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Towards a Pragmatic Land Acquisition Policy for Industrial Use

Adarsh N Deepak Jangid Eshnna V P Ekka Gaurav Chand Hemant Kumar

PGP/16/060 PGP/16/80 PGP/16/81 PGP/16/82 PGP/16/83

Agenda

LARR Bill, 2011 Limitations and problems Alternative frameworks

Analysis of issues

Way Forward

Recommendations

Why a new law?

Why a combined law?

- Land Acquisition and Rehabilitation & Resettlement : Two side of the same coin

- Land acquisition always followed by R&R needs


- Negligence towards R&R raising concerns

Both LA and R&R Provisions will apply when Government acquires land : 1. For its own use, hold and control 2. To transfer it for the use of private companies for stated public purpose (including PPP projects but other than state or national highway projects) 3. For immediate and declared use by private companies for public purpose
-Land Acquisition under 2. & 3. above can take place provided 80% of the project affected families give prior informed consent to the proposed acquisition. Government does not envisage acquiring: Land for private companies for private purposes. Or Any multi-crop irrigated land for public purposes

SCOPE OF LARR,2011
Only R&R provisions will apply when: 1. Private companies buy land, equal to or more than 100 acres, on their own; 2. Private company approaches Government for partial acquisition for public purpose.

Definition of Public Purpose

1. Strategic purposes: e.g., armed forces, national security;

2. Infrastructure and Industry: where benefits largely accrue to the general public;
3. Land acquired for R&R purposes; 4. Village or urban sites: planned development - residential purpose for the poor and educational and health schemes; 5. Land for private companies for public purpose, the production of public

goods or provision of public services;


6. Needs arising from natural calamities 8. Under the urgency clause

Affected Families

Land Owners:
1. Family whose land/other immovable properties have been acquired; 2. Those who are assigned land by the Governments under various schemes; 3. Right holders under the Forest Rights Act, 2006

Livelihood Losers: 1. A family whose livelihood is primarily dependent on the land being acquired 2. May or may not own property

Proposed minimum compensation for land


1. a)

Market value of the land: Minimum land value, if any, specified in the Indian Stamp Act, 1899

b) Average of the sale price for similar type of land, ascertained from highest paid

fifty per cent of the sale deeds in the preceding three years,; or whichever is higher:

Note: MARKET VALUE SO CALCULATED SHALL BE MULTIPLIED BY THREE IN RURAL AREAS.


2. Value of the assets attached to land: Total compensation = 1+2 3. Solatium: 100% of total compensation

R&R settlements
For Land owners and livelihood losers
1. Subsistence allowance at Rs. 3000 per month per family for 12 months 2. Options for
A. B. C.

Job One time monetary compensation of Rs. 5 lakh. Annuity payment of Rs. 2000 with index for inflation.

3. A constructed house in respective areas, i.e. rural or urban 4. Transportation fee of Rs. 50,000 5. One time re-settlement allowance : Rs. 50,000

- Special provisions for SC/ST - Infrastructural amenities

R&R in case of Private Purchase of Land


Applicable where a private company is purchasing land more than 100 acres in rural areas or more than 50 acres in urban areas through private negotiations Company shall file an application with the District Collector notifying him of: (a) Intent to Acquire; (b) Purpose of Purchase; (c) Particulars of lands to be purchased

Process Flow

Proposal is Received by the Appropriate Government

Social Impact Conducted Government

Assessment (SIA) by Appropriate

SIA to be examined by independent Expert Group

PreNotification
Legitimacy of Public Purpose and SIA is approved by CS Committee (if above 100 acres) or by a Delegated Committee if below 100 acres)

Collector submits report on status of alternative sites Consent of 80% of Affected sought

Process Flow

Publication of Preliminary Notification to acquire

Notification

Public Hearing

Finalization of R&R Scheme (within 6 months of PN)

Draft Declaration& R&R Scheme published

Awards

Institutional Structure

Centre

National Monitoring Committee

Oversight at Central Level for all projects

State LA&RR Authority

Dispute Resolution for State Projects

State
Chief Secy Committee

Determine whether projects are for public purpose


Overall Admin for LA&RR in State

State Commissioner, RR

Institutional Structure

District Collector
Project-level

Overall coordination and implementation

Administrator, RR

Admin Project-level RR Oversight (Elected reps, civil society, line agencies)

RR Committee

Safeguards against indiscriminate acquisition


Social Impact Assessment mandatory for acquisitions > 100 acres Role of Chief Secretary Committee Draft Notification to include

SIA report Particulars of Administrator monitoring R&R

Draft Declaration to include

Summary of R&R Package

Return of land unused for 5 yrs after the acquisition

- All the documents would be made public and local institutions such as Gram Sabha to be consulted for transparency provisions

Timeline

1. Compensation given within three months from the date of the award 2. Monetary R&R entitlements within six months from the date of the award 3. Infrastructure R&R entitlements eighteen months from the date of the award; 4. No involuntary displacement will take place without completion of R&R; 5. In irrigation or hydel projects, R&R shall be completed six months prior to submergence

Limitations and problems

Problems

Absence of proper land markets

Impractical compensation

Definition of public purpose

Mode of bargaining

Fragmented Holdings

Intermediation and Brokers

Impractical Compensation scheme

A Bill with good intention but..

Market Price

Arbitrary mark up

Principal Drawback

Questions?!
How should landowners be compensated when State seizes private lands for development projects?

How much is enough?

How this amount is determined?

Reasons behind the Problem


Local Market Price= Average Price of all the land

transaction completed in the area in the previous three years Land Acquisition Act 1894.
Problems with Market Price

Transactions not well documented

Selective Sampling and Fake deals

Same price for voluntary and forced acquisitions

A workable Solution

First

Formula to determine compensation amount reflecting the disposed owners own valuation of their assets

Second

The acquisition process must also make up for the absence of well functioning land markets in the area

One of the Proposed Method

Determine Transfer Price by Land Auction

Compensation in Cash or in Land Extension of Area beyond Project area to surrounding farmlands

Killing two Birds with one stone

Determine Fair Price through Participatory Process

Fill in for imperfect or missing land markets by relocating the remaining farmland

Public Purpose??

PUBLIC PURPOSE & COMPULSORY ACQUISITION


Need to define Public purpose Reduce the policy and regulatory risk associated with land acquisition
Dysfunctional Ownership Limitation

Public Purpose

US Framework - Option to leave undefined and open to court matter UK, New Zealand well defined public purpose

Requirement of Specific Land

Public Ownership - not Public Purpose


Public Purpose urban context Specific land required for establishment for intra-city and intercity transport networks, cable, gas, electricity, sewage, water and other networks

Industrial Estates and Market Places

PUBLIC PURPOSE & COMPULSORY ACQUISITION


Pre-independence period Limited compulsory taking, land required for commercial activities was outside compulsory
Dysfunctional Ownership Limitation

Public Purpose

acquisition Acquisition limited to town planning and

infrastructure
Requirement of Specific Land

Post-independence period Compulsory acquisition for commercial activities

Industrial Estates and Market Places

Land Administration Act, 1984


Created large-scale protests and dissatisfaction

PUBLIC PURPOSE & COMPULSORY ACQUISITION

Public Purpose

Dysfunctional Ownership Limitation

Specific land Market failure (other lands are unsuitable) acquisition under eminent domain Acquisition of land for protection of nature Use of eminent domain to discourage the activities injurious to the protection of

Requirement of Specific Land

Industrial Estates and Market Places

nature

PUBLIC PURPOSE & COMPULSORY ACQUISITION


Land for industrial estates

Public Purpose

Could be used for other purpose such as allotment to


favored groups such as officers, academics and journalists Land for market development

Dysfunctional Ownership Limitation

Need of specific land in central places

Option I
Announcement of the proposal, invite challenges and overcome the same in a court of law and then the use of eminent domain

Requirement of Specific Land

Option II
Government acquires land under public purposes and the onus is on challenger to prove that the public purpose is not involved

Industrial Estates and Market Places

Market Development

ALTERNATIVE FRAMEWORK
Parallel non-compulsory framework
Identification of land for urban development

Demarcation into roads, public parks and areas for other public utilities The public land use plus that desired by the AUDA for future sale and use is typically to about 30 per cent restricted Put up for the public for individual objections and acceptance Landowners gain since there is no land transfer, Govt need not pay

Town Planning Scheme

Implicit Acquisition in Road Widening

Use of TDR

ALTERNATIVE FRAMEWORK
Parallel non-compulsory framework

Ribbon Development Limited access for fast movement Plots adjacent to highway highly priced unplanned ribbon development lost social value to interior plots Option corridor development Develop an access (subsidiary road) along with the expressway Shrink all plots proportionately to make road Value appreciation without acquiring land
Town Planning Scheme

Implicit Acquisition in Road Widening

Use of TDR

ALTERNATIVE FRAMEWORK
Parallel non-compulsory framework

Reduce the transaction cost and enhance social value of land Takeover land through eminent domain and issue rights to development (TDRs) Builders and developers to buy TDRs in the market equal to amount of activity

Immediate reward for giving up land


Used to compensate for regulatory takings to preserve heritage and natural resources with fair prices
Town Planning Scheme

Implicit Acquisition in Road Widening

Use of TDR

Option-Pricing Approach

A Possible Solution!
Guaranteeing the Future Claims of Farmers : Through an Option Pricing Approach
..on the lines of Noida protest..

Haryana Model

This model is an adaptation of the so called Haryana Model. This model ensures pre determined annual payments to the farmers.
However the same model was not successful because valuation of such an annuity lead to arbitrage and governance problems

Haryana Model

Stakeholders Involved!
Seller ( Agricultural Farmers, Private Land owners, Government Land )

Buyer (Private Entrepreneurs)

Government (As a Negotiator, Legal Taxing Authority)

Mechanism: In brief
A two period framework: Present and Future Current Value of the Land = V1 The amount Buyer is willing to pay = Vb

above V1 (as agreed by the seller)


Current price of the Land = V1 + Vb

Mechanism: In brief
Actual Value of the Land in Period-2 = V2 Capital Gain on Land (to the buyer) = V2 Vb

A well specified Tax rate x will be agreed upon by

the stakeholders. A debated, decided and fixed rate as statutory provision

Mechanism: In brief
Thus, the capital gain tax = X (V2 Vb)

(that goes to the seller)


Capital gain of the Buyer = (1 X) (V2 Vb) Government charges processing cost on the two

amounts

Advantages: Option Pricing Approach


Seller (farmers) gets a fair share in the augmented value of the land in the future (as the value can really shoot up)

Advantages: Option Pricing Approach


Government will be involved not only as a negotiator, but as legal taxing authority. Capital gain tax utilized for development of the area.

Advantages: Option Pricing Approach


The claim paper of the land can be used as instruments that can be traded in the market. Development of such markets in rural areas.

Advantages: Option Pricing Approach


Poor farmers can utilize capital gains from the instrument paper for liquidity as required.

WAY FORWARD FAIR PROCESS


Correct valuation of land

Define Public Purpose

Role of court & legislature

NAC

Transaction tax

Compensation

Dams, harbors, mines, roads and other networkspecific land

- Valuation of land by professional bodies Interference by courts in case of differences

Reduce below 2 percent to allow small players to use land as an asset

Option to take eminent land acquisition to the courts or legislature Curb the discretionary power to state Govt

Abolish requirement of NAC

-Compensate to cover the value of land - Support to create assets (fishing, and tourism) and provide these services directly or on an agency basis

Recommendations
Devise mechanisms for fair and practical

compensation

Auctioning Alternative Assets Equity in the company Expanded social costing

Include direct dependents

Recommendations
Develop land markets

TDRs, options etc. Set up regulatory body to monitor

Make the people aware of the market


Financial inclusion to spread the benefits

Recommendations
Define Public Purpose Properly

Beyond uncoerced individual will Concept of community

Shared culture, ethics, norms and economy

Consent to proposed model development Need for government to look beyond utilitarian concept and recognize the expanded notion of citizenship

Thank You