Opinion Preparing the ground

First,land must be priced more fairly whether acquired by the state or private players. Unfortunately the economics of the land market suffers from many deficiencies. High stamp duty,coupled with the practice of receiving substantial payments outside the banking system suppresses the official cost of land. The huge difference between the time when the intention of land acquisition is announced to its formal acquisition leads to huge cost differences. Besides the future value of land hardly gets reflected. Furthermore,population density,probabilities of economic growth and differences in governance patterns create wide variations in land price between states and regions. Not to mention serious delays in actual project implementation,given time and cost overruns. We therefore need to develop normative benchmarks for pricing land better given serious market imperfections and information asymmetry. While estimating the value of land,international practices like the “special value principle” adopted in Australia and the “highest and best use” method used in UK are worth considering.

Second,acquisition for public purpose must be closely defined. Acquisition by the state for highways,rural roads,power projects or airports are globally accepted. But these must involve the consensual participation of all stakeholders. What is more complex are public-private partnerships,or when the government acquires land for auctioning to private players. What proportion of the final price realised by the government or windfall gains of private contractors should be shared by farmers whose land is being acquired? In the proposed Land Acquisition Amendment Bill 2007,“public purpose” has been classified into three categories: strategic purposes,public infrastructure and projects useful for the general public. The Supreme Court in its 2010 judgment on the Yamuna Expressway project emphasised that so long as proper compensation is paid to the owners and the projects serve more than a small section of the populace,use of “eminent domain power” is justified.

In view of the persisting ambiguity,we need a clearer policy while defining public purpose. Needless to say,the price also needs to be realistic,giving a reasonable return to private promoters,otherwise investments would not be forthcoming. The opportunity cost of land is not easy to define because intangible factors like future value,disruption to social and cultural habits and alternative livelihood patterns cannot be captured in economic terms.

Third,while it is best to leave the land acquisition of private parties to their own negotiating skills,at what stage should the state be willing to help to prevent blackmail by few recalcitrant owners? Say if 70 or 80 per cent can be acquired by the private promoter,perhaps the last-mile acquisition can be helped by the state. The recent suggestion by the National Advisory Council (NAC) that all land should be acquired by the state,can protect small farmers from being outmanoeuvered by private entities. However,this places a huge obligation on the state to acquire land for private use. Would it be simpler if the acquisition is left to the private parties themselves while the state stipulates the compensation based on the formula finally arrived at?

Fourth,land acquisition leads to displacement of original residents. Guaranteeing employment and giving them a stake in the proposed project is certainly helpful. Suggesting alternative livelihood patterns which do not lead to alienation of their social and cultural habits would also help.

Finally India has a long way to go both to meet its infrastructure needs and for orderly urbanisation. Pressures on land will inevitably rise. Compulsions for development will need a sensible land acquisition policy which is not only humane but also facilitates rapid growth needed for improving life quality. Being either sentimental or mercenary cannot help. Solving the land riddle is central to our growth strategy.

The writer is a Rajya Sabha MP