Towards a Pragmatic Land Acquisition Policy for Industrial Use
- Indian Economy Project Report

Group 8
Isha Mani Ganesh
Jithin CR

PGP/15/283

Manju Nair

PGP/15/288

Manish Govindan

PGP/15/287

Prem Sarath

1|P ag e

PGP/15/280

PGP/15/304

Contents
1. Introduction................................ ................................ ................................ ............................... 3
2. Land Acquisition Act, 1894 ................................ ................................ ................................ ......... 3
The Process ................................ ................................ ................................ ............................... 3
Definition of Public Purpose................................ ................................ ................................ ....... 4
Compensation and Valuation ................................ ................................ ................................ ..... 4
3. Land Acquisition and Rehabilitation and Resettlement Bill 2011 ................................ ................ 4
4. Land Acquisition across the Globe................................ ................................ .............................. 8
5. Case Studies of Land Acquisition in India ................................ ................................ .................... 9
6. Reforms and Recommendations ................................ ................................ .............................. 10
Innovative Solutions for Land Acquisition................................ ................................ ................. 11
7. References................................ ................................ ................................ ............................... 13

2|P ag e

1. Introduction
Land is an essential requirement for the industrial development of a country.
Manufacturing, urbanisation, defence and many other vital components of a modern country requires land. Land acquisition is a problematic issue in many developing countries including
India. In recent times, there have been increasing incidents of resistance, sometimes violent, from the land-owners and livelihood losers towards land acquisition. Cases of Posco, Mavel,
Singur and Nandigram were flashpoints in our country in the past two years.
One of the main reasons for these conflicts has been the inadequacy of the current land acquisition act to take into account the legitimate concerns of land owners and livelihood losers. Hence, the government has introduced a new bill to reduce the concerns of these stakeholders in land acquisition.

2. Land Acquisition Act, 1894
The central philosophy behind the act is the State’s power of eminent domain. It is the power of the state to directly own lands, also private lands, through acquisition. This power has three essential ingredients: the power of the state to take over private land, that this power has to be used for the public good and finally, that the state is obliged to compensate those whose lands have been taken.
The Process
1. Once the government decides on land for public purpose, a notification and public notice would be issued and put up, after which the survey would be done [Section 4]
2. Any person with a claim for compensation can raise an objection to the collector within 30 days[Section 5A]
3. Declaration would be issued by the government ,ie, the collector, after considering the objections[Section 6]
4. Public notice asking for claims of compensation to be made to the collector[Section9]
5. Enquiry and award by the collector; the value of land, measure of area to be acquired, and compensation decided.[Section 11]

3|P ag e

6. Urgency clause permits collector to take possession of land in case of emergency within 15 days of the public notice [Section 17]
7. Reference to court only on issues of compensation and measurement of the land; public purpose cannot be questioned[Section 18]
Definition of Public Purpose
 One of the major controversies regarding this ancient act is about what constitutes ‘public purpose’ as it is not defined clearly by law.


The Supreme Court, though, has consistently maintained that whether a public purpose is served or not is entirely for the state to decide. Thus it promoted collector-centric decision making. 

The decision of acquisition per se could not be challenged, only the compensation and apportionment could be questioned.



Moreover, once land has been acquired by the government, even surplus land cannot be given back to the owner.

Compensation and Valuation
Compensation is payable only to the owner or legally recognized tenant. Other dependants on the land, such as the tiller, landless labourers, artisans, fisherfolk etc are not in the purview at all. The valuation of land is done by the government themselves. The amount of compensation is paid as per the market value of the property, which in turn is determined by past sales deeds. Thus, the future price of the land is not considered at all; this is unfair to the farmer as land to be used for commercial use would fetch much higher prices than that used for agriculture.

3. Land Acquisition and Rehabilitation and Resettlement Bill 2011
This bill combines resettlement and rehabilitation with land acquisition for the first time in
India’s legal history. Below are some of its provisions:
1. The act applies when government acquires land
a. For its own purpose
b. For privately executed projects for public use
4|P ag e

c. For immediate declared use by private companies for public purpose
Land acquisition under 1.a and 1.b happens only when 80% of the affected families give consent to it.
2. Government will not acquire
a. Land for private purpose of private companies
b. Multi-crop irrigated land for public purposes
3. Only Rehabilitation and resettlement provisions apply when
a. Private companies acquire land greater than or equal to 100 acres
b. Private company approaches government for partial acquisition for public purpose 4. The law clearly defines what the term ‘public purpose’ means and it includes
a. Strategic purposes (Example: defense, atomic energy)
b. Public infrastructure and industry
c. Land for Rehabilitation & Resettlement
d. Village/urban sites for housing needs of the poor and providing health and education facilities
e. Land for private companies for public purposes
f. Land to deal with natural calamities
5. The law clearly defines who the affected families are
a. Land owners: Family whose land/immovable properties were acquired. People who were assigned land by government under its different welfare schemes.
Rights holders under Forest Rights Act,’06
b. Livelihood losers: A family whose livelihood is primarily dependent on the land being acquired. They may or may not own the property being acquired.

5|P ag e

6. The law defines the compensation package which comprises of compensation for the land and the value of assets attached to the land
a. The market value of the land is determined by two methods:
i. The value as determined by the Indian stamp Act, 1899 ii. The average value of similar land deals in the vicinity o f the plot ascertained from 50 % of deeds during the past 3 years
The market value is the one whichever is higher of the two. In rural areas, the value so obtained is multiplied by 3 to get the value of land.
b. The value of the assets like buildings, trees, wells, crop attached to the land is estimated by a competent government authority/official
c. The total compensation is determined by adding the two components together and 100% of it is given as solatium.
7. The law provides for entitlements for various stakeholders as part of the rehabilitation and resettlement package
a. For land owners:
i. Subsistence allowance at Rs. 3000 per month per family for 12 months; ii. Rs 2000 p.m per family as annuity for 20 years, with appropriate index for inflation iii. If house is lost, a constructed house of plinth area of 150 sq m of house site in rural areas or 50 sq m plinth area in urban area; iv. One acre of land to each family in the command area, if land is acquired for an irrigation project;
v. Rs 50,000 for transportation;

6|P ag e

vi. Where land is acquired for urbanization, 20% of the developed land will be reserved and offered to land owners, in proportion to their land acquired; vii. Upon every transfer of land within 10 years of the date of acquisition,
20% of the appreciated value shall be shared with the original owner whose land has been acquired; viii. Mandatory employment for one member per affected family or 2 lakh rupees if employment is not offered; ix. Offer of shares up to 25% of the Compensation amount

b. For livelihood losers:
i. Subsistence allowance at Rs. 3000 per month per family for 12 months; ii. Rs 2000 p.m per family as annuity for 20 years, with inflation index; iii. If home-less, a constructed house (plinth area) on 150 sq. m of house site in rural areas or 50 sq. m in urban area, provided free of cost; iv. A one-time ‘Resettlement Allowance’ of Rs 50,000;
v. Rs 50,000 for transportation; vi. Mandatory employment for one member per affected family or 2 lakh rupees. vii. Free land for community and social gatherings; viii. In case of displacement of 100 or more ST families, a Tribal
Displacement Plan is to be prepared:

7|P ag e

4. Land Acquisition across the Globe
Across the world, the state is given the authority to acquire land for public purpose, in lieu of compensation to be paid to the land owners. However, the terminology ‘Public Purpose’ varies from country to country depending upon their mention in the constitution or legislation. In nations like
France, Japan, China etc, the ‘public purpose’ is very clearly defined in terms of explicit enumerat e situations and projects like national defence, transportation etc. On the other hand, countries like
Malaysia, Brazil, US, UK etc have given a more generic definition to public purpose and this has lead to potential disputes. The land acquisition across the globe can be viewed along three axes as mentioned below:
1. Principles of land acquisition
There are three basic principles majorly followed around the world. The ‘value to the owner principle’ is mainly followed in common wealth nations and it considers the market value of the land as well as other aspects like severance payments, consequential financial losses, solatium etc. The “just compensation” (followed in Philippines) principle provides the land owners with adequate financial compensation i.e. a displaced person shall be put “as far as money can do it, in the same position as if his land had not been taken from him. In other words, he gains the right to receive a monetary payment not less than the loss imposed on him in the public interest, but, on the other[hand], no greater” (Valuation Office Agency 2000).
The principle of reasonable compensation is followed in countries like China and British
Columbia and only considers the direct loses which is indemnified to the land owners.

2. Process of Land Acquisition
The process of land acquisition varies over a spectrum ranging from negotiation to compulsory acquisition. In case of Japan, negotiation techniques with the stakeholders are used in order to decide the compensation. On the other hand, China , Australia, New Zealand etc have Compensation guidelines often prescribed through set formulae, which are the enforced upon affected landowners. Countries like Singapore and Philippines make use of

8|P ag e

mixed strategy wherein they first negotiate with stakeholders to arrive at a mutually acceptable compensation package, upon failure resort to compulsory acquisition based on predetermined formulae.

3. Method of compensation
Following are the methods followed to determine the compensation:
a. Evaluating the market value of the land – A comparable sales technique is used wherein the average sales price of similar land transactions in nearby areas is considered to determine the compensation. Malaysia, China and US follow this strategy. b. Evaluating the net value of income from the land –This method takes into account the present value of the future income of the land which includes all those incomes arising in future from the land. Tanzania uses this method because the market is considered to be inefficient.

c. Determining original land use value as set by the state – This method followed in
China considers compensation by taking into account the actual or original use for which the land was defined.

d. Arriving at land values through negotiation – As the name suggests, the land value is finalized based on negotiations with the land owners.

5. Case Studies of Land Acquisition in India
1. TNUDP Phase III Project (World bank guidelines) :
This project which was carried out under the guidelines of World bank saw the formulation of independent negotiation committee that carried out negotiations with the stake holders who received a compensation ranging from 142% to 150%.

9|P ag e

2. Indore Pithampur SEZ:
The Indore Pithampur SEZ was a fast track project completed in 18 months and hence the initial objections were not entertained. Land sales records in the nearby areas were considered to determine the value. This created several protests as the land values were lower and there were no negotiations.

3. Bus Road Transit System, Indore :
There was minimal land acquisition for a narrow carriageway. It was a forced acquisition without negotiation and cash compensation. The land owners were given permission to develop the existing floor area ratio but not to sell the right and this created discontent among them.

6. Reforms and Recommendations
The new billon Land Acquisition has been able to answer some of the criticisms of the Land
Acquisition Act, 1984. But the number of gaping holes in the new bill is still many. The following recommendations seek to fill in these holes.
1) More Clarity on Public Purpose: The a mbiguity can be removed to a big extent by taking lessons from foreign countries and enumerating public purpose.

2) Compulsory Acquisition only in case of specific land: The land acquired by the TATA’s in
Singur was considered to be the most fertile land in West Bengal. Proper connectivity was the only reason cited by the government for acquiring this particular land. Only in cases where the particular land under consideration is the only possible solution should the land be acquired. Otherwise all the alternatives should be properly evaluated and the decision should take into account the social impact of the transaction also.

10 | P a g e

3) Penalty for non compliance with pre-transaction agreement: Proper penalty should be imposed on companies which fail to stick to their pre-transaction agreement so that it will act as a lesson for other companies following the same path.

4) Acquisition challengeable in court: According to the previous act, only compensation charges could be challenged in court. To prevent the authoritarian power of the government, the affected should be allowed to take their case to court under proper constraints.

5) Defining proper timeline for Rehabilitation: The solution should not only include defining proper timeline for rehabilitation purposes but also the authority should ensure that the companies abide by this timeline
Innovative Solutions for Land Acquisition
1) Town Planning Scheme: This is undertaken when the government wants planned growth of cities without vast land acquisition. The planners clearly demarcate the private and public properties for development. Then a fixed proportion of the land is taken from each private property and public utilities are built on them. Thus each private property gets shrunken by the same proportion and because of the increase in value of land due to developmental activities and no one loses in the end.

Figure 1: Implementation of Town Planning Scheme

11 | P a g e

2) Road Widening Scheme: These schemes are undertaken when the government plans to build express highways connecting cities. Because of the possibility of sudden increase in land values, the phenomenon of ribbon development happens where people flock in on properties on the side of the express highway leading to unsystematic development. This leads to high variation in land prices vertical to the highway. This creates problems for further development. In order to solve this problem, the government should build subsidiary roads as a part of the highway so that there is proper access to areas near the highway and there is gradual change in land prices.

3) Transfer of Development Rights: This solution is used when the government feels the need to preserve a site. The owner of the land is compensated with developmental rights on the agreement that the site will be preserved as such. The owner can sell this developmental right in the market to another person whose limitation on developmental activity has been curbed due to government restriction. Thus this becomes a win-win situation for all the parties.

Figure2: Implementation of Transfer of Developmental Rights

WORD COUNT: 2472

12 | P a g e

7. References
1. Desai, Mihir(2011): “Land Acquisition law and the Proposed Changes”, Economic &
Political Weekly, June 25, 2011, Vol XLVI, Nos 26 &27
2. Sathe, Dhanmanjiri(2011): “ Political Economy of Land and Development in India”,
Economic & Political Weekly, July 16, 2011, Vol XLVI, No 29
3. Levien, Michael(2011):”Rationalising dispossession: The Land Acquisition and Resettlement
Bills”, Economic & Political Weekly, March 12, 2011, Vol XLVI, No 11
4. Sau, Ranjit(2007):”Second Industrialization in India: Land and the State”, Economic &
Political Weekly, February 17, 2007
5. accessed 6th
March, 2012
6. accessed 7th March, 2012
7. accessed 2nd March, 2012
8. Ashwin Mahalingam, Aditi Vyas(2011): “ Comparative Evaluation of Land Acquisition and
Compensation Processes across the World”, Economic & Political Weekly, August 6, 2011
Vol XLVI Nos 32
9. Morris, Pande (2007): “Towards Reform of Land Acquisition Framework in India”,
Economic & Political Weekly, June 2, 2007, pp 2083-90.

13 | P a g e