India Inc still unhappy, activists slam modified land bill

FirstPost Economy, October 18, 2012

While India Inc is not too impressed with the the modified land acquisition Bill cleared by the Sharad Pawar-led group of ministers (GoM) on Tuesday, land rights activists have termed it as a retrograde step aimed at facilitating transfer of precious natural resources to private corporations, which will fuel conflicts in the country.

Despite the promise of greater transparency and better regulation, corporate India is worried about cost. While companies are bracing for increased costs and may tweak project plans, but they?re unlikely to ditch projects altogether, having invested years negotiating with state governments and landowners.

As per the new draft, companies can take possession of acquired land before they complete the resettlement and rehabilitation of affected families, though it is unclear whether the resettlement requirement has been waived off completely for purely private projects.

The bill will be placed before Parliament in the Winter session.

The bill will be placed before Parliament in the Winter session. Reuters

Ficci president RV Kanoria told CNBC-TV18 the bill should not have any retrospective effect on land acquisitions already initiated. The bill initially provided for retrospective application of the law in cases where the land had not been awarded or where compensation had not been paid but the rural development ministry dropped this clause to make it prospective and industry-friendly.

According to the recommendations of the GoM, the bill will no longer have a retrospective effect. Instead, there will be a cut-off date for implementation of its provisions, to be decided later.

Moreover, as per the modified land acquisition Bill, the consent of two-thirds or 66 percent of landowners would be enough, against the earlier consent of 80 percent people for acquiring land for public-private partnership (PPP) and private projects. Firstpost?s R Jagannathan had said earlier, ?if land is going to be made horrendously expensive and difficult to acquire for industry, residential housing and infrastructure, private parties involved in these activities will use bribery to achieve these ends. They will use criminals to manufacture rural consent, and employ corrupt practices to get their prices accepted and validated if the Land Bill becomes law.?

Secondly, the compensation will be two times the market value of land in urban areas and four times the value of land in rural areas, a step down as compared with two to six times required earlier. This is over and above the costs to be incurred in rehabilitation and resettlement of the people selling or dependent on the land being acquired.

Despite these changes, corporate India feels the Bill would inflate the cost of acquiring land for infrastructure projects. And why shouldn?t they? As Firstpost had said earlier, ?by artificially inflating compensation for land at the primary level, it skews the economics of land pricing ? and renders the process of land acquisition for industrial activity more complex and expensive. It will effectively negate the government?s intention to ramp up manufacturing activity in order to create jobs. Over time, it will also slow down economic activity even further.? Such complexities in return could dampen demand for land ? and have the effect of tying farmers to their land in remunerative and unproductive agricultural activity.

?Ficci has always maintained that wherever land is acquired by private parties directly, there should not be any kind of compensation or solution in excess of the value of the land,? said Kanoria. Neither is the industry group in favour of market-determined pricing of land.

However, the real estate industry is divided over the the reduction in consensus of 80 percent land owners to 66 percent. While the president of the developers body NAREDC has said the bill will make land aggregation process simpler, Raheja and DLF are of the view that compensation offered to land owners in the proposed bill would increase project cost.

?The compensation amount of 2X for urban areas and 4X for rural areas is going to increase the cost of establishing projects. To benefit a particular segment of land owners, this cost would be borne by every Indian which should actually be reviewed and rethought once again,? Raheja told PTI.

DLF Group Executive Director Rajeev Talwar told Business Standard that ?When land prices go up, it will push up project costs by many times over, as land constitutes a big portion of any project cost. You will not see big projects now. Not many developers will be willing to launch large projects as not many can afford resettlement and rehabilitation? .

CREDAI President Lalit Jain said the consent formula arrived by the GoM is ?acceptable? but added that determination of price should be based on negotiations between buyers and sellers.

Meanwhile, the activists have slammed the Group of Ministers for allowing land acquisition for the private and PPP projects which, they said, are nothing but a loot of natural resources and would deprive the nature resource-based communities of their livelihood . They said the Government has failed to learn lessons from the past failures related to resettlement and rehabilitation of displaced of Bhakra dam and Sardar Sarovar project that led to withdrawal of World Bank.

PV Rajagopal, founder and president of Ekta Parishad told Firstpost that the biggest problem with the bill is that it refuses to see the sufferings of the people. ?It is more progressive than the first one. But again, it is not a land redistribution bill, it is a land acquisition bill. That is my problem ? without considering land redistribution as a major agenda, the government is acquiring land for industry,? he told Firstpost.

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