The popular perception is that the process of urbanisation will suffer a great deal following the passage of Land Acquisition, Rehabilitation and Resettlement Bill, 2012 (LARR Bill), owing to the rising cost of land acquisition.
A contrarian view, however, is that farmers might just become willing participants in urbanisation. There are quite a few reasons in support of the view.
A compensation price that is at least two times the market rate if the land is close to urban area (which is where land will be acquired for developing new townships) is an incentive enough.
Further, there is the prospect of having a share in the developed land at a discounted price. The new legislation mandates that affected families must be offered 20 per cent of the developed land, in proportion to the land being acquired, at a price equal to the cost of acquisition and development.
The new legislation that relates to the exemption from capital gains tax on the compensation amount one gets if his/her land is acquired by the government is another sweetener.
The recently passed Bill says: "No income tax or stamp duty shall be levied on any award or agreement made under this Act, except under section 47 and no person claiming under any such award or agreement shall be liable to pay any fee for a copy of the same."
According to the existing provisions (before the new law is effective), one is required to pay a capital gains tax on compensation received, if his non-agricultural land is acquired for projects that serve public purpose. However, proceeds from the acquisition of agricultural land, both rural and urban, are exempted from capital gains tax even now.
The incentives are especially attractive when juxtaposed against returns from farming. With the growth in yield falling, farm input cost rising and fragmentation of landholding, income from agriculture alone is not enough to sustain a family. A land owner is, therefore, necessarily on the lookout for other sources of income. The new legislation affords him an opportunity to do so, which he might just grab with both hands. Shouldn't developers cash in on this?
