As the population shift accelerates from villages to the cities, India is becoming less and less an agrarian economy. But this process of modern development is far from peaceful or orderly. It is, in fact, highly conflict-prone since land acquisition for setting up factories, dams and highways are being contested by villagers, including tribals, who believe their land is being acquired – mostly by the Indian State – for a song. Land acquisition has cast a long shadow over the largest foreign direct investment deal in steel. The project to manufacture the world’s cheapest car was also forced to relocate to another state due to land troubles.
As land has become a flashpoint for social tension, the UPA government’s new Land Acquisition, Rehabilitation and Resettlement Bill (LARR) has sought to douse the conflicts over acquisition by offering much higher prices. Compensation will be no less than twice the market price in urban areas and four times the land price in rural areas. But what is the market price for rural land and how is it determined? For such reasons, the LARR bids fair to make the process of land acquisition prohibitive for much-needed infrastructure projects, public-private partnerships and private industry.
An important part of the problem is the big difference between the urban and rural land markets. Many buyers and sellers, transactions and good information on prices characterise urban markets. The constraints include laws on rent ceilings, renter rights, and land use change. Nothing exemplifies this reality better than an apocryphal factoid that Bangaloreans have a “realty” check every four minutes. On the other hand, few transactions and secrecy and misinformation about prices characterise rural markets. The constraints are ceiling laws, tenancy laws, laws on Adivasi land and fragmented holdings.
Sanjoy Chakravorty, professor in the Department of Geography and Urban Studies at Temple University in the US, recently gave a seminar on land markets and acquisition – with material from his forthcoming book The Price of Land: Acquisition and Conflict in India – at the Center for Policy Research. That the urban land market is distinct from the rural is exemplified by the fact that there is a well-functioning high-end market, especially in metropolitan India. In Mumbai, for instance, Poddar Mill’s land in Worli was auctioned for Rs 198 crore per acre. Bharat Textile Mill’s land fetched Rs 188 crore an acre.
A data base of over 70 projects in 2010 indicates that urban land prices typically are the highest in the central business districts (CBD) and decline as one moves on to the suburbs. Thus, in Mumbai, prices are the highest at Rs 200 crore an acre in the CBD and decline to Rs 31 crore an acre in suburbs like Ghatkopar and Rs 7.65 crore an acre in Khargar, Navi Mumbai. Haryana, in fact, has enshrined this in its acquisition policy that has declining price bands emanating from Gurgaon and South Delhi — starting from Rs 72 lakh an acre, including annuity and a “no litigation” clause.
In sharp contrast, the price of rural land is indeed elusive. Some of it is even priceless! It is not easy to discover the price of land in rural India since there are only a few transactions at a village scale. A study by P Bardhan, M Luca, D Mookherjee and F Pino found that only one acre of land is bought and sold per village every year. This order of activity has also been observed in rural Haryana. A significant but unrecorded portion of transactions are distress sales that tell us a lot more about the raging agrarian crisis and the differentiation that is taking place among the peasantry than about the rural land market.
Why is some rural land even priceless? This happens under certain conditions: When the land has no substitute for its owner or when the owner gets more utility from the current use than can possibly be compensated by the new land use, it then can become priceless! The examples of such land are the well-to-do cashew farms in Goa and the impoverished Niyamgiri Hills in Orissa: “When this priceless land sits on an immovable resource - be it an existing airport that has to be expanded or a bed of iron that needs to be extracted — the conditions exist for serious conflict”, argues Chakravorty.
In this milieu, LARR appears to be more of the problem than a solution. Doubling a known urban price creates bizarre boundaries where the price of land is twice as high on the other side. More problematical is quadrupling an unknown rural land price. Although the intention is to enable landowners to become compliant sellers, this legislation has the potential to generate spiraling prices in rural and urban India. For instance, the cost of land as a percentage of project cost for a four-lane highway project will be up to a prohibitive level of 72 per cent! The provision of land-intensive public goods and private projects like IT parks might get restricted due to the difficulty finding land. Since only the rich states can subsidise private industry to get land, regional disparities will widen.
From the Ivory Tower will make research from the academic world accessible to all our readers