LAND ACQUISITION BILL - ICRA

ICRA Rating Feature September 2013
IMPACT ANALYSIS: NEW LAND ACQUISTION BILL
Analyst Contacts
Sheetal Sharad
sheetal.sharad@icraindia.com
+91-124-4545374
Shubham Jain
shubhamj@icraindia.com
+91-124-4545306
Rohit Inamdar
rohit.inamdar@icraindia.com
+91-124-4545847
Website
www.icra.in
Executive Summary
Given the growing protests and unrest over land acquisition during the
past few years, the Central Government was forced to re-examine the
existing land acquisition framework as laid out in the Land Acquisition
Act, 1894. On September 7, 2011, the Ministry of Rural Development
(MoRD) presented the Land Acquisition Rehabilitation & Resettlement
Bill, 2011 to the Union Cabinet. It was subsequently referred to the
Standing Committee on Rural development for examination and
report. Based on the suggestions and comments of the Committee,
various stakeholders and discussions with the MoRD, an amended
version of the LARR Bill 2011 was re-presented to the Union Cabinet
which cleared it with few additional amendments in December 2012.
The Bill was then discussed at various all-party meetings, and in
September 2013 it was approved by both the houses. The Bill has
been named as “The Right to Fair Compensation and Transparency in
Land Acquisition, Rehabilitation and Resettlement Bill 2013” (LARR
2013 or Bill) repealing the previous Land Acquisition Act of 1894, and
it awaits the President‟s assent to become a law.
The Bill has attempted to address two critical aspects of land
acquisition namely Acquisition and Rehabilitation & Resettlement
(R&R). The Bill restricts the government role to an acquirer of land for
projects with defined public and „permanent‟ purposes. Further, in
case of private companies taking up public purpose projects, it defines
the government‟s role as that of an assisting authority in cases where
the majority of landowners‟ consent exists and only a small
percentage of land is remaining to be acquired. Nevertheless,
flexibility is given to state governments to prescribe involvement of the
concerned government for land acquisition required for private
projects. Thus approach of the states towards land acquisition will be
a crucial parameter for industrial development. Further, the Bill also
lays a lot of emphasis on Rehabilitation and Resettlement (R&R) and
extends the applicability of R&R in cases where large tracts of land
are acquired even through private negotiations. It emphasises both on
monetary payments as well as non-monetary benefits as a part of
R&R and also covers the loss of livelihood rather than only the loss of
land. As has been the practice earlier, the Bill has linked monetary
compensation to the market value of the land and the value of the
assets attached to it. It also lays down timelines and procedures in
order to ensure time bound land acquisition and R&R. For industry
players acquiring land, factors like location (rural/urban), number of
land losers/livelihood losers and whether they opt for non-monetary
benefits instead of upfront payments will now assume importance in
determining the final cost of acquisition.
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In ICRA‟s view, the Bill attempts to satisfy the woes of the land losers and simultaneously provide a
systematic framework for the administration and industry players in order to acquire land. However,
the implementation of the provisions can be considerably challenging as land acquisition is mostly
being done in rural areas where the population is fully dependent on the land and the related
ecosystem. With higher compensation for land and associated R&R costs, the overall land acquisition
cost is expected to rise significantly, forcing companies to reassess the project viability and even
rationalise their land requirements. Nevertheless, if the prescribed time-bound land acquisition
process is implemented effectively, the inordinate delays on account of protests and litigations can be
avoided thus resulting in huge savings for the industry. While the Bill does stipulate steps like social
impact assessment and public hearings as part of the acquisition process, it also lays down the
maximum time limit for completing each step, failing which the acquisition process will be considered
to have lapsed. Hence, the ability of the concerned authorities to adhere to these timelines will be a
key to the successful implementation of the provisions in the bill. Moreover, the approach of the states
towards land acquisition policy and the form in which they adopt the Centre‟s policy will be critical.
While the existence of a contemporary law to address land acquisition issues is of utmost importance
considering the growing concerns in this area across all stakeholders, the actual implementation of
the same and the cost implications would have to be seen.
KEY FEATURES OF THE BILL
Acquisition for public purpose only
The Land Acquisition Bill of 1894 had acted as an enabler for the government to acquire privately held
land for use for public purposes. Subsequent modifications 1 allowed the government to acquire land
for companies proposing to utilize the land towards a public purpose. As the economy developed,
government entities acquiring land on behalf of privately held companies became fairly common.
Often there seemed to be more dissent from land owners parting with their land for a private
company‟s project, mainly because they perceived it as a profit making venture with no major benefits
accruing to the land owners themselves. In addition, changes in project purpose and „liberal‟ use of
the urgency clause 2 pointed towards misuse of the law. The need for a specific and permanent
purpose for acquisition addresses anomalies like the wrongful use of urgency clause or purpose as
witnessed in recent cases involving land allotment to real estate developers.
Table 1 Comparison of public purpose definition with earlier law
Land Acquisition Act 1894 (the Act)
(a) For development of village sites, town or
rural planning (b) planned development from
public funds pursuant to a government
scheme, land to poor or landless people for
residential purpose or to people displaced by
natural calamity or implementation of a scheme
by government or local authority or government
controlled corporation (c) Education, housing,
slum development as per a government
scheme or as approved by any authority like
local authority/society/cooperative society, (d)
land for any scheme sponsored by government
(e) land for a corporation owned or controlled
by State
The Right to Fair Compensation and
Transparency in Land Acquisition,
Rehabilitation and Resettlement Bill 2013(the
Bill)
(a) strategic defence purposes and national
security, (b) all activities listed by the government
as infrastructure projects in its notification dated
March 27, 2012, excluding private hospitals,
private educational institutions and private hotels;
(c) government owned/ cooperative owned agro
processing, cold storage facilities, water
harvesting, sanitation etc (d) industrial corridors or
mining activities, national investment and
manufacturing zones as designated in the National
Manufacturing Policy; (e) government administered
educational schemes/institutions (f) sports,
healthcare, tourism, space programme; (g) project
affected families;(g) housing for specified income
1 There have been 16 central amendments; last amendment in 1984. Land Acquisition Bill 2007 had lapsed without being
passed in the Rajya Sabha owing to dissolution of government
2 Generally used in times of urgent government requirement like natural calamities, defense purposes etc.
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groups (h)planned development or improvement of
villages, and (i) residential purposes for the poor
and landless and (j) any other infrastructural
facilities notified by the central government after
tabling the notification in Parliament. Public
purpose also includes the projects either
government owned or by private companies or
Public Private partnerships (PPPs) for above
purposes”.
In ICRA‟s view, the Bill defines public purpose more specifically as compared to the earlier Act
thereby reducing scope for flexible interpretations. The earlier Act had allowed land acquisition by
government for government controlled or owned companies as well as schemes run by
authorities/societies/cooperative societies while the new Bill allows acquisition for public purpose by
private companies and PPPs apart from government administered schemes and government
controlled organizations. The Bill also forbids any change in purpose after acquisition. The
mechanism and timeline of determining whether a proposed project qualifies for public purpose will be
important. To address this, the Bill prescribes the need for a Social Impact Assessment by the Gram
Sabha or an equivalent body in urban areas as part of the preliminary investigations for the land
acquisition which will assess the legitimacy of public interest involved, apart from the impact on
affected families and the availability of better alternatives. Further, as a safeguard against wrongful
acquisition, objections can be made by persons interested in such land after the notification of
acquisition which will be considered at an appropriate government level.
Onus on companies to acquire larger part of land in public purpose projects
The Bill stipulates that private entities and PPPs carrying out public purpose projects may approach
the government to acquire land on their behalf after receiving the consent of 80% (70% for PPPs) of
the landowners. While the 80:20 clause transfers more onus on the project owner to receive consent,
it relieves the government of the “political disadvantage” of displacing farmers. Hence, the Bill portrays
the government‟s role more as a facilitator in cases where the acquisition is stalled by a relatively
small group of landowners owning a critical area or the final portion of unacquired land. As the Bill
prescribes little on the government‟s involvement in acquisition for private purposes, there is flexibility
for the states to formulate their policy in this regard including the area of land and percentage consent
after which the State can step in. In ICRA‟s view, it remains to be seen how various states approach
land acquisition for private projects; which will further determine how things will pan out at ground
level.
The involvement of the government in smooth land acquisition for private/PPP companies can be vital
as acquiring land for large projects through direct negotiations can prove to be a challenging task for
organizations. A real case of a steel major acquiring land for its project and implementing R&R is
presented later in this note 3 . On the whole, in private purpose projects where large tracts of land are
required, companies are bound to show a preference to states that are pro-active in making land
available. A good example is the State of Gujarat which has provided opportunities to various
automobile manufacturers who were facing issues in setting up facilities in other states. Hence the
policy at state level will become a key variable in capital investment decisions.
Quick project implementation necessary as unutilized land may be returned
Apart from government‟s limited involvement in acquisition and required consent of affected families,
the Bill also talks about the return of acquired land if unutilized after a period of five years. However, it
does not elaborate on the mechanism of such return. The same has to be prescribed by the
appropriate government. As highlighted by the Standing Committee on Rural Development in regard
to this clause, clarity is required on issues like value to be paid to the original landowner in case of
3 Refer Annexure 3 for R&R being implemented by a steel manufacturer for its integrated steel plant
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return, validity of change land use and cases where only part of the land has been utilized. In light of
the possibility that land may have to be returned, the project owner is obligated make fast decisions
and implement the envisaged project on the acquired land. Further, the possibility of unutilized land
being transferred to the state government also exists. This gives state governments the opportunity to
replenish their land banks and reconsider it for alternative development purposes.
The Bill will apply retrospectively for cases where no award has been made as per earlier law or
where majority of the affected persons have not received compensation or affected persons have not
received compensation/not given up possession and the land acquisition proceedings have been
pending for five years or more.
Restrictions on acquisition of irrigated multi-cropped land
In order to safeguard food security, the Bill restricts any acquisition of irrigated multi-cropped land but
for exceptional circumstances. An equivalent area of culturable wasteland or land value has to be
deposited with government in the case of such an acquisition. As the land profile of each state differs,
state wise distinctions have to be specified with regard to the net sown area for the acquisition of
agricultural land. Restrictions on acquisition of multi-cropped irrigated land will lead to significant
reduction in the available land pool. Annexure 3 presents a state wise land profile. States like Punjab,
Haryana, Uttar Pradesh, Bihar and West Bengal had more than 35% of their land falling under net
irrigated area as per the statistics published for 2009-10 by the Directorate of Economics and
Statistics under the Ministry of Agriculture. Such states may set a lower threshold to allow acquisition
of irrigated land.
Implementation of Resettlement and Rehabilitation (R&R) 4 a challenge
Traditionally R&R has been in the form of a one-time compensation, which was decided using the last
registered sale or a similar sale in the vicinity of the land as a base. After the proposed project is set
up, the land prices rise owing to the benefits of the development. This creates considerable
dissatisfaction amongst the displaced people. To prevent such issues, the entire R&R package
stipulates the provision of employment by the project owner in cases where jobs are generated by the
project and basic infrastructure including drinking water, individual electric connections, health centre
etc for the resettled. Over and above this, delivery of the compensation and the R&R are proposed to
be preconditions to the transfer of the land title. The ability of the implementing authorities to deliver
these benefits which involve components as outlined above, in a time bound manner, will be a
significant challenge.
The Bill stipulates that R&R will apply for any acquisition of land area as specified by the State
government (an R&R committee will be appointed to review R&R progress in case land acquired is
100 acres or more for public purpose) irrespective of the purpose. This is expected to reduce
asymmetries in compensation when companies acquire parcels of land for a large project over a
period of time leading to inconsistent compensation. The applicability of such rigorous R&R as
stipulated is thus bound to increase the input costs for project owners and hence the project.
Timelines and penalties specified
The procedure for acquisition and R&R will include a Social Impact Assessment(SIA) which will cover
the investigation of public purpose, minimum extent of land required thereof, estimation of
displacement and social impact on affected families apart from the overall cost versus benefit analysis
for the proposed project. The SIA will be appraised by an Expert Group (EG) which will comprise of
two non official social scientists, two representatives of Panchayat, Gram Sabha, Municipality or
Municipal Corporation as the case may be, two experts on rehabilitation and a technical expert in the
subject relating to the project. Post these, the R&R scheme will be prepared by a designated
Administrator (or Committee in case the land area is more than 100 acres) which will further be
4 Refer Annexure 1 for proposed R&R entitlements to project affected families.
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reviewed by Collector and approved by Commissioner (R&R). Public hearings and enquiry to any
objections will be done at specified stages.
The maximum timelines specified for these steps are six months for SIA from its commencement and
two months for EG. The process will lapse in case no land acquisition notification happens after
twelve months of the EG report. Further, the R&R award should be made within twelve months from
public declaration of the R&R scheme. Such a timeline is however extendable by the appropriate
Government by another twelve months in specific justifiable cases. Exhibit 1 gives the process flow for
land acquisition and R&R.
Exhibit 1 Process flow for land acquisition 5
Social
Impact
assessment
PRE NOTIFICATION
Appraisal by
Expert Group
(EG)
Examination by
appropriate
government
NOTIFICATION
6 months from PN
Preliminary
notification
(PN)
R&R finalization
Public
hearing
Draft
declaration
and R&R
scheme
Compensation
(3 months from
award)
R&R awards and
(6 months from
award)
Infrastructural
amenities
(18 months from
award)
2 months
6 months from 2 months SIA
from SIA
12 months
from EG
report
Objections to
be given within
60 days of PN
12 months
from PN
3 to 18
months from
date of award
The land possession is possible only after paying the full compensation, the maximum time
for which is three months for the compensation and six months for monetary R&R, from date of
award. The non-monetary R&R has to be done within a period of eighteen months from the date of
award, however the implementation of the same which includes various infrastructure related facilities
will be a herculean task. In agreement with the Standing Committee recommendations, the Bill
incorporates penal rates of 9% per annum of unpaid sums in case of a delay of less than a year and
15% per annum in case of delays of more than an year to be paid by the Collector.
Increased emphasis on R&R will impact project cost; implementation timeline a
function of how the prescribed mechanism works
Revisiting project viability, farsighted planning needed
The R&R proposals put in perspective the cost to be borne towards socio economic development,
industrialization and urbanization. Considering the higher monetary compensation coupled with the
provision of non-monetary benefits, land acquisition is expected to be much costlier than before,
leading to higher funding requirements. For large projects, apart from the cost, the responsibility of
acquiring 80% consent will be a time consuming process which may lead project owners back to the
drawing board and rationalize the actual requirement of land; even more in cases where any multi
cropped irrigated land is involved. Impact Assessment will also aim at notifying the minimum possible
land required and related displacement for a project. The provision of fair compensation to the
affected families through the new Bill may encourage the families to give consent as compared to a
previous situation where they may have been apprehensive about the adequacy of the compensation.
However the actual outcome will be project and location specific and remains to be seen.
5 Source: Presentation on the Land acquisition bill by Ministry of Rural Development, September 2013
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The first resale of undeveloped land acquired under the Bill will require sharing of 40% of the
appreciation with the landowner. Thus companies will need to have a clear vision with respect to their
investment plans, arriving at a specific permanent purpose and a reasonable land requirement.
Rationalization of land requirement will lead to efficient utilization of the country‟s land in the long
term.
Formal and transparent mechanism for R&R implementation prescribed
Notwithstanding the increase in financial cost of land acquisition, smooth R&R can arrest inordinate
delays and costs attached with such delays. Various projects stalled owing to land acquisition issue
will gain impetus after the law is enacted owing to the clarity regarding land acquisition process and
associated costs. The Bill has outlined an institutional framework at the Centre, State and Project
level to carry out the acquisition and R&R as shown in Exhibit 2. Time bound implementation will
require efficient working and good coordination across these levels, failure of which will defeat the
Bill‟s basic purposes of creating a streamlined process thereby saving on time and related sunk costs.
Exhibit 2 Institutional structure for acquisition and R&R 6
Centre level State level Project level
National
Monitoring
Committee
State LA&RR Authority
Committee constituted
by appropriate
government
District Collector
Administrator RR
State Commissioner RR
RR Committee
R&R costs directly proportionate to number of land and livelihood losers
The proposed R&R will have a visible impact on various industries and will be more onerous in
sectors where the magnitude of land acquired and/or number of people affected is higher. Say a
developer plans to develop a residential township over 100 acres of land in an urban area, under the
existing norms, if the developer were to acquire the land directly from the owners at a place where the
existing market rate were, say Rs 1 crore per acre, the cost of acquisition would be around Rs 100
crore. Let us assume that as per the concerned state policy, R&R as per the new law will apply in this
case.
In case the land area in question is of a significant size, the ownership would typically be fragmented.
Consequently, a developer would have to negotiate with the various landowners thus prolonging the
acquisition process. While some owners would sell their share at the offered rate, others would prefer
to negotiate more or not to sell at all. Let us assume that the developer is eventually able to acquire
the entire land over a period of three years at an average rate of Rs 1.3 crore per acre, that translates
to a total acquisition cost of Rs 130 crore. Now under the Bill, as per specified land area by the
respective State Government, the developer may have to comply with R&R requirements as the land
area acquired is significant. This would be irrespective of the project purpose. The overall R&R, under
some broad assumptions, would be as per table below:
6 Source: Presentation on the Land acquisition bill by Ministry of Rural Development, September 2013
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Table 2 Land acquisition example for project requiring a 100 acre land
Key assumptions: Acquisition of 100 acre land. Say, land comprises 50 pieces of 2 acre each having
1 constructed house worth Rs 5 lakh and assets worth Rs 50,000 on their respective piece. Further,
the entire land is source of livelihood to 50 families. Say market value is Rs 1.0 crore per acre
Total monetary compensation under earlier law
Compensation and R&R under LARR 2013
Principal Compensation for land owners assuming 50 land
owner families
Determined market Based on factors like average sale
value + value of price of highest sale price over
assets attached to previous 3 years/to be multiplied by a
land
factor if it does not reflect actual
prevailing rate in opinion of concerned
authority
Solatium
Determined market value + value of
assets attached to land
Rs lakh
per
affected
family
Rs
130.0
crore
Rs
crore
for
entire
area
205.50 102.75
Compensation 411.00 205.50
(A)Subsistence Rs 3000*12 month
allowance for 1 year
0.36 0.18
(B)Options
Annuity OR one job per family OR one
time grant of Rs 5 lac per family
(C)Transportation Rs 50,000 0.50 0.25
(D)Constructed
house
(E)Land
(F)Land
(G)Appreciation
benefit
For Livelihood losers
If house is lost, constructed house in
urban area (equivalent cost of house if
preferred by owner)
1 acre if land acquired for irrigation
project
20% of developed land reserved for
land owner, if acquired for
urbanization
40% of appreciated land value if
unused land sold within 5 years
Irrespective of number
of affected people
Remark
205.50 102.75 Assuming average value
of asset on land for each
land owner Rs 50,000
5.0 2.50 Assuming one time
grant
0.50 0.25 Assuming 100
constructed houses of
Rs 5 lac each
5.00 2.50 Not applicable
0.0 0.0 Assuming land owners
do not exercise this
option
0.0 0.0 Not considered in this
illustration
A, B,C,D,E above and additional resettlement allowance of
Rs 50,000
0.50 0.25 Assuming 50 livelihood
users
Total monetary compensation under LARR 2013 427
lakhs
per
family
213
crore
for the
total
land
As compared to Rs 130 crore, the developer will have to incur a cost of Rs 213 crore owing to the new
R&R norms. The above calculation is based on acquisition of 100 acre urban land with 50 land
owners and 50 livelihood losers. A factor of two times can be considered on the market value for rural
land acquisition based on the distance from an urban area in which case the outflow in the above
example may vary based on the market value of land in that area. The example illustrates that the
cost of acquisition will increase significantly under new norms for large scale developers. The cash
outflow upfront may be lower in case the land losers opt for developed land share or shares of the
acquiring company, which however would mean reduction in the saleable area/shareholding for the
acquirer. Hence, the number of people involved and the severity of displacement will be key factors
determining the acquisition cost. The table overleaf gives examples of number of people affected for
some large projects across the country.
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Table 3 Land involved and people affected as part of some on-going projects in the country
Type State Land involved (hectares) Affected persons
Atomic power plant Gujarat 777 (603 agricultural) 4000 villages
International airport Maharashtra 450 5000 families
Nuclear power plant Maharashtra 938 ~2355 landowners
Integrated Steel plant Orissa 1620 (177 privately owned) ~500 families
Thermal power plant Orissa 849 600 families
Source: Media reports
The monetary compensation apart, R&R also includes the provision of basic infrastructural amenities
to those being resettled. The example of R&R implemented by a private steel manufacturing
company 7 shows that under the new law, the area, type of land and the number of people dependent
on the land would emerge as key factors while looking for suitable land. Companies looking to set up
projects would prefer to move to rural areas which would require lower compensation, other factors
being equal. Further, land where the lowest number of people are affected will be cheaper. With R&R
linked to the number of affected people it would help bring in some sensitivity towards the land
owners and livelihood losers.
ICRA believes that the proposed R&R package is a significant step forward in addressing the
concerns of displaced people. Using a liberal multiple on the market value aims at resolving the
crucial issue of inadequate compensation through creating a respectable acquisition floor price.
Landowners can also expect benefits accruing from the development through price appreciation and
land for land compensation in case of irrigation projects and the option to own a part of the developed
land in case of urbanization projects. However, increasingly most land acquisition is being done in
rural areas where the population is mostly fully dependent on the land and its related ecosystem. In
case the intended recipient has limited access to a formal financial channel (such as bank accounts)
which may be in the case of labour on the farmland, providing the proposed future benefits like
annuity payments and effectively implementing R&R could be a difficult task.
Impact on sectors
Real estate Cost of development would go up for real estate developers. They would also need to
budget for sharing the developed land or the appreciation benefit with the affected families. All these
factors would impact housing prices as well as the profitability of developers, depending on the ability
of the market to absorb the price increase. Players with already built up land banks will be in an
advantageous position. Co-development of projects with the landowner under a Joint Development
Agreement (JDA) is another prevalent option whereby the developer markets and develops the
project and shares a part of the area/profits with the land owner. However, this would be feasible for
projects where limited land or landowners are involved. In the long run, permitting higher Floor Space
Index (FSI) would become imperative to contain the real estate prices.
Roads Road sector projects are facing inordinate delays on account of severe issues with acquiring
the requisite right of way, resulting in profit erosion across the value chain. Under the various
programmes of the National Highways Authority of India (NHAI), as of March 31, 2013 8 there were
156 projects (4690 kms) under implementation and 63 projects (7994 kms) which have been awarded
where work is yet to be started. A total of 17103 kms of work is yet to be awarded by NHAI. Though
contiguous land parcels are not required in this sector, given the quantum of road length, land
acquisition plays a significant part in the execution of the same. For example, for the North South East
West (NS & EW) programme phase I and phase II under NHDP, 636 km is under implementation
across 56 projects and 372 km is yet to be awarded. The land acquisition status report mentions that
7 Refer Annexure 4
8 Source: Project information System, NHAI website
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16303 hectares out of total required 23835 hectares or 68% is in possession for construction. Land
acquisition is the responsibility of NHAI and as per the above status; it has to acquire another 7325
hectares across 16 states. Considering the other road development programmes being implemented
by NHAI and the various State Governments, the overall land to be acquired would be enormous. The
provisions of the Bill will not apply to certain land acquisitions under the existing legislations (as
specified in the Bill) including National Highways, Atomic Energy, Metro Railways etc. However the
Central Government will notify within a year, for applicability of similar provisions in the Bill relating to
compensation and R&R for affected families under those existing legislations as well. Thus in the long
term, the acquisition process in these segments will not be affected, however the compensations
payable will presumably fall in line with the Bill.
Other Infrastructure Eight out of the top 20 projects shelved in 2011-12 were shelved owing to land
acquisition or availability issues. These projects entailed an investment of Rs 165,000 crore across
sectors like power, steel, highways, education and other manufacturing 9 . Projects like airports, power
plants, dams etc, which are in the planning stage and where large tracts of land are to be acquired,
will have to rework their costing and funding plans given that land cost will be higher than the previous
estimate. However, with a policy framework finally being in place, work on the acquisition will gain
momentum with all stakeholders having clarity on the cost and compensation. In case of projects
being developed for public purpose, project owners will have the option of seeking government
intervention where a majority of the land has been acquired depending on state specified limits and
consent from 70% or 80% of land owners has been received. Higher land costs will necessitate
reworking on the funding and revenue models for such projects. While the affected people will be
compensated in a fair manner, part of such elevated costs may trickle down to the public in case of
public purpose projects. For projects which are under implementation, the applicability of revised R&R
can impact project metrics and increase funding requirements of the sponsor. In large infrastructure
projects, much will depend on the government‟s ability to plan ahead and devise mechanisms in order
to effectively implement the R&R.
For private purpose projects, states’ approach will be key
The Centre has provided a basic framework to the states for land acquisition through the Bill.
Ultimately, it will be the state‟s prerogative on how to approach the issue. Specific land areas need to
be identified for industrial use which will lead to better infrastructure support to industries, ease of
operation and minimum displacement of people. For example, in Tamil Nadu the land acquisition for
industry has largely been smooth, as barren lands have been identified for industrial use by creating
Special Economic Zones. As the Bill does not prescribe much on government involvement in
acquisition for private purposes, there is ample scope for states to formulate their policy in this regard.
States like Gujarat and Karnataka have been acquiring land through state promoted agencies and
have been providing compensation as per negotiated rates or prescribed formulae. In terms of
compensation, states with large tracts of agricultural land like Haryana and Uttar Pradesh have
devised elaborate compensation policies. While Haryana was one of the first states to introduce an
annuity like compensation structure, the earlier Uttar Pradesh government had announced its
compensation policy which included the option of appreciation benefits to farmers in addition to
annuity based compensation. The States are free to provide R&R norms superior to that specified in
the Bill. The States have flexibility to specify distance based slabs for applying the multiplying factor
(upto 2 times) for determining market value. The Bill has also indicated an option of leasing instead of
acquiring land for public purpose. In the long term, some states may move to a land bank concept
which can act as a support to speed up industrial development.
9 Source: CMIE newsletter June 2012
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Conclusion
The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and
Resettlement Bill lays down the much needed policy framework which will act as a facilitator between
the land owner and the acquirer. The Bill empowers the government to some extent for defined
purposes in order to support infrastructure development and industrialization. Further, even in case of
private projects where a large quantum of land is acquired, the Bill safeguards the interests of the
affected families by making an elaborate R&R applicable. However in doing so, it also increases the
overall cost and time required for land acquisition, thereby compelling project owners towards more
efficient utilization of land.
The implementation of the proposed institutional structure and mechanism for acquisition and R&R
will be a key in creating a transparent and swift land acquisition process. Only then will the higher cost
borne by developers be compensated by faster project implementation and reduction in disruptions
due to protests 10 and litigations, etc. Large investment plans and projects have been stalled due to
land acquisition issues or are moving slow in anticipation of clarity on land acquisition policy. The
enactment of the law is expected to expedite investment decisions and aid economic growth.
Ultimately the states‟ approach towards adopting and implementing the new policy will be critical in
determining its effectiveness in the long term.
September 2013
10 Refer Annexure 4 for recent protest regarding land acquisition
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ICRA Rating Feature New Land Acquisition Bill 2013
Annexure
Annexure 1 Rehabilitation and Resettlement package stipulated by The Right to Fair
Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill
2013
Table 4 Proposed R&R package in LARR 2013
Package Affected
component person
Determined
market value
of land
Land
owners
Detail
a) Market value if specified in the Indian Stamp Act 1899 for the registration of sale
deeds or agreement to sell where the land is situated at
b) Average sale price for similar type of land situated in nearest village or vicinity area
c) Consented amount of compensation as agreed upon in case of acquisition of
land for private /PPP companies
Whichever is higher
Average sales price shall be determined taking into account sales deeds or
agreements to sell for similar type of area in vicinity during immediately preceding
three years
Above average sale price will be determined by taking into account one half of the
total number of sale deeds or agreements to sell in which highest price has been
mentioned
Any price paid as compensation under this Act in the district on an earlier occasion
will not be considered as market value or average sale price
Any price paid as per above which in opinion of Collector is not indicative of
prevailing market price may be discounted for purposes of calculating market value
Where market value cannot be determined if land is situated in area where land
transactions are restricted or sales deeds/agreements to sell in similar area are not
available or market value has not been specified as per a) above- State
government concerned shall specify floor price based on price calculated in
respect to similar land in adjoining areas
Rural x * determined market value + value of assets attached to land, where x is 1 or 2
Solatium
based on distance from urban area
Urban Determined market value + value of assets attached to land
(A)Subsistence allowance Rs 3000*12 month
(B-1)Annuity
Rs 2000*12 month*20 years, with indexation
(B-2)Employment
For 1 member per family
(B-3) One time
Rs 5 lac per family
(C)Transportation Rs 50,000
Land owners (D)Constructed house If house is lost, constructed house in urban area
(E)Land
1 acre if land acquired for irrigation project
R&R
(F)Land
20% of developed land reserved for land owner, if
acquired for urbanization in place of compensation
(G)Appreciation benefit 40% of appreciated land value if undeveloped land sold
within 5 years
(H)Others
Fishing rights, artisan grant, small trader grant etc
Livelihood A, B,C,D,E above and additional resettlement allowance of Rs 50,000
losers
Scheduled Special provisions including preparation of development plan, land for land, etc
tribes (ST)
Infrastructural
amenities
In case of
resettlement
25 amenities including roads, drinking water, sanitation, individual electric
connections, school, basic irrigation facilities, health centre etc.
Note: Option to affected family from B-1, B-2, B-3
Additional 12% per annum on market value from the date of SIA notification;
Stamp duty and registration fee to be paid by requiring body;
Requiring body has an option of providing shares to land owners as 25% of the determined market value at
the option of the landowners.
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ICRA Rating Feature New Land Acquisition Bill 2013
Annexure 2 State wise land profile
As per the statistics published for 2009-10 by the Directorate of Economics and Statistics under
Ministry of Agriculture, India‟s geographical land area is 305 mn hectares. About 61% of the land is
spread across seven states, namely Rajasthan, Madhya Pradesh, Maharashtra, Andhra Pradesh,
Uttar Pradesh, Karnataka and Gujarat.
140 mn hectares or 46% of the total area was under net area sown in the reporting year (i.e. the total
area sown with crops and orchards, counted only once, even if multiple crops have been sown in the
reporting year). Further, 63.2 mn or 21% of the total land area was irrigated land (area irrigated for
cultivation through various sources like canals, tanks, tube wells etc once a year). However, this
irrigated land was concentrated over a few states. Around 92% of the irrigated land was spread
across 12 states, which however comprised 74% of the total geographical area. For 10 states, more
than 20% of their land area fell under irrigated land. These states accounted for 37% of the country‟s
total geographical land. The % is higher if cultivated land is considered. 51% of the total land area in
the country was cultivated as of 2009-10. For 16 states, more than 40% of their land area fell under
cultivated land. States like Punjab, Haryana, Uttar Pradesh, Bihar and West Bengal had more than
35% of their land falling under net irrigated area in 2009-10. Hence state wise distinctions for
acquisition of irrigated land will be crucial for economic development in these states.
Source: Directorate of Economics and Statistics, Ministry of Agriculture, All data for 2009-10
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ICRA Rating Feature New Land Acquisition Bill 2013
Table 5 State wise % of cultivated and net irrigated land
State
Total
land
as % of
all India
cultivated
land
as % of
total land
Net irrigated
land
as % of total
land
Rajasthan 34270 11% 19030 56% 5850 17%
Maharashtra 30758 10% 18773 61% 3254 11%
Madhya Pradesh 30756 10% 15519 50% 6891 22%
Andhra Pradesh 27504 9% 13352 49% 4214 15%
Uttar Pradesh 24171 8% 17821 74% 13458 56%
Karnataka 19049 6% 11705 61% 3391 18%
Gujarat 18811 6% 10681 57% 4336 23%
Orissa 15571 5% 6180 40% 2181 14%
Chhattisgarh 13790 5% 4956 36% 1323 10%
Tamil Nadu 13033 4% 6009 46% 2863 22%
Bihar 9359 3% 6189 66% 3395 36%
West Bengal 8685 3% 5579 64% 3112 36%
Jharkhand 7970 3% 2814 35% 102 1%
Assam 7850 3% 2889 37% 197 3%
Uttarakhand 5672 2% 775 14% 338 6%
Arunachal Pradesh 5661 2% 252 4% 56 1%
Punjab 5033 2% 4195 83% 4072 81%
Himachal Pradesh 4549 1% 602 13% 109 2%
Haryana 4372 1% 3684 84% 3069 70%
Kerala 3887 1% 2156 55% 387 10%
Jammu & Kashmir 3781 1% 819 22% 316 8%
Meghalaya 2229 1% 341 15% 62 3%
Mizoram 2101 1% 189 9% 10 0%
Manipur 2011 1% 234 12% 52 3%
Nagaland 1621 1% 420 26% 73 5%
Tripura 1049 0% 281 27% 59 6%
A&N Island 757 0% 17 2% 0 0%
Sikkim 692 0% 82 12% 14 2%
Goa 361 0% 144 40% 28 8%
Delhi 147 0% 34 23% 22 15%
Pondicherry 49 0% 22 45% 16 33%
D & N Haveli 48 0% 22 46% 4 8%
Chandigarh 7 0% 1 14% 1 14%
Lakshadweep 3 0% 3 100% 1 33%
Daman & Diu 0 0% 0 0% 0 0%
ALL INDIA 305610 100% 155770 51% 63256 21%
Land area in thousand hectares
Source: Directorate of Economics and Statistics, Ministry of Agriculture
All data for 2009-10
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R&R BY A PRIVATE MANUFACTURING MAJOR
ICRA Rating Feature New Land Acquisition Bill 2013
Annexure 3 Example of R&R implemented by a private steel manufacturer over 2006 to 2011
The following is an example of the R&R implementation of a steel manufacturing company from 2006
to early 2011 for its integrated steel plant in Orissa. The company has a 4 R policy to implement R&R
which comprised Reassuring Communication, Resettling the displaced population with care,
Rehabilitation – ensuring a better quality of life, income and happiness and Recheck implementation
through self and independent social audits. The highlights of the R&R initiatives taken by the
company are given below:
Exhibit 2 R&R being implemented by a private steel manufacturer
Project metrics
Cost
Rs 21.6 bn
Expected annual revenues
Rs 2.2 bn
Investment towards R&R
Rs 0.2 bn
Expected employment generation 20,000
Timeline
Signing of MoU with State 2004
Start of project construction 2010
Commissioning of first phase 2014
Area &
people involved
Acquisition and
R&R status
Land to be acquired
3260 acres
Land ownership
81% private, 19% state
No. of villages 6
Affected families
1195 (~3866 persons)
Commissioning of first phase 2014
Land acquired 24% till Jul 2011
Families rehabilitated 909 till Feb 2011
Persons trained for employment 492 till Dec 2010
Persons provided employment 186
6
Affected families
1195 (~3866 persons)
Highlights Commissioning of R&R initiatives of first phase 2014
Employment regeneration:
Technical skills training to a family member OR a one-time compensation in lieu of a job. Option of
one time compensation if the family submits a definite plan for return generating utilization of the
cash.
Self Help groups for both non-farm and farm based income generation activities like handicrafts,
farming of seasonal vegetable. 16 acre agricultural land leased out for this purpose.
Relocation:
Allotment of plot in resettlement colony and financial and operational support in building house
Provision of basic infrastructure amenities like roads, street lighting, drinking water
Construction of medical centre, provision of education, scholarships etc.
Compensation (over and above price of land acquisition)
One-time compensation of Rs 2.2 lakh in lieu of the job. Option of one time compensation only
when the family submits a definite plan for return generating utilization of this cash.
Monthly maintenance allowance of Rs 2300 to extended family after confirmation of dismantling of
house on project land
House building allowance of Rs 1.5 lakh in installments.( in addition Rs 1 lakh R&R entitlement)
Transportation allowance of Rs 2000
Source: Company website as on July 7, 2012, presentation on R&R initiatives
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ICRA Rating Feature New Land Acquisition Bill 2013
Acquiring
authority
Delhi Mumbai
Industrial
Corridor
State
government
Greater Noida
Authority
Noida
Authority
Jaipur
Development
Authority
Annexure 4 Recent prominent land acquisition protests
Year of Location, Affected Project Issue Status
protest State
Land area
2012 Haryana &
Rajasthan
(acres)
3000 Delhi Mumbai
Industrial
Corridor
2012 Jharkhand 227 Educational
institutions (IIM
Ranchi, IIT
Ranchi & Central
Law University)
2011 Greater
Noida, Noida
Extension,
UP
NA Real estate
development;
Formula one
track Yamuna
Expressway
Various 2011 Chhattisgarh NA Thermal power
plants
Inadequate
compensation
Land acquired by
erstwhile Bihar
government ,
unutilised by
government
Villagers farming
on the said land
Use of urgency
clause,
Government role in
acquiring land for
private purposes
Below par
compensation
2011 Noida, UP NA Real estate Below par
development compensation
2011 Rajasthan Jaipur ring road Below par
compensation
Acquisition of
excess land than
required
Sale of tribal , multi
crop irrigated land
Government in
process of
taking consent
from
landowners,
Protest ongoing
State
government has
formed
committee for
dialogue with
villagers,
Probable
change in
location
Settlement of
additional
compensation
and land.
Acquisition
cancelled in
some cases by
HC.
Acquisition
cancelled in
some cases by
SC in August
2013
Settlement with
farmers
Protest ongoing
Protests
ongoing,
allotment of
some lands
cancelled by HC
Bellary
airport
2010 Karnataka Airport Fertile land Acquisition
cancelled by HC
Tata Motors 2006 West Bengal 997 Automobile Farmers not Plant had to be
manufacturing agreeable to shifted to
plant
acquisition
Gujarat.
Farmers in West
Bengal
demanding
Posco Steel 2005 Orissa 4004 Integrated steel
plant
Source: Media reports
Fertile land ,
displacement of
large population
return of
unutilised land
Company
reduced land
requirements to
2700 acres
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ICRA Rating Feature New Land Acquisition Bill 2013
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