Land Acquisition in India Final

Land Acquisition in India: Situation Analysis & Strategic Approach for a Way Forward

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“Let industry be established in the countryside, adopt the villages in the neighborhood…. It is also clearly in the interests of industry that surrounding areas should be healthy, prosperous and peaceful”

“ In a free Enterprise, the community is not just another stakeholder in business, but is, in fact, the very purpose of our existence ”

Sir J R D Tata (Chairman of the TATA group from 1938 to 1993)

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Land Acquisition in IndiaPolicy and Practices in Land AcquisitionR&R policy of Centre/StateEnvironmental adherenceBest practices in Land Acquisition - Global Experience

Land acquisition Challenges and major policy & institutional constraintsDichotomy of Land looser and Land seekersStakeholders in Land Acquisition Key examples: Success and Failure in Land acquisitionIdeal reforms needed in Land Acquisition Act Key Characteristics of Successful Land Acquisition

Successful Land Acqusition ModelRecommended R&R

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Land Acquisition in IndiaPolicy and Practices in Land AcquisitionR&R policy of Centre/StateEnvironmental adherenceBest practices in Land Acquisition - Global Experience

Introduction

Infrastructure development is closely connected to land availability. In the past years, land acquisition had been the main bottleneck for infrastructure development, even though many regulations have been enacted to prevail this issue. The difficulties that come in the process of Land Acquisition in India are immense, given the population density and the type of land use in the country. This is evident from the fact that the fundamental issue in a number of top stories in the past few years has been the Process of Land Acquisition; be it Narmada Bachao Andolan or the recent Nandigram issue. With number of State Governments demarcating lands as Special Economic Zones the problem just is going to get worse. The evolution of Law of Land Acquisition as it exists today in various forms in different statutes in India has undergone an evolution in the last decade. Originally the wishes of owners of property were totally irrelevant, but at present, the law tries to provide various provisions for objections and alternative remedies in case of inadequacy of compensation.

The Process of Land Acquisition in India

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Acquisition and Compensation Policies—1894 to 2008

Milestones Mode of acquisition Compensation and livelihood AgendaLAA, 1894 Drawing strength from an English

law; the concept is known as theLaw of Compulsory Purchase. It yields extraordinary power to the state to acquire land with mere notification.

The LAA, 1894 is a highly efficient instrument in the hands of a state, designed to facilitate acquisition of land for public purpose. This law empowers the state, (as an exception to the general rule) to compel the owner of a property to submit it to the state, any agency or entity authorized by the state on the grounds that the property is required for the use of the state (for an inadequately defined ‘public purpose’). In effect, the state can appropriate private property rights for public purpose—which has a wide and generous definition. The pretext of ‘public purpose’ is often accused of harbouring private interests. LAA, 1894 does propose compensation for the loss of asset ownership but there is no clear emphasis on livelihood.

LAA, 1894 (as amended in 1984)

Acquisition process as above The Amendment in 1984 enabled greater private sector participation but the state’s role was still pre-eminent. There was still no emphasis on livelihood security

National Policy on Resettlement, 1998 (Hanumantha Rao Committee)

Acquisition underRehabilitation and LAA, 1894

The NPRR-1998 recognizes the rights of tenants and agricultural- labour and is broad-based to address the livelihood issues to include both the displaced and affected.

World Commission on Dams, 2000

Acquisitions for dams and irrigation projects financed by multilateralaid/loan

The World Commission on Dams recognizes ‘good practices’ and advises greater focus on means of livelihood and their protection rather than only assets. It recommends baseline surveys and assessments to arrive at a ‘just compensation’ for livelihood lost. These recommendations were not made mandatory. The implementation history of these recommendations is poor.

Andhra Policy, 2005

Acquisition for Irrigation Project under LAA, 1894

The definition of agriculture was broadened to include all allied activities and artisans.

SEZ Act, 2005 Acquisition for SEZ The focus of this Act was primarily on the creation of new jobs at the cost of traditional/existing livelihoods. The transition is particularly difficult for project-affected persons (PAPs)

Orissa R&R Policy, 2006

Acquisition for all kinds of projectsunder LAA, 1894

This R&R policy has broadened the definition of a family with a major focus on livelihood analysis and planning, perspective infrastructure planning in the resettlement areas, socio-cultural and socio-economic survey to give recognition to wide-ranging livelihood options in the affected areas.

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This is the first attempt at benefits sharing with the offer of preference shares.

National Rehabilitation2007 (NRRP-2007)and Land Acquisition(Amendment) Bill, 2007

Acquisition through a narrowed-down and Resettlement Policy, version of ‘public purpose’

NRRP-2007 recognizes traumatic, psychological, and socio-cultural consequences on the displaced populations, which calls for affirmative state action for protecting their rights. It talks about the concept of indexed benefit and direct negotiations similar to the Orissa Policy mentioned above. LA (Amendment) Bill lays down that companies, in order to qualify for state intervention in land acquisition, must raise at least 70 per cent of the land required through market mechanisms. They can seek state support in only acquiring the pending 30 per cent. This is a major paradigm change which recognizes livelihood threats and takes a candid look at the employability possibilities of PAPs in the new project.

Multilateral-financedprojects in 2008

Acquisition under LAA, 1894 The Asian Development Bank in Uttaranchal (Road Investment programme, 2000), and the World Bank in Orissa (Community Tank Management Programme 2008) developed an Entitlement Matrix recognizing the rights of the affected persons and provided separate compensation for asset acquisition, livelihood assistance, and rehabilitation assistance.

Private sector industrial, 2008

Mostly complying with the Act and state policies or project-specific packages

Pohang Steel Company Ltd (POSCO) Project in Orissa offers additional Compensation for traditional livelihoods and shops for trading as well as skill building opportunities. Videocon Project promises profit sharing by offering shares in West Bengal and Maharashtra (2008).

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Rehabilitation benefits for affected families: The R&R Bill 2007

Criteria for Eligiblity of Benefits BenefitsAny affected family whose house has been acquired or lost

Land for a house (without payment) of up to 250 sq. mt of land in rural areas or up to 150 sq. mt of land or a house of up to 100 metres carpeted area in urban areas.

Affected family owning agricultural land whose land has been acquired or lost or has been reduced to marginal farmer

If available in the resettlement area, agricultural land or cultivable wasteland equivalent to the land lost up to one hectare of irrigated land or two hectares of un-irrigated or cultivable wasteland; shall be in the name of each person included on the record of rights

Below Poverty Line (BPL)-affected family without land and has continuously lived in an area for 5 years before declaration

A house with at least 50 square metre carpet area in rural areas or 25 square metre in urban areas; or the family can opt for a one-time financial assistance for house construction

Family with land lost for an irrigation or hydel project

Preference for land-for-land in the command area of the project; if land is not available or family opts not to take the land, they shall receive monetary compensation; fishing rights in the reservoirs

Allotment of agricultural land instead of acquired land

One-time compensation of at least Rs 10,000 to each person on the records of rights

Allotment of wasteland instead of acquired land

One-time compensation of at least Rs 15,000 per hectare to each person on the records of rights

Displaced affected family with a cattle shed Minimum of Rs 15,000 for construction of a cattle shedAffected artisan, small trader, or self employed person

Minimum of Rs 25,000 for construction of a shop or shed

All affected families One-time compensation for moving and transportation costs of at least Rs 10,000

All vulnerable affected persons Minimum of Rs 500 per month for lifetime pensionFor land development project instead of land-for-land or employment

Developed land or build-up space within the development project in proportion to the land acquired, subject to some limits

Linear Acquisitions for railway lines, highways, transmission lines, laying of pipelines, and other projects requiring a narrow parcel of land

Minimum of Rs 20,000 in addition to other benefits under the scheme through which land is acquired to each person on the records of rights. Benefits listed in this Bill shall also be given if the person becomes landless or is reduced to a small or marginal farmer

Family affected by land acquisition on behalf of a requiring body

Monthly subsistence allowance of 25 days minimum agricultural wages* per month for one year; allotted houses or land shall be free of encumbrances and may be in joint names of wife and husband

Land acquisition on behalf of a requiring body: affected family not provided agricultural land or employment

Rehabilitation grant of 750 days minimum agricultural wages; If requiring body is a company, it is required to give the option of taking 20–50% of this rehabilitation grant as shares or debentures

Note: * The monetary value may vary from state to state as each state sets its own minimum agricultural wage.

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R&R Policies of Select PSUs in India

Coal India LimitedThe R&R Policy of Coal India Limited (CIL) of May 2008 attempts to streamline the different R&R practices followed by its subsidiaries in a way that allows subsidiaries to deal more effectively with the issue of R&R. The Policy provides for two types of benefits to project-affected persons (PAPs) viz. economic rehabilitation and resettlement. The former accrues to persons from whom land is acquired, persons whose homestead is acquired, tribals dependent on forest produce and sharecroppers, land lessees, tenants, and day labourers. The resettlement benefit is provided to the displaced families who are defined as those who are permanent residents and have been living in the project area on the date of publication of the notification of land acquisition. The compensation provided under the Policy includes monetary compensation for land at a value determined on the basis of prevailing legal norms and one employment for every two acres of land for persons whose land is acquired, site of 100 sq. metre per family or one time lump sum payment for persons whose homestead is acquired, and non-farm self-employment through the provision of petty contracts or jobs with contractors of CIL for sharecroppers, day labourers, and landless tribals. The Policy also provides for a budgetary provision of 1 to 2.5 per cent of retained earnings in CIL’s subsidiaries for Corporate Social Responsibility (CSR) activities in creating social assets, developing infrastructure, and creating institutions to impart vocational training.

National Hydel Power Corporation Limited NHPC’s R&R Policy—2007 came into effect in February 2008. It categorizes PAPs into titleholders and non-titleholders. Houseless PAPs are those who own a house in the project area and whose house or entire homestead is acquired while landless PAPs are those whose entire agricultural land is acquired or those who are left with less than 0.2 hectare unirrigated land or 0.1 hectare irrigated land. Amongst the titleholders, the Policy also covers people whose property is not acquired but has become inaccessible because the land in its immediate vicinity has been acquired and people losing common property resources such as ponds, grazing land, and community land. Besides compensation in the form of land, the Policy provides for other forms of compensation such as subsidy for seeds, pesticides, and fertilizers for those who have been allotted agricultural land, option of taking up to 20 per cent of their rehabilitation grant amount in the form of shares and debentures of NHPC, marriage grant of Rs 10,000 to Projected-Affected Families (PAFs) belonging to BPL category at the time of marriage of their dependent daughter or sister, scholarships for children of PAPs, and free OPD medical facility during the construction phase of the project.

National Thermal Power Corporation Limited NTPC’s Policy of June 2005 puts the cut-off date for R&R package at three years of residence in the acquired area. Eligible PAPs include agricultural as well as non-agricultural labourers, squatters and encroachers. In terms of compensation, the policy lays down the option of land for land and a one-time rehabilitation grant for those whose land is acquired, subject to the ceiling of maximum of 1 ha of irrigated land or 2 ha of unirrigated/cultivable wasteland subject

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to availability of government land in the districts. If Government land is not available, PAPs will be assisted in purchasing land on a ‘willing buyer-willing seller’ basis. The policy further allows each PAP a monthly subsistence allowance equivalent to 20 days of Minimum Agricultural Wages (MAW) per month for a period of one year up to 250 days of MAW. Other compensation provided under this policy include compensation on a project specific basis for loss of common property resources like grazing lands, cremation grounds, religious, skill upgradation of PAPs through various training schemes and training institutes of NTPC/state government in order to make them self- reliant and 80% subsidized treatment in all facilities like outdoor and indoor treatments in project hospitals.

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Environment Approval Process

Environment Sustainability Framework

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Project Conception

Screening

Preliminary Assessment

EIA Required

Scoping

Impact Analysis

Mitigation

Reporting

Review by SPCB

Review by MoEF

Decision Making

EIA not needed

Public Consultatio

n

PublicHearing

ApprovedNot

Approved

Redesign & Resubmit Implementation & Monitoring

Current EIA practiceLooks at project-specific impacts, separately, on:

Land environment Air environment Water environment Biodiversity, etc.

Cumulative impact of multiple projects in the same region is outside the scope of current EIA framework

Extended framework to internalize environmental concerns for community and business well-beingLooks at project-specific impacts, in totality on:

Provisioning services Regulatory services Cultural services Supporting services1. Evaluate alternate project locations to minimize

loss of ecosystem service flows2. Adopt ‘No net ecosystem service loss’ as a

business principal3. Adopt carrying capacity-based project location

choices

Best practices in land acquisition across the world

Each country’s R & R has some lessons here are few examples are from Columbia, China, Brazil, Papua New Guinea, Chad and South Africa, to be learned on the key issues which has been classified into four different themes viz., (I) Legal and Policy Framework; (ii) project preparation; eminent domain and compensation; (iii) community participation and benefit sharing; and (IV) grievance redress; monitoring and transparency. The salient messages are here organized below.

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Continued…

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Land acquisition Challenges and major policy & institutional constraintsDichotomy of Land looser and Land seekersStakeholders in Land Acquisition Key examples: Success and Failure in Land acquisitionIdeal reforms needed in Land Acquisition Act Key Characteristics of Successful Land Acquisition

Land Acquisition Challenges

Displacement of a high proportion of population dependent on land Fragmented ownership Absence of incomplete ownership records Antiquated land acquisition laws Illegal occupations on government land Corrupt practices Taking over of land without the owner’s consent Land Acquisition laws in India based on colonial framework and provided for forcible

land acquisition Current amendments done in land Acquisition act are not adequate and has only

enlarged the scope of the Govt. Current laws equated involuntary displacement with displacement by calamities or acts of God

Major policy and Institutional Constraints in Land Acquisition Act

No provision of payment of solatium and interest is provided in the LA act No time limit for award of compensation No provision for de-notification of excess land No provision of time limit for filing the cases of arbitration Absence of a market valuation methodology Inadequate manpower with the land acquisition units or special land units

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Stakeholders/Potential Stakeholders in LA

Glimpse of Land Acquisition: The successful-optimistic- ugly side

The acquisition of land for different public purposes has become not only a blood-letting political question but also a legal one. To elicit some major cases, below mentioned are few relevant cases.

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Steps for Ideal Reforms in Land Acquisition Act

Creation of price advisory committee for compensation. Serious reforms in LA will only take place if people were made stakeholders of the

project. (Raheja SEZ in Gurgaon: This included purchasing the land independently without government support, and by making some of the land owner’s partners in the project development)

Need to make the duty of the state to ensure proper rehabilitation of those whose land has been acquired or who have been ousted from the land.

Key Characteristics of Successful Land Acquisitions:

Avoid productive lands: Gaining social consent becomes much easier if all of the selected land is a waste land / fallow land or at least large portion of the land is not cultivated. This becomes the case given the fact that beneficial effects to the local population through that land are in all probability going to be minimal. Mundra Port and Special Economic Zone had a smooth sail in its land acquisition process and gaining social consent as the land they identified in Kutch region of Gujarat was arid and unoccupied (Hindu Business Line, 4 November, 2007). JSW Steel, part of the OP Jindal Group, also made a smart decision of setting up its steel plant in Salboni area of West Bengal on large portions of fallow land. Out of 4,860 acres of land needed the company acquired 4,300 acres of fallow land directly from the government (Economic Times, 29 May,2007).

Open Direct communication channels with Locals: One way of building trust and transparency to a relation is by establishing direct communication with the local stakeholders (say, gram sarpanch, mukhia, landholders etc). It also ensures in minimizing information asymmetry and private rent seeking opportunities available to the outsiders and middlemen. A good example of the same is the recent experience of Jindal group to acquire more than 24,700 acres of land forits Bhadres Lignite Power Plant located in Barmer district of Rajasthan. Initially, large number of the farmers refused to give up the identified land to the Rajasthan government. A direct discussion between the locals (Kisan Bhoomi Awapti Sangharsh Samiti) and Jindal Group CEO Sajjan Jindal led to an in-principle agreement between both the parties (Telegraph India, 29 September, 2008). Another example is that of Mahindra WorldCity, India’s first operational special economic zone, 50 kms from Chennai (Maraimalainagar), opted for this route right from start. The company negotiated with land owners on its own. Their experience suggests that private acquisition of land is faster, cheaper, and even faces a lower risk of litigation (Outlook Business, 1 December, 2007).

Equitable benefit sharing: Perfect markets are places where there is enormous competition by both buyers and sellers leading to ‘efficient price formation’. Land trade in India is highly taxed with transaction taxes being as high as 14% in many states. This would limit the trade of land and deals would often be underreported in value to avoid payment of taxes at such high rates. Add to these, issues of income taxes and specific regulations pertaining to sale of agricultural

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land and the problem of low reported market valuations only increase (Morris and Pandey, 2007). All these factors lead to a need for an excellent compensation package to the locals preferably a package that envisages to share the future upside of the industrial project. Two examples, both from the OP Jindal group, stand out in this regard. JSW Bengal Steel in Salboni area chalked out a workable partnership with 700 marginal farmers owning 450 acres of land. The package was, JSW Bengal Steel offers one job per family and compensation for land acquired (approximately, Rs. 3 Lakhs per acre) – 50 per cent of the compensation in cash and the rest deposited as annuity policy, payable monthly. In addition, shares of the company, equivalent to the value of the land, are offered free of charge (Outlook Business, 5 July, 2007).To acquire land for its Bhadres Power Plant located in Barmer district of Rajasthan, Jindal group agreed to a proposal wherein farmers would be allowed to rent out the land for mining so that they do not forego their ownership rights. After mining, the land would be leveled and given back to the farmers and hence farmers would have access to future potential gains in case the land prices appreciate, which is most likely (NDTV.com, 27 August, 2008).

No Political alignment: Usually private business signs its agreements and works out the details of its industrial project details including land issues with the ruling party leaders. Opposition political parties often take this opportunity to align the locals on their side. Ruling party might also be eager to play a game as part of the industrial project. In a democratic country, political fortunes also often change. A private business has to be wary of all such issues and hence should consciously tread a formal apolitical path. Jindal Steel and Power Limited avoided taking political sides even though there were protests against its project in Raigarh district of Chattisgarh. We have also not come across even one news article which shows Mahindra WorldCity and its officials taking any political sides during their land acquisition process in Tamil Nadu.

Coordinated Corporate Communications: Communication gaps, wrong signals, and issues of information asymmetry can play a spoil sport in a land acquisition process. This aspect assumes importance given that the literacy levels in local communities are usually low. Even off-the cuff, carefree statements and rumors can create problems especially when the land acquisition process is at its initial stage. Hyundai Motors second car manufacturing plant is a case in point. From its first announcement in February 2005 to inauguration of the plant in February 2008, the company had made only thirteen news releases. Of these thirteen news releases only one was a threatening signal of relocating the company’s second plant outside Tamil Nadu and demanding better incentives for the company (Financial Express, 11 May, 2006). It took more than four years for Mahindra WorldCity, to convince a tea stall owner who held up the land acquisition of the project. Yet, the company never made a corporate communication emitting wrong signals or threatening signals to the locals (Business World, 30 August, 2008).

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Successful Land Acqusition ModelRecommended R&R

Successful Land Acquisition Model

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Stage 1Business- State Government Discussion

Formal Signing of Agreement

Stage 2Business-Stakeholder Discussion

Role of Govt. Is limited No or limited involvement of rent seeking agents

Direct Contact eliminates Wrong signals Misinterpretation of signals

Direct Contact facilities In-depth appreciation of

mutual concerns Better opportunities for

concern redressal Better opportunities for

reconciliation Opportunities to arrive at win-

win solutions

Stage 3Business Gains

Legal licenses to operate Social license to operate

Stage 4Successful Project Implementation

Recommended : R&R

Objective of the company’s rehabilitation policy should be• To provide an appropriate compensation along with better habitation and employment

opportunity to the people being affected through government or private sector projects.

• Project affected people to be given proper compensation and allotment of alternative land, based on availability.

• Make arrangement for creating either equivalent or better quality residence for those people whose home-stead are being acquired. Plan and re-settle the people at an alternative site. This facility is to be provided to all class of effected persons.

• Provide permanent employment to Project Affected people. • Ensure minimum acquisition of land and displacement of houses and for the proposed

project.

Compensation for house• Minimum 0.50 acre of land will be given for construction of house and Bari. • In lieu of the affected house a pacca house of 400 sq. feet to the affected person will be

given ( 20 % bigger than the demo house) along with a cattle shed. • Each affected person will be provided with Rs. 1.00 Lakh cash and Rs. 10000/- for Cattle

shed. • Minimum Rehabilitation assistance of Rs. 11000/- in lieu of house. • Free transportation or Minimum Rs. 1000/- transportation expenses. • Common civic services like road, religious places, playground, and community health

centre, commercial places, drinking water facility for community, burial ground etc. as per community needs.

Land for land • Those land owners whose 75% to 100% land is acquired up to one acre will be allotted

1.00 acre of land. Looser of land form 1.00 acre to 2.47 will get equal of land loosing and a maximum of 2.47 acres of land to the effected land owner who are loosing more than 2.47 acres a part from compensation An amount of Rs. 10000/- cash add not exceeding Rs. 25000/- per acre will also be given for land development.

• Residential plot of 2.5 Decimile will be provided in the same village where land will be given

• All the benefits of government plan shall be provided in addition to the above benifit.

Technical training• Irrespective of the amount of land being acquired from an individual all displaced

people between 18 to 35 years of age will be given opportunity of technical training • 10+2 pass people would be offered a full time, 3 years engineering diploma course

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• 10+2 pass people will have the opportunity for a 2 years ITI course • 8th pass people will be offered 1 year full time operation program opportunity • Std. 5 pass people will have an opportunity for becoming a trained skilled labor • The priority for the technical training will be the some as defined by the employment

section below • For each program on offer seats for women seats will be made available

Employment Employment to one adult member of affected family or in its ancillaries in view of the need, suitability and qualification. Priority will be as under:-

• Displaced family loosing house and 100 % land • 100% land displaced family • More than 75% and less than 100 % of land displaced family • More than 50% and less than 75% of land displaced family • More than 25% and less than 50% of land displaced family • Less than 25% of land displaced family • Other displaced family • Other educated unemployed family in the effected village from the project • Other educated unemployed family of thus state. • Employment will be given as per industrial policy of 2004-09 of the state.• Opportunity of employment will be generated after the land acquisition and starting

of plant site work.• During construction period job opportunity available for unskilled, semi-skilled and

skilled level.• After the plant and its benefit starts opportunity for regular employment will

gradually generate.

Farm complex/NursuryAffected adults (men and women) who are unable to work in the plant will be able to work in the Agriculture Farm (farm complex) in area selected by the government/company. This Unique Agriculture farm will be set up for affected people above 35 year. Affected people will be able to invest some of this compensation as capital in this enterprise along will employment. They will also be made a part of the shared profit of the enterprise.

Alternative against employment• Those people who wish to remain with the agriculture programme they will get cash

add of Rs.10000/- up to a maximum limit of Rs. 25000/- per acre the land development and add one time cash add of Rs. 75000/-

Or • Commercial Plot of 200 sq. ft. and cash add of Rs. 25000/-

Or

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• Enterprises training for self employment and cash seed money of Rs. 25000/- Or

• Enterprises training for self employment and cash seed money of Rs. 50000/- Finance facility through Bank.

Or • If none of above alternative is availed cash add of Rs. 1 Lakh will be provided.

Nomination facility• Acceptation of nomination will be based on the condition that the affected family in

the future will not ask for employment or training. • Form the date of Publication of sector of the age of the nominee should have

completed minimum of 14 years • Under special circumstances on a case-to-case basic based on discussion sons or

daughters of 14 years or less many be nominated.• Minimum education Qualification will be essential for the nominee for technical

training.• Nomination person will be eligible for employment on complication of 18 years of age.

Social responsibility initiatives • Health – Set up a well equipped hospital in the project area. • Education

Set up a good quality English medium school. Affected families children would get free admission.Present school improvement in the of studs of the area.Availability of medical facilityThrough medical mobile ransSport activities in schools and villagesEntrerprenunicial Developments and Income generationWomen empowermentPresentation and prmation of Indegemance Tribal cultureEncouragement of Tourism

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Thank You!

Nilesh Kumar

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Stage 1Business-

State Govt. Discussions

For