market forces became contentious and led to calls for more protection for land-losers. The United Progressive Alliance government obliged by legislating the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (LARR) Act in 2013. It mandated that any acquisition of land for any project, including infrastructure, must include a mandatory Social Impact Assessment, and the provision of a consent clause (at least 80 per cent for all private projects and 70 per cent for those under the public-private partnership route).
Section 107 of the LARR Act confers on states the right to enhance entitlements and compensation. So far, 11 states have taken advantage of this provision to modify the application of LARR Act in favour of the seller, but at least three states — Karnataka, Tamil Nadu and Maharashtra — have moved to enable direct industry-farmer transactions. Karnataka has been the most ambitious, passing an ordinance to amend its Land Reforms Act, 1961, allowing industry to buy land directly from farmers. Farmers and political groups have immediately challenged the ordinance. Other states will be keenly watching the developments before they move the needle.
All three states are industrially advanced and have found it useful to keep the application of LARR Act in abeyance. The Centre does not maintain a database of land acquired since the LARR Act was passed, but it appears that acquisitions have only been possible under the carve-outs created by the states that have modified the mother Act. Maharashtra’s ability to get land for the Bullet train project is a case in point. But that too is not fail-safe — the near abandonment of the West Coast refinery due to farmers’ agitation is an example. In fact, companies
have obtained more land from bankruptcy courts recently. When a company like Essar Steel goes down under, its land parcel is a valuable asset for the acquirer, in this case ArcelorMittal/Nippon Steel. Essar wanted to sell 1,000 acre at Paradip even as the bankruptcy case was on (it did not succeed).
In those states where there the model LARR applies, land acquisition has stalled. In Bihar, for example, an ADB-financed road project status report from 2018 shows only 62 per cent of the land needed for the project has been acquired in four years.
But the central problem remains: that no state has moved to create a viable market for land. A market for land would actually reduce the cost of transaction by those whose principle economic asset is a piece of land. In most cases land-related suits brought before the Supreme Court, the litigants do not question the locus standi of the Centre or the states to acquire land, but the price at which it should be bought.
For the market to take off, one needs scientific land records, without which small landholders have to either bribe local officials or take lower price for leasing or selling their land. The Centre has made some progress here, principally in preparing cadastral maps under the Rural Development
Ministry-run Digital India Land Records Modernisation Programme (DILRMP). Some 90 per cent of the records across states have been computerised and about 53 per cent of India’s land mass has been surveyed by a combination of space technology and on-ground matching.
But as both Singh and Chautala discovered, convincing investors that land parcels are easily available is a tough call. There are as yet few success stories available to convince investors that India can be the alternative factory to the world.