Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013

Land Acquisition, Rehabilitation and Resettlement Bill in India was a bill passed that was passed on August 29, 2013 in the Lok Sabha (lower house of the Indian parliament) and currently under consideration in Rajya Sabha (upper house of the Indian parliament). As per the bill the much-awaited land acquisition and rehabilitation bill that aims to provide fair compensation to those whose land is taken away, brings transparency to the process of acquisition of land to set up factories or buildings and assures rehabilitation of those affected. This legislation has been eagerly sought by both industry and those who live off the land.Out of the 235 members who voted on the bill, 216 backed it while 19 voted against it. The bill aims to replace a nearly 120-year-old law enacted during British rule in 1894.

The bill establishes meaningful regulations for land acquisition as a part of India's massive industrialisation drive driven by public-private partnership. The bill was introduced in Lok Sabha in India on 7 September 2011. The bill will be central legislation in India for the rehabilitation and resettlement of families affected by land acquisitions.

The Land Acquisition, Rehabilitation and Resettlement, 2011 Bill is also known as LARR Bill 2011 and LARR 2011. The Bill has 107 clauses. It was in public domain and India's parliament for review, as Bill number 77 of 2011.

Purpose of the Bill

LARR 2011 seeks to repeal and replace India's Land Acquisition Act, 1894. The Bill seeks to enact a law that will apply when:

• Government acquires land for its own use, hold and control.
• Government acquires land with the ultimate purpose to transfer it for the use of private companies for stated public purpose. The purpose of LARR 2011 includes public-private-partnership projects, but excludes land acquired for state or national highway projects.
• Government acquires land for immediate and declared use by private companies for public purpose.

LARR Bill 2011 aims to establish the law on land acquisition, as well as the rehabilitation and resettlement of those directly affected by the land acquisition in India.

The scope of LARR 2011 includes all land acquisition whether it is done by the central government of India, or any state government of India, except the state of Jammu & Kashmir.

Need for the Bill

The Government of India claims there is heightened public concern on land acquisition issues in India. Of particular concern is that despite many amendments, over the years, to India's Land Acquisition Act of 1894, there is an absence of a cohesive national law that addresses:

• fair compensation when private land is acquired for public use, and
• fair rehabilitation of land owners and those directly affected from loss of livelihoods.

The Government of India believes that a combined law is necessary, one that legally requires rehabilitation and resettlement necessarily and simultaneously follow government acquisition of land for public purposes.

Forty-Fourth Amendment Act of 1978 omitted Art 19(1) (f) with the net result being:-

1.The right not to be deprived of one’s property save by authority of law has since been no longer a fundamental right.
Thus, if government issues a fiat to take away the property of a person, that person has no right to move the Supreme Court
under Art 32.
2.Moreover, no one can challenge the reasonableness of the restriction imposed by any law the legislature made to deprive
the person of his property.

Art 31(2) in the original Constitution embodied the principle that if the Government makes a compulsory acquisition or requisitioning of private property, then it must take following actions:-

a) make a law

b) such law must be for public purpose

c) compensation must be paid to the owner of the property

First, the 25th Amendment Act, 1971 replaced the requirement of ‘compensation’ by ‘an amount’, the adequacy of which cannot be challenged in any court. Then the real killer 44th Amendment Act, 1978 came and omitted the Art 31 along with Art 19(1) (f). Thus individual’s right to compensation for loss of property was also lost.

In recent times, there have been multiple incidents where farmers were protesting against the Government as it took away the land from them without paying the adequate compensation and against the wishes of many farmers. The whole debate about Right to Property needs to be re-initiated under this background. The Right to Property, which was enshrined in the original Constitution of India, as Fundamental Right should be re-instated by voiding the changes made by 44th Amendment Act of 1978 in this respect.

Content of the Bill

Definition of public purpose

Clauses 2 and 3 of LARR Bill 2011 define the following as public purpose for land acquisition within India:

• Acquisition of land for purposes relating to the armed forces of India, national security or defence, police, safety of the people;
• Acquisition of land for railways, highways, ports, power and irrigation purposes for use by government or by government controlled corporations (also known as public sector companies);
• Acquisition of land for planned development or improvement of village or urban sites or for residential purpose to weaker sections of society in rural or urban areas;
• Acquisition of land for government administered educational, agricultural, health and research schemes or institutions;
• Acquisition of land for persons residing in areas affected by natural calamities;
• Acquisition of land for resettlement of affected people for any of the above government projects;
• Acquisition of land by the government for public-private-partnership projects for the production of public goods or the provision of public services;
• Acquisition of land for private companies for the production of public goods or provision of public services

the acquird land is not used in five years the land should be back to original land owners When government declares public purpose and shall control the land directly, consent of the land owner shall not be required. However, when the government acquires the land on behalf of public sector companies or for private companies, LARR 2011 proposes that the consent of at least 80% of the project affected families shall be obtained through a prior informed process before government uses its power under LARR 2011 to acquire the remaining land for public good.

LARR 2011 includes an urgency clause for expedited land acquisition. The urgency clause may only be invoked for national defense, security and in the event of rehabilitation of affected people from natural disasters or emergencies.

Definition of 'land owner' and 'livelihood loser'

LARR 2011 defines the following as land owners:

• family whose land or other immovable property is to be acquired
• family who was assigned land by the government under any of its social development initiatives
• family who hold rights under India's The Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006

LARR 2011 defines the following as livelihood losers:

• any family whose livelihood, over most recent three years, was primarily dependent on the land being acquired, including agriculture labourers, tenants or sharecroppers
• any family whose livelihood, over most recent three years, was primarily dependent on forests or waterbodies being acquired; including forest gatherers, hunters, fisher folk and boatmen
• any family whose livelihood, over most recent three years, was dependent primarily on the land being acquired in the urban areas
• any family who was residing on the land being acquired in the urban areas

Limits on acquisition

LARR Bill 2011 forbids land acquisition when such acquisition would:

• cumulatively exceed 5% of multi-crop irrigated area in any district in any state of India, or
• cumulatively exceed 10% of single-crop net sown area in any district in any state of India, if the net sown area in that district was less than 50% of the total area of the district

Even below these threshold, LARR 2011 requires that wherever multi crop irrigated land is acquired an equivalent area of culturable wasteland shall be developed by the state for agricultural purposes.

These limits shall not apply to linear projects. LARR 2011 illustrates linear projects with examples such as railways, highways, major district roads, power lines, and irrigation canals.

Compensation

Clause 26 of LARR 2011 defines the method by which market value of the land shall be computed under the proposed law. Schedule I outlines the proposed minimum compensation based on a multiple of market value. Schedule II through VI outline the resettlement and rehabilitation entitlements to land owners and livelihood losers, which shall be in addition to the minimum compensation per Schedule I.

The market value of the proposed land to be acquired, shall be set as the higher of:

• the minimum land value, if any, specified in the Indian Stamp Act, 1899 for the registration of sale deeds in the area, where the land is situated; or
• the average of the sale price for similar type of land being acquired, ascertained from the highest fifty per cent of the sale deeds registered during the preceding three years in the nearest village or nearest vicinity of the land being acquired

LARR 2011 bill proposes that the minimum compensation be a multiple of the total of above ascertained market value plus a solatium. Specifically, the current version of the Bill proposes the total minimum compensation be:

• At least four times the market value for land acquired in rural areas;
• At least two times the market value for land acquired in urban areas

In addition to above compensation, the draft LARR 2011 bill proposes a wide range of rehabilitation and resettlement entitlements to land owners and livelihood losers from the land acquirer.

For land owners, the Bill proposes:

• an additional subsistence allowance of Rs.36,000 (US$ 800) for the first year
• an additional entitlement of a job to the family member, or a payment of Rs.5,00,000 (US$ 11,000) up front, or a monthly annuity totaling Rs.24,000 (US$ 550) per year for 20 years with adjustment for inflation – the option from these three choices shall be the legal right of the affected land owner family, not the land acquirer
• an additional upfront compensation of Rs.50,000 (US$ 1,100) for transportation
• an additional upfront resettlement allowance of Rs.50,000 (US$ 1,100)
• if the land owner loses a home in a rural area, then an additional entitlement of a house with no less than 50 square meters in plinth area
• if the land is acquired for urbanization, 20% of the developed land will be reserved and offered to land owning families, in proportion to their land acquired and at a price equal to cost of acquisition plus cost of subsequent development
• if acquired land is resold without development, 20% of the appreciated land value shall be mandatorily shared with the original owner whose land was acquired

In addition to minimum compensation explained above, and additional entitlements for the affected land owners, LARR 2011 bill proposes the following additional entitlements to each livelihood loser:

• an additional subsistence allowance of Rs.36,000 (US$ 800) for the first year
• an additional entitlement of a job to the family member, or a payment of Rs.5,00,000 (US$ 11,000) up front, or a monthly annuity totaling Rs.24,000 (US$ 550) per year for 20 years with adjustment for inflation – the option from these three choices shall be the legal right of the affected livelihood-losing family, not the land acquirer
• an additional upfront compensation of Rs.50,000 (US$ 1,100) for transportation
• an additional upfront resettlement allowance of Rs.50,000 (US$ 1,100)
• whether the livelihood loser is homeless or has a home on the proposed land to be acquired, he or she shall have a right to a house with no less than 50 square meters in plinth area

In addition to the above compensation and entitlements under the proposed LARR 2011, scheduled caste and schedule tribe (SC/ST) families will be entitled to several other additional benefits per Schedule II of the proposed bill. India has over 250 million people protected and classified as SC/ST, about 22% of its total population. The proposed additional benefits to these families include:

• an additional land grant of 2.5 acres per affected family
• an additional assistance of Rs.50,000 (US$ 1,100)
• free land for community and social gatherings, and special Schedule V and VI benefits

Schedule III of LARR 2011 proposes additional amenities over and beyond those outlined above. Schedule III proposes that the land acquirer shall provide 25 additional services to families affected by the land acquisition. Some examples of the 25 additional services include schools, health centres, roads, safe drinking water, child support services, places of worship, burial and cremation grounds, post offices, fair price shops, and storage facilities.

LARR Bill 2011 proposes that Schedule II through VI shall apply even when private companies willingly buy land from willing sellers, without any involvement of the government.

The Bill as drafted mandates compensation and entitlements without limit to number of claimants. Thus, for clarity and as an example, if 1000 acres of rural land is to be acquired for a project, with market price of Rs.2,25,000 per acre (US$ 5000 per acre), 100 families claim to be land owners, and 5 families per acre claim their rights as livelihood losers under the proposed LARR 2011 Bill, the total cost to acquire the 1000 acre would be

• Land compensation = Rs.90,00,00,000 (US$ 20,000,000)
• Land owner entitlements = Rs.6,30,00,000 (US$ 1,400,000) + 100 replacement homes
• Livelihood loser entitlements = Rs.365,00,00,000 (US$ 70,000,000) + 5000 replacement homes

The average effective cost of land, in the above example will be at least Rs.41,00,000 (US$ 91,400) per acre plus replacement homes and additional services per Schedule III to VI of the proposed bill. Even if the pre-acquisition average market price for land were just Rs.22,500 per acre (US$ 500 per acre) in the above example, the proposed R&R, other entitlements and Schedule III to VI would raise the effective cost of land to at least Rs.33,03,000 (US$ 73,400) per acre.

The LARR Bill of 2011 proposes the above benchmarks as minimum. The state governments of India, or private companies, may choose to set and implement a policy that pays more than the minimum proposed by LARR 2011.

For context purposes, the proposed land prices because of compensation and R&R LARR 2011 may be compared with land prices elsewhere in the world:

• According to The Financial Times, in 2008, the farmland prices in France were Euro 6,000 per hectare ($2,430 per acre; Rs.1,09,350 per acre).
• According to the United States Department of Agriculture, as of January 2010, the average farmland value in the United States was $2,140 per acre (Rs.96,300 per acre). The farmland prices in the United States varied between different parts of the country, ranging between $480 per acre to $4,690 per acre.

A 2010 report by the Government of India, on labour whose livelihood depends on agricultural land, claims that, per 2009 data collected across all states in India, the all-India annual average daily wage rates in agricultural occupations ranged between Rs.53 to 117 per day for men working in farms (US$ 354 to 780 per year), and between Rs.41 to 72 per day for women working in farms (US$ 274 to 480 per year). This wage rate in rural India study included the following agricultural operations common in India: ploughing, sowing, weeding, transplanting, harvesting, winnowing, threshing, picking, herdsmen, tractor driver, unskilled help, mason, etc.

Benefits and Effects of the Bill

The 2011 LARR Bill, if enacted into law, is expected to affect rural families in India whose primary livelihood is derived from farms. The Bill will also affect urban households in India whose land or property is acquired.

Per an April 2010 report, over 50% of Indian population (about 60 crore people) derived its livelihood from farm lands. With an average rural household size of 5.5, LARR Bill 2011 R&R entitlement benefits may apply to about 10.9 crore rural households in India.

According to Government of India, the contribution of agriculture to Indian economy's gross domestic product has been steadily dropping with every decade since its independence. As of 2009, about 15.7% of India's GDP is derived from agriculture. LARR Bill 2011 will mandate higher payments for land as well as guaranteed entitlements from India's non-agriculture-derived GDP to the people supported by agriculture-derived GDP. It is expected that the Bill will directly affect 13.2 crore hectares (32.6 crore acres) of rural land in India, over 10 crore land owners, with an average land holding of about 3 acres per land owner. Families whose livelihood depends on farming land, the number of livelihood-dependent families per acre varies widely from season to season, demands of the land, and the nature of crop.

LARR Bill 2011 proposes to compensate rural households – both land owners and livelihood losers. The Bill goes beyond compensation, it mandates guaranteed series of entitlements to rural households affected. According to a July 2011 report from the Government of India, the average rural household per capita expenditure/income in 2010, was Rs.928 per month (US$ 252 per year).

For a typical rural household that owns the average of 3 acres of land, the LARR 2011 Bill will replace the loss of annual average per capita income of Rs.11,136 for the rural household, with:

• four times the market value of the land, and
• an upfront payment of Rs.1,36,000 (US$ 3,000) for subsistence, transportation and resettlement allowances, and
• an additional entitlement of a job to the family member, or a payment of Rs.5,00,000 (US$ 11,000) up front, or a monthly annuity totaling Rs.24,000 (US$ 550) per year for 20 years with adjustment for inflation – the option from these three choices shall be the legal right of the affected land owner family, not the land acquirer, and
• a house with no less than 50 square meters in plinth area, and
• additional benefits may apply if the land is resold without development, used for urbanization, or if the land owner belongs to SC/ST or other protected groups per rules of the Government of India

If the affected families on the above rural land demand 100% upfront compensation from the land acquirer, and the market value of land is Rs.1,00,000 per acre, the 2011 LARR Bill will mandate the land acquirer to offset the loss of an average per capita 2010 income of Rs.11,136 per year created by this 3 acre of rural land, with the following:

• Rs.18,36,000 (US$ 41,727) to the rural land owner; which is the total of R&R allowances of Rs.6,36,000 plus Rs.12,00,000 – which is four times the market value of the land, plus
• a house with no less than 50 square metres in plinth area and benefits from Schedule III-VI as applicable to the rural land owner, plus
• additional payments of Rs.6,36,000 each to any additional families claiming to have lost its livelihood because of the acquisition, even if they do not own the land

The effects of LARR Bill 2011, in certain cases, will apply retroactively to pending and incomplete projects. The Bill exempts land acquisition for all linear projects such as highways, irrigation canals, railways, ports and others.

Criticism of the Bill

The proposed Bill, LARR 2011, is being criticized on a number of fronts:

• It is heavily loaded in favour of land owners and ignores the needs of poor Indians who need affordable housing, impoverished families who need affordable hospitals, schools, employment opportunities and infrastructure. For example, ASSOCHAM, the Indian organisation that represents the interests of trade and commerce in India, with over 2,00,000 small business and large corporate members, claims that LARR 2011 in its current version, prevents a conducive environment for economic growth.
• Economists who have studied LARR 2011 as tabled in India's parliament suggest it as well intentioned but seriously flawed. Its principal defect is that it attaches an arbitrary mark-up to the historical market price to determine compensation amounts, along with its numerous entitlements to potentially unlimited number of claimants. Such a Bill, some claim, will guarantee neither social justice nor the efficient use of resources. For example, Ghatak of London School of Economics and Ghosh of Delhi School of Economics, claim that the Bill places unnecessary and severe conditions on land acquisition which will stifle the pace of India's development without promoting the interests of farmers. They suggest that the Bill should be amended to allow free market dynamism, such as competitive land auction. These economists claim that India's greatest challenge in enacting laws and opening up to international markets is to balance the needs of economic growth, equitable distribution and human rights, while rescuing complex and sometimes conflicting objectives from the demagoguery of single issue advocates and political opportunists. The current Bill, they claim, fails to do so.
• LARR 2011 as proposed mandates that compensation and rehabilitation payments to land owners and livelihood losers be upfront. This misaligns the interests of land acquirer and those affected. Once the payment is made, one or more of the affected families may seek to delay the progress of the project to extract additional compensation, thereby adversely affecting those who chose long term employment in the affected families. The Bill, these economists suggest, should link compensation and entitlements to the progress and success of the project, such as through partial compensation in form of land bonds. These success-linked infrastructure bonds may also help poor states reduce the upfront cost of land acquisition for essential public projects such as hospitals, schools, universities, affordable housing, clean drinking water treatment plants, electricity power generation plants, sewage treatment plants, flood control reservoirs, and highways necessary to bring relief to affected public during fires, epidemics, earthquakes, floods and other natural disasters. The state of Kerala has decided to pursue the use of infrastructure bonds as a form of payment to land owners.
• LARR 2011 places no limit on total compensation or number of claimants; nor does it place any statute of limitations on claims or claimants. The beneficiaries of the Bill, with guaranteed jobs for 26 years, will have no incentive to be productive. The Bill should place a limit on total value of entitlement benefits that can be annually claimed per acre, this entitlement pool should then be divided between the affected families, and the government should run this program if it is considered to be fair.
• LARR 2011 as proposed severely curtails free market transactions between willing sellers and willing buyers. For example, DLF Limited – India's largest real estate developer – claims that the current bill may limit private companies such as DLF from developing affordable housing for millions of Indians. DLF suggests that direct land transactions with owners on a willing voluntary basis, at market-determined rate, should be kept out of the purview of the bill. There should be no conditions imposed on free market transactions between willing sellers and willing buyers.
• Amartya Sen, the India-born Nobel Laureate in economics, claims prohibiting the use of fertile agricultural land for industries is ultimately self-defeating. Sen claims industry is based near cities, rivers, coast lines, expressways and other places for logistical necessities, quality of life for workers, cost of operations, and various reasons. Sen, further suggests that even though the land may be very fertile, industrial production generates many times more than the value of the product produced by agriculture. History of industrialisation and global distribution of industry hubs, Sen claims, show that the locations of great industry, be it Manchester, London, Munich, Paris, Pittsburgh, Shanghai or Lancashire, these were all on heavily fertile land. Industry always competes with agriculture, Sen claims, because the shared land was convenient for industry for trade and transportation. Amartya Sen further argues that in countries like Australia, the US or Canada, where agriculture has prospered, only a very tiny population is involved in agriculture. Agriculture prospers by increasing productivity and efficiency. Most people move out to industry. Industry has to be convenient, has to be absorbing. When people move out of agriculture, total production does not go down; rather, per capita income increases. For the prosperity of industry, agriculture and the economy, India needs industrialisation. Those in India, who in effect prevent industrialisation, either by politically making it impossible for entrepreneurs to feel comfortable in starting a business, or by making it difficult to buy land for industry, do not serve the interest of the poor well, claims Sen. The proposed LARR 2011 bill prohibits the acquisition of fertile agriculture land beyond 5% per district.
• An article in The Wall Street Journal claims that the proposed LARR 2011 rules will apply even when any private company acquires 100 acres of land or more. For context, POSCO India seeks about 4000 acres for its US$12 billion proposed steel manufacturing plant in the Indian state of Orissa. In most cases, even small companies planning US$10-US$300 million investment, seeking 100 or more acres will be affected by the compensation plus rehabilitation effort and expenses of LARR 2011. The WSJ article further claims that the proposed LARR 2011 bill doesn’t actually define the word “acquisition,” and leaves open a loophole that could allow government agencies to continue banking land indefinitely.
• The Observer Research Foundation's Sahoo argues that the bill fails to adequately define "public purpose". The current definition, he claims, can be interpreted vaguely. In leaving public purpose too vague and porous, it would ensure that land acquisition will remain hostage to politics and all kinds of disputes. More clarity is needed, perhaps with the option that each state have the right to hold a referendum, whereby the voters in the state can vote to approve or disapprove proposed public purpose land acquisitions through the referendum, as is done through local elections in the United States for certain public acquisition of private or agricultural land.
• The Confederation of Real Estate Developers' Association of India claims that the proposed LARR 2011 bill is kind of one-sided, its ill-thought-out entitlements may sound very altruistic and pro-poor, but these are unsustainable and will kill the goose that lays the golden egg. This group further claims that the bill, if passed, will increase the cost of acquisition of land to unrealistic level. It will be almost impossible to acquire 50-acre or 100-acre land at one place for planned development. They suggest that if India does not facilitate urbanization in an organized manner, all the incremental population will be housed in disorganized housing developments such as slums with dire consequences for Indian economy. In the long run, even farmers will suffer as fringe development of urban centres will largely be in the form of unauthorized developments and they will not realize the true economic potential of their lands.
• The bill inflates the cost of land to help a small minority of Indians at the cost of the vast majority of Indian citizens, as less than 10% of Indian population owns rural or urban land., The LARR Bill 2011 favours a privileged minority of land owners as the Bill mandates above market prices for their land plus an expensive rehabilitation package. The Bill does not mandate a process by which the time involved in land acquisition is reduced from current levels of years. Nor does the Bill consider the effect of excessive costs upfront, and expensive rehabilitation mandate over time, on the financial feasibility of large-scale, socially necessary infrastructure projects needed by 90%+ of Indians who are not landowners. In an editorial, Vidya Bala writes that the most important weakness in the Bill is bringing non-government transactions too under its purview. Private players buying 50+ acres of urban land tracts or 100+ acres of rural areas would be required to comply with the R&R package stated in the Bill.
• LARR 2011 Bill's sections 97, 98 and 99 are incongruous with other laws of India in details and intent. Section 98, for example, says that the provisions of the Bill shall not apply to the enactments relating to land acquisition specified in the Fourth Schedule of the Bill. According to Indian Legal Code, the Fourth Schedule referred to by LARR 2011 Bill, consists of 16 bills, including the ancient monuments and archaeological sites and remains Act, 1958, the atomic energy Act, 1962, the special economic zones Act, 2005, the cantonments Act, 2006, the railways Act, 1989 amongst others. Laws can not be in conflict with each other. LARR Bill carve outs through Sections 97, 98 and 99 add confusion, offering a means for numerous citizen petitions, law suits and judicial activism. The LARR 2011 Bill thus fails to deliver on the goals motivating it.

See also

• Eminent domain
• Public use
• Land bonds
• 2011 land acquisition protests in Uttar Pradesh
• POSCO India

References

Lok Sabha Passes Land Acquisition Bill on 29 August, 2013