Exasperated with the public perception of its role, the Indian government appears keen to somehow abdicate its key sovereign function of making land available for economic development by dumping it on the private sector. This is wrong. The maintenance of up-to-date land records, the scientific identification of tracts for a shift from agricultural to non-agricultural uses and the smooth transfer of land assets are the functions of the sovereign. The Land Acquisition (Amendment) Bill, 2009, to be introduced in conjunction with the National Rehabilitation and Resettlement Bill (R&R Bill), as originally formatted, for all practical purpose, threw the baby out with the bath water.
In the ongoing debate on the Land Acquisition Bill, the National Advisory Council (NAC) has got the perspective right. It is advocating that the government play a proactive role and not leave it entirely to private hands and market forces. It is also recommending that the issues of land acquisition, R&R and economic development be seen as a holistic effort and hence the two separate Bills, the Land Acquisition (Amendment) Bill and the R&R Bill, should be consolidated and integrated under the possible title of the National Development, Acquisition, Displacement and Rehabilitation Act. Finally, it is prescribing that a National Commission for Land Acquisition, Resettlement and Rehabilitation be set up, with powers to supervise and exercise oversight over land acquisition, resettlement and rehabilitation. It will do this in three ways. One, by promoting public accountability and ensuring compliance with legally established policies, procedures and practices. Two, by mediating and responding to complaints and dis putes in the capacity of an ombudsman. And three, by advising the government.
The NAC’s recommendations would certainly please large sections of industry by making the process of acquiring land more participative as well as transparent. The NAC feels that if the acquisition affects less than 400 households, industry has a choice. It can either buy directly from farmers or request the state government. But for large projects affecting more than 400 households, industry should come to the government. Industry will have to bear the entire cost of not only the land acquisition but also rehabilitation and resettlement. This is an eminently fair and practical suggestion.
The NAC’s viewpoints come as a breath of fresh air and a reaffirmation of “going back to practical realities” by large sections of the private sector. The Confederation of Indian Industry has for long been advocating that the state continue to play a developmental role in this crucial “factor of production”, stridently putting forth its view through press releases, memoranda to government, and espousing the cause at public fora. This is also in a context where certain industry bodies and industry leaders have been toeing the line of “leave it to market forces” without understanding fully the difficulties and consequences.
Identifying large tracts of land and their subsequent acquisition should be sterilised politically. This means that land is acquired ex-ante, and partially or fully developed, before it is allocated to a particular private sector entity, or entities, and before controversies erupt over government acting at the behest of any particular industrial group. The clause “public purpose” should be redefined to empower the state to acquire land not only for infrastructure or defence purposes but also for developing land for potential use by private sector-led industrial, commercial or institutional purposes. This is all the more relevant in an era when public private partnership is being encouraged in bus terminals, sports stadia, hospitals and so on.
Land Bank Corporations in the public domain would be an appropriate 21st century institutional response to fulfilling the required objectives. The focus of these State Land Bank Corporations would be to scientifically acquire large tracts of primarily non-cultivable land, develop them as land banks for the future, build appropriate infrastructure linkages and have a transparent mechanism to pass them on to the private sector. The Rehabilitation and Resettlement Bill requirements should be handled by the Land Bank Corporations and the costs should be passed on to the private sector.
In case site requirements are large (like a refinery, or steel plant), or very specific (like a mine), it is clear that the effort has to go beyond ex-ante land banking. Here industry and the government have to work together. Buying land should be a tripartite arrangement and must involve the government, the seller and the buyer. The Land Bank Corporation can be the market maker. As Chief Economic Advisor Kaushik Basu wrote: “Modern economic theory ... comes out on the side of government intervention … the land acquisition process cannot be left to voluntary transactions. The state must have a role.” Among the three classical factors of production, the government plays a pivotal role in developing and regulating capital and labour markets; it cannot excuse itself from the third factor of production — the land market.