Land Acquisition and Compensation in Singur: Household ...Singur We compare actual compensations offered with market values of acquired plots, using a household survey, and evaluate

Land Acquisition and Compensation inSingur:

Household Survey Results

Maitreesh GhatakLondon School of Economics

Sandip MitraIndian Statistical Institute, Kolkata

Dilip MookherjeeBoston University

Anusha NathBoston University

January 11, 2012M.Ghatak, S. Mitra, D. Mookherjee, A.Nath

Singur Compensation Survey

Purpose

Ascertain facts concerning land compensation offered tofarmers whose land was acquired for the Tata factory inSingur

We compare actual compensations offered with marketvalues of acquired plots, using a household survey, andevaluate the extent to which the offered amounts wereinadequate reasonsWould the chances of acceptance have been higher if thegovernment have offered higher compensations?What were the impacts of the land acquisition on differentsocio-economic groups in the affected villages?Implications for future land acquisition policy

M.Ghatak, S. Mitra, D. Mookherjee, A.Nath


Purpose

Ascertain facts concerning land compensation offered tofarmers whose land was acquired for the Tata factory inSingurWe compare actual compensations offered with marketvalues of acquired plots, using a household survey, andevaluate the extent to which the offered amounts wereinadequate

reasonsWould the chances of acceptance have been higher if thegovernment have offered higher compensations?What were the impacts of the land acquisition on differentsocio-economic groups in the affected villages?Implications for future land acquisition policy



Purpose

Ascertain facts concerning land compensation offered tofarmers whose land was acquired for the Tata factory inSingurWe compare actual compensations offered with marketvalues of acquired plots, using a household survey, andevaluate the extent to which the offered amounts wereinadequate reasonsWould the chances of acceptance have been higher if thegovernment have offered higher compensations?

What were the impacts of the land acquisition on differentsocio-economic groups in the affected villages?Implications for future land acquisition policy



Purpose

Ascertain facts concerning land compensation offered tofarmers whose land was acquired for the Tata factory inSingurWe compare actual compensations offered with marketvalues of acquired plots, using a household survey, andevaluate the extent to which the offered amounts wereinadequate reasonsWould the chances of acceptance have been higher if thegovernment have offered higher compensations?What were the impacts of the land acquisition on differentsocio-economic groups in the affected villages?

Implications for future land acquisition policy



Purpose

Ascertain facts concerning land compensation offered tofarmers whose land was acquired for the Tata factory inSingurWe compare actual compensations offered with marketvalues of acquired plots, using a household survey, andevaluate the extent to which the offered amounts wereinadequate reasonsWould the chances of acceptance have been higher if thegovernment have offered higher compensations?What were the impacts of the land acquisition on differentsocio-economic groups in the affected villages?Implications for future land acquisition policy



Survey Details

In 2010-11 we conducted a survey of a random sample ofhouseholds in the 5 affected villages stratified according tolandholding, occupation of head, and whether directlyaffected or not

Compared them with households in 5 neighboringnon-affected villages located on both sides of the DurgapurExpressway



Survey Details

In 2010-11 we conducted a survey of a random sample ofhouseholds in the 5 affected villages stratified according tolandholding, occupation of head, and whether directlyaffected or notCompared them with households in 5 neighboringnon-affected villages located on both sides of the DurgapurExpressway



Survey Details

In 2010-11 we conducted a survey of a random sample ofhouseholds in the 5 affected villages stratified according tolandholding, occupation of head, and whether directlyaffected or notCompared them with households in 5 neighboringnon-affected villages located on both sides of the DurgapurExpressway



GPS Village Map



Survey Details

Total sample size: 1100 households, approximatelyone-sixth of the relevant population

Divided equally (one third) between affected households inacquired villages, unaffected households in acquiredvillages, and households in unacquired villagesDemographics, ownership of land and other assets,education etc very similar across three groupsCompare households reports of market value of land, pastmarket transactions and compensations offered, withgovernment documents concerning compensations offeredand basis thereof



Survey Details

Total sample size: 1100 households, approximatelyone-sixth of the relevant populationDivided equally (one third) between affected households inacquired villages, unaffected households in acquiredvillages, and households in unacquired villages

Demographics, ownership of land and other assets,education etc very similar across three groupsCompare households reports of market value of land, pastmarket transactions and compensations offered, withgovernment documents concerning compensations offeredand basis thereof



Survey Details

Total sample size: 1100 households, approximatelyone-sixth of the relevant populationDivided equally (one third) between affected households inacquired villages, unaffected households in acquiredvillages, and households in unacquired villagesDemographics, ownership of land and other assets,education etc very similar across three groups

Compare households reports of market value of land, pastmarket transactions and compensations offered, withgovernment documents concerning compensations offeredand basis thereof



Survey Details

Total sample size: 1100 households, approximatelyone-sixth of the relevant populationDivided equally (one third) between affected households inacquired villages, unaffected households in acquiredvillages, and households in unacquired villagesDemographics, ownership of land and other assets,education etc very similar across three groupsCompare households reports of market value of land, pastmarket transactions and compensations offered, withgovernment documents concerning compensations offeredand basis thereof



Proportion of Households Directly Affected in AcquiredVillages



Standards of Adequate Compensation

Legal standard (based on the 1894 Land Acquisition Act):according to market value

From an economic standpoint, this is inadequate for anumber of reasons:

Market values understate personal valuation of land formany reasons: role of land as a financial asset; those whohave not sold their land have personal values that exceedthe market priceTheoretical arguments imply compensations should be atleast as large as personal valuations, on efficiency groundsalone (Ghatak and Mookherjee 2011)Supplementary arguments on grounds of fairness andpolitical sustainability




Legal standard (based on the 1894 Land Acquisition Act):according to market valueFrom an economic standpoint, this is inadequate for anumber of reasons:





Legal standard (based on the 1894 Land Acquisition Act):according to market valueFrom an economic standpoint, this is inadequate for anumber of reasons:




Compensations Offered: Did They Meet the LegalStandard?

Government compensation offered: the stated policyLand rates for different kinds of land (Table 1)Additional solatium of 30%, plus allowance for irrigation,location of plots to be entertained






Compensations offered according to governmentdocuments were consistent with the stated policy for 97%of all plots: land rates plus solatium of 30%

However we find a large discrepancy between governmentrecords of offered compensation and household reports forparticular kinds of landAccording to household reports of compensations offered,average amounts actually offered for sona land did notinclude solatium, while for sali land they did




Compensations offered according to governmentdocuments were consistent with the stated policy for 97%of all plots: land rates plus solatium of 30%However we find a large discrepancy between governmentrecords of offered compensation and household reports forparticular kinds of land

According to household reports of compensations offered,average amounts actually offered for sona land did notinclude solatium, while for sali land they did




Compensations offered according to governmentdocuments were consistent with the stated policy for 97%of all plots: land rates plus solatium of 30%However we find a large discrepancy between governmentrecords of offered compensation and household reports forparticular kinds of landAccording to household reports of compensations offered,average amounts actually offered for sona land did notinclude solatium, while for sali land they did






Table 2: Household reports of compensations offered werelower than announced rates plus solatium for sona plots byabout 30%, and higher than these by about 10% for saliplotsOne possible explanation is mis-classification of sonaplots: many plots that used to be sali have been convertedby owners to sona over time, but this change had not beennoted in government land records




Table 3: Average amounts of compensation offered (asreported by households) are equal approximately toaverage land market values at time of acquisition (asreported by households), when averaging across all typesof cultivable plots






Table 4: However sona low plots under-compensated whilesali plots over-compensated






Table 5: Substantial additional heterogeneity of plots, interms of observable characteristics





Compensations Offered

Even if average compensation = average land marketvalue, this heterogeneity implies that many plot holderswould be under-compensated relative to market value



Under-Compensation and Decision of LandownersWhether to Accept

Table 6: under-compensation relative to market value asignificant predictor of rejection of the offer by owners






Owners of sona plots and irrigated plots more likely toreject

One standard deviation increase in under-compensationled to 12% lower probability of acceptanceEvidence of other sources of demand for land: those moredependent on agriculture, with fewer distinct sources ofincome (skill-specificity, demand for income diversification)were more likely to reject




Owners of sona plots and irrigated plots more likely torejectOne standard deviation increase in under-compensationled to 12% lower probability of acceptance

Evidence of other sources of demand for land: those moredependent on agriculture, with fewer distinct sources ofincome (skill-specificity, demand for income diversification)were more likely to reject




Owners of sona plots and irrigated plots more likely torejectOne standard deviation increase in under-compensationled to 12% lower probability of acceptanceEvidence of other sources of demand for land: those moredependent on agriculture, with fewer distinct sources ofincome (skill-specificity, demand for income diversification)were more likely to reject



Impact on Tenants

On economic efficiency grounds alone, tenants ought to beover-compensated, in the sense that they should be betteroff after the compensation (Ghatak-Mookherjee 2011)

Registered tenants get 75% share under the law, unlesslandlords provide inputs directlyWest Bengal government offered only 25% compensationto registered tenants, while unregistered tenants wouldobviously be offered nothingTable 7: Impact on agricultural income was greatest fortenants, much more adverse than landowners whose landswere acquired



Impact on Tenants

On economic efficiency grounds alone, tenants ought to beover-compensated, in the sense that they should be betteroff after the compensation (Ghatak-Mookherjee 2011)Registered tenants get 75% share under the law, unlesslandlords provide inputs directly

West Bengal government offered only 25% compensationto registered tenants, while unregistered tenants wouldobviously be offered nothingTable 7: Impact on agricultural income was greatest fortenants, much more adverse than landowners whose landswere acquired



Impact on Tenants

On economic efficiency grounds alone, tenants ought to beover-compensated, in the sense that they should be betteroff after the compensation (Ghatak-Mookherjee 2011)Registered tenants get 75% share under the law, unlesslandlords provide inputs directlyWest Bengal government offered only 25% compensationto registered tenants, while unregistered tenants wouldobviously be offered nothingTable 7: Impact on agricultural income was greatest fortenants, much more adverse than landowners whose landswere acquired





Impact on Agricultural Workers

Table 8: Wage rates rose between 2005-10 by less inaffected villages compared with unaffected villages morethan 10 Km away






Most adverse impact was on wage rates and earnings ofworkers in unacquired villages near the Tata factory

No scope for compensating workers at all under the 1894Act




Most adverse impact was on wage rates and earnings ofworkers in unacquired villages near the Tata factoryNo scope for compensating workers at all under the 1894Act



Overall Impact of Acquisition and Compensation Policy

Adverse impact on agricultural workers that constitute25–30% of the local population in adjoining areas

Add to this: adverse impact on tenants (15% of thepopulation), and significant proportion of landownerswhose lands were acquired owing to under-compensationHence a majority of the local population were adverselyimpactedThe process was also a major source of dissatisfaction: atop-down process, with no efforts (at least initially) toconsult or negotiate with the local community




Adverse impact on agricultural workers that constitute25–30% of the local population in adjoining areasAdd to this: adverse impact on tenants (15% of thepopulation), and significant proportion of landownerswhose lands were acquired owing to under-compensation

Hence a majority of the local population were adverselyimpactedThe process was also a major source of dissatisfaction: atop-down process, with no efforts (at least initially) toconsult or negotiate with the local community




Adverse impact on agricultural workers that constitute25–30% of the local population in adjoining areasAdd to this: adverse impact on tenants (15% of thepopulation), and significant proportion of landownerswhose lands were acquired owing to under-compensationHence a majority of the local population were adverselyimpactedThe process was also a major source of dissatisfaction: atop-down process, with no efforts (at least initially) toconsult or negotiate with the local community



Implications for Future Land Acquisition Policy

Sound economic arguments for over-compensation offarmers and tenants on grounds of efficiency, equity andpolitical sustainability of industrialization programme

Local community should welcome the acquisitionWhat makes compensation tricky is the heterogeneity ofplots and of personal valuations placed by different ownerson land as an asset




Sound economic arguments for over-compensation offarmers and tenants on grounds of efficiency, equity andpolitical sustainability of industrialization programmeLocal community should welcome the acquisition

What makes compensation tricky is the heterogeneity ofplots and of personal valuations placed by different ownerson land as an asset




Sound economic arguments for over-compensation offarmers and tenants on grounds of efficiency, equity andpolitical sustainability of industrialization programmeLocal community should welcome the acquisitionWhat makes compensation tricky is the heterogeneity ofplots and of personal valuations placed by different ownerson land as an asset




Sound economic arguments for over-compensation offarmers and tenants on grounds of efficiency, equity andpolitical sustainability of industrialization programmeLocal community should welcome the acquisitionWhat makes compensation tricky is the heterogeneity ofplots and of personal valuations placed by different ownerson land as an asset



Implications for Future Land Acquisition Policy, contd.

Clear that appropriate compensations should exceed themarket value of the land

Two problems with this:Problems of ascertaining market values of acquired plots(mis-classification, incorporation of other relevantcharacteristics)How much higher should the compensation be?

LARR Bill in Parliament sets compensation at an arbitrarymultiple (quadruple) of market value in rural areas




Clear that appropriate compensations should exceed themarket value of the landTwo problems with this:

Problems of ascertaining market values of acquired plots(mis-classification, incorporation of other relevantcharacteristics)How much higher should the compensation be?

LARR Bill in Parliament sets compensation at an arbitrarymultiple (quadruple) of market value in rural areas




This may be too high, and retard industrialization(Chakravorty)

Key tradeoff: set compensation high enough to satisfyfarmers, but not too high that it retards industrializationexcessivelyEconomists’ solution (extension of Ghatak and Ghosh):elicit households willingness to give up land by conductingauctionsWe would extend their proposal to include multi-stageauctions: at the community level and then withincommunities at the household level




This may be too high, and retard industrialization(Chakravorty)Key tradeoff: set compensation high enough to satisfyfarmers, but not too high that it retards industrializationexcessively

Economists’ solution (extension of Ghatak and Ghosh):elicit households willingness to give up land by conductingauctionsWe would extend their proposal to include multi-stageauctions: at the community level and then withincommunities at the household level




This may be too high, and retard industrialization(Chakravorty)Key tradeoff: set compensation high enough to satisfyfarmers, but not too high that it retards industrializationexcessivelyEconomists’ solution (extension of Ghatak and Ghosh):elicit households willingness to give up land by conductingauctions

We would extend their proposal to include multi-stageauctions: at the community level and then withincommunities at the household level




This may be too high, and retard industrialization(Chakravorty)Key tradeoff: set compensation high enough to satisfyfarmers, but not too high that it retards industrializationexcessivelyEconomists’ solution (extension of Ghatak and Ghosh):elicit households willingness to give up land by conductingauctionsWe would extend their proposal to include multi-stageauctions: at the community level and then withincommunities at the household level



Multi-Stage Auction

Stage 1: industrialist seeks land of x acres with specifiedcharacteristics, states maximum price it is willing to pay

Stage 2: different panchayats are asked to conduct a(conditional) procurement auction within their jurisdictionswhere they seek to procure x acres and find out whatlandowners are willing to accept for their land, upto anaggregate of x acres of contiguous landStage 3: based on outcome of stage 2, each panchayatsubmits a bid for the project: the lowest bid wins subject tomeeting the factory reserve price



Multi-Stage Auction

Stage 1: industrialist seeks land of x acres with specifiedcharacteristics, states maximum price it is willing to payStage 2: different panchayats are asked to conduct a(conditional) procurement auction within their jurisdictionswhere they seek to procure x acres and find out whatlandowners are willing to accept for their land, upto anaggregate of x acres of contiguous land

Stage 3: based on outcome of stage 2, each panchayatsubmits a bid for the project: the lowest bid wins subject tomeeting the factory reserve price



Multi-Stage Auction

Stage 1: industrialist seeks land of x acres with specifiedcharacteristics, states maximum price it is willing to payStage 2: different panchayats are asked to conduct a(conditional) procurement auction within their jurisdictionswhere they seek to procure x acres and find out whatlandowners are willing to accept for their land, upto anaggregate of x acres of contiguous landStage 3: based on outcome of stage 2, each panchayatsubmits a bid for the project: the lowest bid wins subject tomeeting the factory reserve price



Multi-Stage Auction

Stage 1: industrialist seeks land of x acres with specifiedcharacteristics, states maximum price it is willing to payStage 2: different panchayats are asked to conduct a(conditional) procurement auction within their jurisdictionswhere they seek to procure x acres and find out whatlandowners are willing to accept for their land, upto anaggregate of x acres of contiguous landStage 3: based on outcome of stage 2, each panchayatsubmits a bid for the project: the lowest bid wins subject tomeeting the factory reserve price



Conclusion

We need to consider such policy options, what problemsthey may give rise to

Many advantages: it is a bottom-up procedure, itincorporates heterogeneity of land, is based on voluntaryparticipation of those whose lands are acquiredAdditional consideration needs to be devoted to effect ofacquisition on tenants and agricultural workersAnd offer a choice to owners of different modes ofcompensation: land elsewhere, pensions, shares in theindustry, shop on factory premises, training and factoryemployment opportunities



Conclusion

We need to consider such policy options, what problemsthey may give rise toMany advantages: it is a bottom-up procedure, itincorporates heterogeneity of land, is based on voluntaryparticipation of those whose lands are acquired

Additional consideration needs to be devoted to effect ofacquisition on tenants and agricultural workersAnd offer a choice to owners of different modes ofcompensation: land elsewhere, pensions, shares in theindustry, shop on factory premises, training and factoryemployment opportunities



Conclusion

We need to consider such policy options, what problemsthey may give rise toMany advantages: it is a bottom-up procedure, itincorporates heterogeneity of land, is based on voluntaryparticipation of those whose lands are acquiredAdditional consideration needs to be devoted to effect ofacquisition on tenants and agricultural workers

And offer a choice to owners of different modes ofcompensation: land elsewhere, pensions, shares in theindustry, shop on factory premises, training and factoryemployment opportunities



Conclusion

We need to consider such policy options, what problemsthey may give rise toMany advantages: it is a bottom-up procedure, itincorporates heterogeneity of land, is based on voluntaryparticipation of those whose lands are acquiredAdditional consideration needs to be devoted to effect ofacquisition on tenants and agricultural workersAnd offer a choice to owners of different modes ofcompensation: land elsewhere, pensions, shares in theindustry, shop on factory premises, training and factoryemployment opportunities



Documents

Land Acquisition and Compensation in Singur: Household ...Singur We compare actual compensations offered with market values of acquired plots, using a household survey, and evaluate