LAND ACQUISITION BILL: THEN AND NOW

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1 June 17, 2015 Land Acquisition Bill Background LAND ACQUISITION BILL: THEN AND NOW After independence, the Indian government adopted the Land Acquisition Act of 1894 (LAA 1894). However, an argument against this Act was that it was out-dated and unfair to the land owners. It had many pitfalls like forced acquisition, lack of safeguard provisions for the affected people and presence of a vague urgency clause. The previous United Progressive Alliance (UPA) government during its first term ( ) sought to amend the Act in February However, due to lack of majority, the bill could not be passed in the Rajya Sabha. After the UPA government came back to power with a stronger mandate in the second term, it reintroduced the bill in the Parliament and the same was passed in August 2013 as The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (LARR 2013) and came into effect on January 1, The title of the LARR 2013 had significance as the primary objective of the old law, ie, LAA 1894 was to acquire land for the specified projects, whereas the principle aim of the LARR 2013 was to provide fair compensation, adequate resettlement and rehabilitation facilities to those displaced and greater transparency in the process of land acquisition. In May 2014, the National Democratic Alliance (NDA) government came to power with a strong majority in the Lok Sabha. Land being a key factor to boost infrastructure projects, construction and domestic manufacturing capabilities, it sought to amend the LARR Under the proposed draft, the government intends to exempt certain provisions of the LARR including exemption from taking consent of the land owners for acquisition of land required for five specified categories of investments. What Land Acquisition refers to? Land acquisition refers to the process where the government acquires land from its owners for the purpose of development projects. In a normal land purchase, a sale is made by a willing seller as opposed to a land acquisition, wherein land is acquired even without the consent of the land owner. Why an Act on Land Acquisition? In a densely populated country like India, land being a scarce resource has a sentimental value. Indian population is highly dependent on agriculture. As per a World Bank report, nearly 68% of the total population in India lives in rural areas where agriculture is the main occupation. Land ownership in these areas is fragmented and disorganised which makes it difficult for direct acquisition by a private entity. In addition, greater bargaining power of large corporations for acquisition may make it an unfair deal for the farmers and other smaller groups negotiating from a position of weakness. Even rehabilitation and 1

2 resettlement of people living in the acquired area is a cause of concern as their livelihood is dependent on that land. The proposed amendment to the LARR 2013 seeks to bridge the above gap and support two-way development, i.e. economic growth of the country as well as economic upliftment of the affected people. The Land Acquisition Act, 1894 had many shortcomings Source: Under the old legislation, there were absolutely no provisions for resettlement and rehabilitation of the affected people. The land owner was entitled for compensation determined on the basis of prevailing rates in the area. It did not take into account increase in future value of the land parcel due to development projects. Most misused section of the old law was the urgency clause wherein the law never properly illustrated what could be termed as urgency thereby giving great discretionary power to the acquiring authority. There was neither any proper mechanism for appeal by the affected people, nor any provision for dialogue with the acquiring authority. LARR Act, 2013 LARR (Amendment) Bill, 2015: Transition Proposed changes in some key provisions of LARR 2013: Majority consent a must LARR 2013 specified a mandatory clause for obtaining consent of a minimum specified percentage of the affected people in case of land acquisition for private companies (80%) as well as public private partnership (PPP) projects (70%). The Act gave more power in the hands of landowners while responsibility to acquire land and negotiate with the landowners was transferred to the project owner. As per the proposed LARR (amendment) Bill, 2015, to expedite the process of land acquisition for strategic and development activities, five categories are proposed to be exempted from this provision namely Land Acquisition Bill: Then and Now 2

3 Scope of the Act widened Thirteen specified laws like the Atomic Energy Act, 1962, the National Highways Act, 1956, the Railways Act, 1989, the Metro Railways Act, 1978, the Electricity Act, 2003,the Ancient Monuments and Archaeological Sites and Remains Act, 1958, the Atomic Energy Act, 1962, the Damodar Valley Corporation Act, 1948, the Indian Tramways Act, 1886, the Land Acquisition (Mines) Act, 1885, The Petroleum and Minerals Pipelines Act, 1962, the Requisitioning and Acquisition of Immovable Property Act, 1952, the Resettlement of Displace Persons Act, 1948, and the Coal Bearing Areas Acquisition and Development Act, 1957, were exempted from the purview of this Act. However, the compensation, rehabilitation and resettlement provisions of these 13 laws were to be brought in accordance with this Act through a notification by January 1, LARR (amendment) Bill, 2015 proposes to apply provisions pertaining to compensation, rehabilitation and resettlement of this Act to all the 13 specified laws. This is expected to benefit those land losers whose land may be acquired under these 13 specified laws, as there is no uniform policy on the rehabilitation and resettlement for the affected people. Project execution remains the key as unutilised land has to be returned As per the LARR 2013, any land acquired which remains unutilised for a period of 5 years from the date of taking possession, shall be returned to the original owner. If in any case, the ownership is transferred to any person for a consideration, without any development having taken place on such land, then 40 per cent of the appreciated land value shall be shared with original owners within a period of five years from the date of acquisition. As per the proposed LARR (amendment) Bill 2015, the unutilised land has to be returned in (i) Five years or (ii) Any period specified at the time of setting up the project, whichever is later. Retrospective application of the Act If a land is acquired under the old legislation wherein an award has been made 5 years or more before the enactment of LARR 2013 but if physical possession of the land is not taken or the compensation has not been paid then such proceedings are deemed to have lapsed. Even in case where an award has been made but the compensation in respect of majority of the land holding is yet to be deposited in the account of land owners then in such case all the beneficiaries are eligible for compensation as per LARR, As per the proposed LARR (amendment) Bill 2015, any period during which the proceedings of acquisition were held up: (i) on account of stay order of a court, or (ii) a period specified in the award of a tribunal for taking Land Acquisition Bill: Then and Now 3

4 possession, or (iii) any period where possession has been taken but the compensation is lying deposited in a court or any designated account, will not be counted. Offence by a government official LARR 2013 states that if an offence is committed by a government official under the provisions of this act, the head of department would be deemed guilty unless he could prove that it was committed without his/her knowledge or that he/she had exercised due diligence to prevent the same. As per the proposed LARR (amendment) Bill 2015, if an offence is committed by a government official under the provisions of this act, then the government employee can be prosecuted as per section 197 of the Code of Criminal Procedure, And as per the section 197, prior sanction of the government is required before prosecuting a public servant. Compensation to land owners The compensation to the land owners has to be determined by the Collector within a period of 12 months from the date of publication of the declaration. Market value of the land is determined on the basis of the following criteria:- Whichever is higher:- 1) The market value specified in the Indian Stamp Act, 1899, for the registration of sale or 2) The average sales price for top one half of sale deeds during previous 3 years for similar type of land situated in the nearest vicinity or 3) Consented amount of compensation as agreed upon when government acquires land for private companies or PPP projects. Final calculation of compensation amount after determining market value:- Urban Land = {(Market value of land x factor of 1) + solatium*} + Value of assets attached to land Rural Land = {(Market value of land x factor in a range of 1-2 depending upon the distance of project from urban area) + solatium*} + Value of assets attached to land Comparison of Key provisions: Snapshot *Solatium is equal to 100% of (market value of land multiplied by its factor) Land Acquisition Bill: Then and Now 4

5 Comparison of Key provisions: Snapshot Major Points LARR Act (2013) LARR (Amendment) Bill 2015 Majority Consent Minimum land owner s consent of 80% for private projects and 70% for PPP projects was mandatory. To expedite the process of land acquisition for strategic and development activities, amended bill exempts five categories from this provision mainly 1. National Security and Defence 2. Rural Infrastructure including electrification 3. Affordable housing and housing for poor 4. Industrial corridors set up by the government 5. Infrastructure projects including projects under PPP Social Impact Assessment and Provision for Food security Return of unutilised land Retrospective application Offence by government official Compulsory employment Scope of the Act SIA was mandatory for all the projects while multi-crop irrigated land should be acquired only as a last resort. If a land is acquired under this law and it remains unutilised for a period of five years, it should be returned to the original owners. If an award was made five years or more before commencement of the LARR Act, 2013, and the physical possession of land has not been taken or compensation has not been paid, then the new Act would be applicable. If an offence is committed by a government official, the head of department would be deemed guilty unless he could prove that it was committed without his knowledge or that he had exercised due diligence to prevent it. Employment would be given to at least one member of the affected family under the rehabilitation and resettlement award. 13 specified laws like the Atomic Energy Act, the National Highways Act, the Railways Act, etc. were exempted from the purview of this act. However, the compensation, rehabilitation and resettlement provision of these 13 laws to be brought in accordance with this act through a notification by January 1, Provision relating SIA and acquisition of multi-crop land are exempted for above mentioned five categories. Under the amended law, unutilised land will have to be returned in (i) five years or (ii) Any period specified at the time of setting up the project; whichever is later. Any period during which the proceedings of land acquisition were held up: (i) on account of stay order of a court, or (ii) a period specified in the award of a tribunal for taking possession, or (iii) any period where possession has been taken but the compensation is lying deposited in a court or any designated account, will not be counted. If an offence is committed by a government official, then law states that government employee can be prosecuted as per section 197 of the Code of Criminal Procedure, Section 197 requires prior sanction of the government before prosecuting a public servant. Compulsory employment has to be provided to at least one member of affected family of farm labourer also. Amended bill proposes to apply provisions pertaining to compensation, rehabilitation and resettlement of this Act to all the 13 specified laws. Land Acquisition Bill: Then and Now 5

6 Stages Process of Land Acquisition Procedure Land Acquisition Bill: Then and Now 6

7 Key takeaways For decades, India is termed as country with inadequate infrastructure, non-competitive manufacturing and one of the largest importers of defence equipment in the world. India s Prime Minister, Mr Narendra Modi, with an intent to make India a manufacturing hub launched Make in India campaign. Land being a scarce commodity remains the key to the government s thrust on various reform initiatives like infrastructure development (including rural infrastructure), domestic manufacturing, enhancing defence capabilities and providing affordable house to all etc.; hence, a well laid down and simplified policy and procedure for acquisition of land is desirable from view point of all the stake holders as delay in acquisition and resistance of land owners could become major deterrents for investment in core sectors of our economy. The proposed LARR (Amendment) Bill 2105 tries to address concerns on retrospective application and return of unutilised land in equitable manner. Another key take away from the proposed LARR Bill is inclusion of 13 legislations such as like the Atomic Energy Act, 1962, the National Highways Act, 1956, the Railways Act, 1989, etc. in its purview as previously there was no uniform policy of rehabilitation and resettlement under these 13 Acts. However, removal of consent clause and SIA requirement for five exempted categories is considered as antifarmer clauses as it could lead to loss of transparency, simultaneously it would leave no option with land owner to put forward their interest. The recent audit reports of the Comptroller and Auditor General of India (CAG) has pointed out various irregularities (as per LAA, 1894) in case of allotment and utilisation of land, compensation as well as rehabilitation and resettlement of the affected people after acquisition of land. Hence, now the onus is on the government to oversee that proposed amendments in LARR, 2013, serves its intended purpose and optimum utilisation of land resources happens on the ground level in a fair and transparent manner. In essence, the government has to strike a balance between growth and interest of land owners in order to serve the interest of the public at large. Contact: Manish Parekh Kalpesh Patel Dy. Manager Sr. Manager manish.parekh@careratings.com kalpesh.patel@careratings.com Disclaimer This report is prepared by Credit Analysis & Research Limited (CARE Ratings). CARE Ratings has taken utmost care to ensure accuracy and objectivity while developing this report based on information available in public domain. However, neither the accuracy nor completeness of information contained in this report is guaranteed. CARE Ratings is not responsible for any errors or omissions in analysis/inferences/views or for results obtained from the use of information contained in this report and especially states that CARE Ratings has no financial liability whatsoever to the user of this report. Land Acquisition Bill: Then and Now 7