LAND ACQUISITION BILL land acquisition... · 2013-09-23 · Land Acquisition, Rehabilitation and Resettlement Bill 2013” (LARR 2013 or Bill) repealing the previous Land Acquisition

ICRA Rating Services Page 1

IMPACT ANALYSIS: NEW LAND ACQUISTION BILL

Analyst Contacts

Sheetal Sharad

[email protected]

+91-124-4545374

Shubham Jain

[email protected]

+91-124-4545306

Rohit Inamdar

[email protected]

+91-124-4545847

Website www.icra.in

Executive Summary Given the growing protests and unrest over land acquisition during the

past few years, the Central Government was forced to re-examine the

existing land acquisition framework as laid out in the Land Acquisition

Act, 1894. On September 7, 2011, the Ministry of Rural Development

(MoRD) presented the Land Acquisition Rehabilitation & Resettlement

Bill, 2011 to the Union Cabinet. It was subsequently referred to the

Standing Committee on Rural development for examination and

report. Based on the suggestions and comments of the Committee,

various stakeholders and discussions with the MoRD, an amended

version of the LARR Bill 2011 was re-presented to the Union Cabinet

which cleared it with few additional amendments in December 2012.

The Bill was then discussed at various all-party meetings, and in

September 2013 it was approved by both the houses. The Bill has

been named as “The Right to Fair Compensation and Transparency in

Land Acquisition, Rehabilitation and Resettlement Bill 2013” (LARR

2013 or Bill) repealing the previous Land Acquisition Act of 1894, and

it awaits the President‟s assent to become a law.

The Bill has attempted to address two critical aspects of land

acquisition namely Acquisition and Rehabilitation & Resettlement

(R&R). The Bill restricts the government role to an acquirer of land for

projects with defined public and „permanent‟ purposes. Further, in

case of private companies taking up public purpose projects, it defines

the government‟s role as that of an assisting authority in cases where

the majority of landowners‟ consent exists and only a small

percentage of land is remaining to be acquired. Nevertheless,

flexibility is given to state governments to prescribe involvement of the

concerned government for land acquisition required for private

projects. Thus approach of the states towards land acquisition will be

a crucial parameter for industrial development. Further, the Bill also

lays a lot of emphasis on Rehabilitation and Resettlement (R&R) and

extends the applicability of R&R in cases where large tracts of land

are acquired even through private negotiations. It emphasises both on

monetary payments as well as non-monetary benefits as a part of

R&R and also covers the loss of livelihood rather than only the loss of

land. As has been the practice earlier, the Bill has linked monetary

compensation to the market value of the land and the value of the

assets attached to it. It also lays down timelines and procedures in

order to ensure time bound land acquisition and R&R. For industry

players acquiring land, factors like location (rural/urban), number of

land losers/livelihood losers and whether they opt for non-monetary

benefits instead of upfront payments will now assume importance in

determining the final cost of acquisition.

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ICRA Rating Feature New Land acquisition Bill 2013


In ICRA‟s view, the Bill attempts to satisfy the woes of the land losers and simultaneously provide a

systematic framework for the administration and industry players in order to acquire land. However,

the implementation of the provisions can be considerably challenging as land acquisition is mostly

being done in rural areas where the population is fully dependent on the land and the related

ecosystem. With higher compensation for land and associated R&R costs, the overall land acquisition

cost is expected to rise significantly, forcing companies to reassess the project viability and even

rationalise their land requirements. Nevertheless, if the prescribed time-bound land acquisition

process is implemented effectively, the inordinate delays on account of protests and litigations can be

avoided thus resulting in huge savings for the industry. While the Bill does stipulate steps like social

impact assessment and public hearings as part of the acquisition process, it also lays down the

maximum time limit for completing each step, failing which the acquisition process will be considered

to have lapsed. Hence, the ability of the concerned authorities to adhere to these timelines will be a

key to the successful implementation of the provisions in the bill. Moreover, the approach of the states

towards land acquisition policy and the form in which they adopt the Centre‟s policy will be critical.

While the existence of a contemporary law to address land acquisition issues is of utmost importance

considering the growing concerns in this area across all stakeholders, the actual implementation of

the same and the cost implications would have to be seen.

KEY FEATURES OF THE BILL

Acquisition for public purpose only

The Land Acquisition Bill of 1894 had acted as an enabler for the government to acquire privately held

land for use for public purposes. Subsequent modifications1 allowed the government to acquire land

for companies proposing to utilize the land towards a public purpose. As the economy developed,

government entities acquiring land on behalf of privately held companies became fairly common.

Often there seemed to be more dissent from land owners parting with their land for a private

company‟s project, mainly because they perceived it as a profit making venture with no major benefits

accruing to the land owners themselves. In addition, changes in project purpose and „liberal‟ use of

the urgency clause2 pointed towards misuse of the law. The need for a specific and permanent

purpose for acquisition addresses anomalies like the wrongful use of urgency clause or purpose as

witnessed in recent cases involving land allotment to real estate developers.

Table 1 Comparison of public purpose definition with earlier law

Land Acquisition Act 1894 (the Act) The Right to Fair Compensation and Transparency in Land Acquisition,

Rehabilitation and Resettlement Bill 2013(the Bill)

(a) For development of village sites, town or

rural planning (b) planned development from

public funds pursuant to a government

scheme, land to poor or landless people for

residential purpose or to people displaced by

natural calamity or implementation of a scheme

by government or local authority or government

controlled corporation (c) Education, housing,

slum development as per a government

scheme or as approved by any authority like

local authority/society/cooperative society, (d)

land for any scheme sponsored by government

(e) land for a corporation owned or controlled

by State

(a) strategic defence purposes and national

security, (b) all activities listed by the government

as infrastructure projects in its notification dated

March 27, 2012, excluding private hospitals,

private educational institutions and private hotels;

(c) government owned/ cooperative owned agro

processing, cold storage facilities, water

harvesting, sanitation etc (d) industrial corridors or

mining activities, national investment and

manufacturing zones as designated in the National

Manufacturing Policy; (e) government administered

educational schemes/institutions (f) sports,

healthcare, tourism, space programme; (g) project

affected families;(g) housing for specified income

1 There have been 16 central amendments; last amendment in 1984. Land Acquisition Bill 2007 had lapsed without being

passed in the Rajya Sabha owing to dissolution of government 2 Generally used in times of urgent government requirement like natural calamities, defense purposes etc.

ICRA Rating Feature New Land Acquisition Bill 2013


groups (h)planned development or improvement of

villages, and (i) residential purposes for the poor

and landless and (j) any other infrastructural

facilities notified by the central government after

tabling the notification in Parliament. Public

purpose also includes the projects either

government owned or by private companies or

Public Private partnerships (PPPs) for above

purposes”.

In ICRA‟s view, the Bill defines public purpose more specifically as compared to the earlier Act

thereby reducing scope for flexible interpretations. The earlier Act had allowed land acquisition by

government for government controlled or owned companies as well as schemes run by

authorities/societies/cooperative societies while the new Bill allows acquisition for public purpose by

private companies and PPPs apart from government administered schemes and government

controlled organizations. The Bill also forbids any change in purpose after acquisition. The

mechanism and timeline of determining whether a proposed project qualifies for public purpose will be

important. To address this, the Bill prescribes the need for a Social Impact Assessment by the Gram

Sabha or an equivalent body in urban areas as part of the preliminary investigations for the land

acquisition which will assess the legitimacy of public interest involved, apart from the impact on

affected families and the availability of better alternatives. Further, as a safeguard against wrongful

acquisition, objections can be made by persons interested in such land after the notification of

acquisition which will be considered at an appropriate government level.

Onus on companies to acquire larger part of land in public purpose projects

The Bill stipulates that private entities and PPPs carrying out public purpose projects may approach

the government to acquire land on their behalf after receiving the consent of 80% (70% for PPPs) of

the landowners. While the 80:20 clause transfers more onus on the project owner to receive consent,

it relieves the government of the “political disadvantage” of displacing farmers. Hence, the Bill portrays

the government‟s role more as a facilitator in cases where the acquisition is stalled by a relatively

small group of landowners owning a critical area or the final portion of unacquired land. As the Bill

prescribes little on the government‟s involvement in acquisition for private purposes, there is flexibility

for the states to formulate their policy in this regard including the area of land and percentage consent

after which the State can step in. In ICRA‟s view, it remains to be seen how various states approach

land acquisition for private projects; which will further determine how things will pan out at ground

level.

The involvement of the government in smooth land acquisition for private/PPP companies can be vital

as acquiring land for large projects through direct negotiations can prove to be a challenging task for

organizations. A real case of a steel major acquiring land for its project and implementing R&R is

presented later in this note3. On the whole, in private purpose projects where large tracts of land are

required, companies are bound to show a preference to states that are pro-active in making land

available. A good example is the State of Gujarat which has provided opportunities to various

automobile manufacturers who were facing issues in setting up facilities in other states. Hence the

policy at state level will become a key variable in capital investment decisions.

Quick project implementation necessary as unutilized land may be returned

Apart from government‟s limited involvement in acquisition and required consent of affected families,

the Bill also talks about the return of acquired land if unutilized after a period of five years. However, it

does not elaborate on the mechanism of such return. The same has to be prescribed by the

appropriate government. As highlighted by the Standing Committee on Rural Development in regard

to this clause, clarity is required on issues like value to be paid to the original landowner in case of

3 Refer Annexure 3 for R&R being implemented by a steel manufacturer for its integrated steel plant



return, validity of change land use and cases where only part of the land has been utilized. In light of

the possibility that land may have to be returned, the project owner is obligated make fast decisions

and implement the envisaged project on the acquired land. Further, the possibility of unutilized land

being transferred to the state government also exists. This gives state governments the opportunity to

replenish their land banks and reconsider it for alternative development purposes.

The Bill will apply retrospectively for cases where no award has been made as per earlier law or

where majority of the affected persons have not received compensation or affected persons have not

received compensation/not given up possession and the land acquisition proceedings have been

pending for five years or more.

Restrictions on acquisition of irrigated multi-cropped land

In order to safeguard food security, the Bill restricts any acquisition of irrigated multi-cropped land but

for exceptional circumstances. An equivalent area of culturable wasteland or land value has to be

deposited with government in the case of such an acquisition. As the land profile of each state differs,

state wise distinctions have to be specified with regard to the net sown area for the acquisition of

agricultural land. Restrictions on acquisition of multi-cropped irrigated land will lead to significant

reduction in the available land pool. Annexure 3 presents a state wise land profile. States like Punjab,

Haryana, Uttar Pradesh, Bihar and West Bengal had more than 35% of their land falling under net

irrigated area as per the statistics published for 2009-10 by the Directorate of Economics and

Statistics under the Ministry of Agriculture. Such states may set a lower threshold to allow acquisition

of irrigated land.

Implementation of Resettlement and Rehabilitation (R&R)4a challenge

Traditionally R&R has been in the form of a one-time compensation, which was decided using the last

registered sale or a similar sale in the vicinity of the land as a base. After the proposed project is set

up, the land prices rise owing to the benefits of the development. This creates considerable

dissatisfaction amongst the displaced people. To prevent such issues, the entire R&R package

stipulates the provision of employment by the project owner in cases where jobs are generated by the

project and basic infrastructure including drinking water, individual electric connections, health centre

etc for the resettled. Over and above this, delivery of the compensation and the R&R are proposed to

be preconditions to the transfer of the land title. The ability of the implementing authorities to deliver

these benefits which involve components as outlined above, in a time bound manner, will be a

significant challenge.

The Bill stipulates that R&R will apply for any acquisition of land area as specified by the State

government (an R&R committee will be appointed to review R&R progress in case land acquired is

100 acres or more for public purpose) irrespective of the purpose. This is expected to reduce

asymmetries in compensation when companies acquire parcels of land for a large project over a

period of time leading to inconsistent compensation. The applicability of such rigorous R&R as

stipulated is thus bound to increase the input costs for project owners and hence the project.

Timelines and penalties specified

The procedure for acquisition and R&R will include a Social Impact Assessment(SIA) which will cover

the investigation of public purpose, minimum extent of land required thereof, estimation of

displacement and social impact on affected families apart from the overall cost versus benefit analysis

for the proposed project. The SIA will be appraised by an Expert Group (EG) which will comprise of

two non official social scientists, two representatives of Panchayat, Gram Sabha, Municipality or

Municipal Corporation as the case may be, two experts on rehabilitation and a technical expert in the

subject relating to the project. Post these, the R&R scheme will be prepared by a designated

Administrator (or Committee in case the land area is more than 100 acres) which will further be

4 Refer Annexure 1 for proposed R&R entitlements to project affected families.



Social Impact assessment

Appraisal by

Expert Group

(EG)

2 months

from SIA

Examination by appropriate government

Preliminary

notification

(PN)

Public

hearing

R&R finalization

PRE NOTIFICATION

NOTIFICATION

Draft

declaration

and R&R

scheme

Compensation (3 months from

award) R&R awards and (6 months from

award) Infrastructural

amenities (18 months from

award)

6 months 2 months

from SIA 12 months from EG report

Objections to be given within 60 days of PN

12 months from PN

6 months from PN

3 to 18 months from date of award

reviewed by Collector and approved by Commissioner (R&R). Public hearings and enquiry to any

objections will be done at specified stages.

The maximum timelines specified for these steps are six months for SIA from its commencement and

two months for EG. The process will lapse in case no land acquisition notification happens after

twelve months of the EG report. Further, the R&R award should be made within twelve months from

public declaration of the R&R scheme. Such a timeline is however extendable by the appropriate

Government by another twelve months in specific justifiable cases. Exhibit 1 gives the process flow for

land acquisition and R&R.

Exhibit 1 Process flow for land acquisition5

The land possession is possible only after paying the full compensation, the maximum time

for which is three months for the compensation and six months for monetary R&R, from date of

award. The non-monetary R&R has to be done within a period of eighteen months from the date of

award, however the implementation of the same which includes various infrastructure related facilities

will be a herculean task. In agreement with the Standing Committee recommendations, the Bill

incorporates penal rates of 9% per annum of unpaid sums in case of a delay of less than a year and

15% per annum in case of delays of more than an year to be paid by the Collector.

Increased emphasis on R&R will impact project cost; implementation timeline a

function of how the prescribed mechanism works

Revisiting project viability, farsighted planning needed

The R&R proposals put in perspective the cost to be borne towards socio economic development,

industrialization and urbanization. Considering the higher monetary compensation coupled with the

provision of non-monetary benefits, land acquisition is expected to be much costlier than before,

leading to higher funding requirements. For large projects, apart from the cost, the responsibility of

acquiring 80% consent will be a time consuming process which may lead project owners back to the

drawing board and rationalize the actual requirement of land; even more in cases where any multi

cropped irrigated land is involved. Impact Assessment will also aim at notifying the minimum possible

land required and related displacement for a project. The provision of fair compensation to the

affected families through the new Bill may encourage the families to give consent as compared to a

previous situation where they may have been apprehensive about the adequacy of the compensation.

However the actual outcome will be project and location specific and remains to be seen.

5 Source: Presentation on the Land acquisition bill by Ministry of Rural Development, September 2013



The first resale of undeveloped land acquired under the Bill will require sharing of 40% of the

appreciation with the landowner. Thus companies will need to have a clear vision with respect to their

investment plans, arriving at a specific permanent purpose and a reasonable land requirement.

Rationalization of land requirement will lead to efficient utilization of the country‟s land in the long

term.

Formal and transparent mechanism for R&R implementation prescribed

Notwithstanding the increase in financial cost of land acquisition, smooth R&R can arrest inordinate

delays and costs attached with such delays. Various projects stalled owing to land acquisition issue

will gain impetus after the law is enacted owing to the clarity regarding land acquisition process and

associated costs. The Bill has outlined an institutional framework at the Centre, State and Project

level to carry out the acquisition and R&R as shown in Exhibit 2. Time bound implementation will

require efficient working and good coordination across these levels, failure of which will defeat the

Bill‟s basic purposes of creating a streamlined process thereby saving on time and related sunk costs.

Exhibit 2 Institutional structure for acquisition and R&R6

R&R costs directly proportionate to number of land and livelihood losers

The proposed R&R will have a visible impact on various industries and will be more onerous in

sectors where the magnitude of land acquired and/or number of people affected is higher. Say a

developer plans to develop a residential township over 100 acres of land in an urban area, under the

existing norms, if the developer were to acquire the land directly from the owners at a place where the

existing market rate were, say Rs 1 crore per acre, the cost of acquisition would be around Rs 100

crore. Let us assume that as per the concerned state policy, R&R as per the new law will apply in this

case.

In case the land area in question is of a significant size, the ownership would typically be fragmented.

Consequently, a developer would have to negotiate with the various landowners thus prolonging the

acquisition process. While some owners would sell their share at the offered rate, others would prefer

to negotiate more or not to sell at all. Let us assume that the developer is eventually able to acquire

the entire land over a period of three years at an average rate of Rs 1.3 crore per acre, that translates

to a total acquisition cost of Rs 130 crore. Now under the Bill, as per specified land area by the

respective State Government, the developer may have to comply with R&R requirements as the land

area acquired is significant. This would be irrespective of the project purpose. The overall R&R, under

some broad assumptions, would be as per table below:

6 Source: Presentation on the Land acquisition bill by Ministry of Rural Development, September 2013

National Monitoring Committee

State LA&RR Authority

Committee constituted by appropriate

government

State Commissioner RR

District Collector

Administrator RR

RR Committee

Centre level State level Project level



Table 2 Land acquisition example for project requiring a 100 acre land

Key assumptions: Acquisition of 100 acre land. Say, land comprises 50 pieces of 2 acre each having

1 constructed house worth Rs 5 lakh and assets worth Rs 50,000 on their respective piece. Further,

the entire land is source of livelihood to 50 families. Say market value is Rs 1.0 crore per acre

Total monetary compensation under earlier law

Rs 130.0 crore

Irrespective of number of affected people

Compensation and R&R under LARR 2013

Rs lakh

per affected

family

Rs crore

for entire

area

Remark

Principal Compensation for land owners assuming 50 land owner families

Determined market value + value of assets attached to land

Based on factors like average sale price of highest sale price over previous 3 years/to be multiplied by a factor if it does not reflect actual prevailing rate in opinion of concerned authority

205.50 102.75

Solatium Determined market value + value of assets attached to land

205.50 102.75 Assuming average value of asset on land for each land owner Rs 50,000

Compensation 411.00 205.50

(A)Subsistence allowance for 1 year

Rs 3000*12 month 0.36 0.18

(B)Options Annuity OR one job per family OR one time grant of Rs 5 lac per family

5.0 2.50 Assuming one time grant

(C)Transportation Rs 50,000 0.50 0.25

(D)Constructed house

If house is lost, constructed house in urban area (equivalent cost of house if preferred by owner)

0.50 0.25 Assuming 100 constructed houses of Rs 5 lac each

(E)Land 1 acre if land acquired for irrigation project

5.00 2.50 Not applicable

(F)Land 20% of developed land reserved for land owner, if acquired for urbanization

0.0 0.0 Assuming land owners do not exercise this option

(G)Appreciation benefit

40% of appreciated land value if unused land sold within 5 years

0.0 0.0 Not considered in this illustration

For Livelihood losers

A, B,C,D,E above and additional resettlement allowance of Rs 50,000

0.50 0.25 Assuming 50 livelihood users

Total monetary compensation under LARR 2013 427 lakhs

per family

213 crore

for the total land

As compared to Rs 130 crore, the developer will have to incur a cost of Rs 213 crore owing to the new

R&R norms. The above calculation is based on acquisition of 100 acre urban land with 50 land

owners and 50 livelihood losers. A factor of two times can be considered on the market value for rural

land acquisition based on the distance from an urban area in which case the outflow in the above

example may vary based on the market value of land in that area. The example illustrates that the

cost of acquisition will increase significantly under new norms for large scale developers. The cash

outflow upfront may be lower in case the land losers opt for developed land share or shares of the

acquiring company, which however would mean reduction in the saleable area/shareholding for the

acquirer. Hence, the number of people involved and the severity of displacement will be key factors

determining the acquisition cost. The table overleaf gives examples of number of people affected for

some large projects across the country.



Table 3 Land involved and people affected as part of some on-going projects in the country

Type State Land involved (hectares) Affected persons

Atomic power plant Gujarat 777 (603 agricultural) 4000 villages

International airport Maharashtra 450 5000 families

Nuclear power plant Maharashtra 938 ~2355 landowners

Integrated Steel plant Orissa 1620 (177 privately owned) ~500 families

Thermal power plant Orissa 849 600 families

Source: Media reports

The monetary compensation apart, R&R also includes the provision of basic infrastructural amenities

to those being resettled. The example of R&R implemented by a private steel manufacturing

company7 shows that under the new law, the area, type of land and the number of people dependent

on the land would emerge as key factors while looking for suitable land. Companies looking to set up

projects would prefer to move to rural areas which would require lower compensation, other factors

being equal. Further, land where the lowest number of people are affected will be cheaper. With R&R

linked to the number of affected people it would help bring in some sensitivity towards the land

owners and livelihood losers.

ICRA believes that the proposed R&R package is a significant step forward in addressing the

concerns of displaced people. Using a liberal multiple on the market value aims at resolving the

crucial issue of inadequate compensation through creating a respectable acquisition floor price.

Landowners can also expect benefits accruing from the development through price appreciation and

land for land compensation in case of irrigation projects and the option to own a part of the developed

land in case of urbanization projects. However, increasingly most land acquisition is being done in

rural areas where the population is mostly fully dependent on the land and its related ecosystem. In

case the intended recipient has limited access to a formal financial channel (such as bank accounts)

which may be in the case of labour on the farmland, providing the proposed future benefits like

annuity payments and effectively implementing R&R could be a difficult task.

Impact on sectors

Real estate Cost of development would go up for real estate developers. They would also need to

budget for sharing the developed land or the appreciation benefit with the affected families. All these

factors would impact housing prices as well as the profitability of developers, depending on the ability

of the market to absorb the price increase. Players with already built up land banks will be in an

advantageous position. Co-development of projects with the landowner under a Joint Development

Agreement (JDA) is another prevalent option whereby the developer markets and develops the

project and shares a part of the area/profits with the land owner. However, this would be feasible for

projects where limited land or landowners are involved. In the long run, permitting higher Floor Space

Index (FSI) would become imperative to contain the real estate prices.

Roads Road sector projects are facing inordinate delays on account of severe issues with acquiring

the requisite right of way, resulting in profit erosion across the value chain. Under the various

programmes of the National Highways Authority of India (NHAI), as of March 31, 20138 there were

156 projects (4690 kms) under implementation and 63 projects (7994 kms) which have been awarded

where work is yet to be started. A total of 17103 kms of work is yet to be awarded by NHAI. Though

contiguous land parcels are not required in this sector, given the quantum of road length, land

acquisition plays a significant part in the execution of the same. For example, for the North South East

West (NS & EW) programme phase I and phase II under NHDP, 636 km is under implementation

across 56 projects and 372 km is yet to be awarded. The land acquisition status report mentions that

7 Refer Annexure 4

8 Source: Project information System, NHAI website



16303 hectares out of total required 23835 hectares or 68% is in possession for construction. Land

acquisition is the responsibility of NHAI and as per the above status; it has to acquire another 7325

hectares across 16 states. Considering the other road development programmes being implemented

by NHAI and the various State Governments, the overall land to be acquired would be enormous. The

provisions of the Bill will not apply to certain land acquisitions under the existing legislations (as

specified in the Bill) including National Highways, Atomic Energy, Metro Railways etc. However the

Central Government will notify within a year, for applicability of similar provisions in the Bill relating to

compensation and R&R for affected families under those existing legislations as well. Thus in the long

term, the acquisition process in these segments will not be affected, however the compensations

payable will presumably fall in line with the Bill.

Other Infrastructure Eight out of the top 20 projects shelved in 2011-12 were shelved owing to land

acquisition or availability issues. These projects entailed an investment of Rs 165,000 crore across

sectors like power, steel, highways, education and other manufacturing9. Projects like airports, power

plants, dams etc, which are in the planning stage and where large tracts of land are to be acquired,

will have to rework their costing and funding plans given that land cost will be higher than the previous

estimate. However, with a policy framework finally being in place, work on the acquisition will gain

momentum with all stakeholders having clarity on the cost and compensation. In case of projects

being developed for public purpose, project owners will have the option of seeking government

intervention where a majority of the land has been acquired depending on state specified limits and

consent from 70% or 80% of land owners has been received. Higher land costs will necessitate

reworking on the funding and revenue models for such projects. While the affected people will be

compensated in a fair manner, part of such elevated costs may trickle down to the public in case of

public purpose projects. For projects which are under implementation, the applicability of revised R&R

can impact project metrics and increase funding requirements of the sponsor. In large infrastructure

projects, much will depend on the government‟s ability to plan ahead and devise mechanisms in order

to effectively implement the R&R.

For private purpose projects, states’ approach will be key

The Centre has provided a basic framework to the states for land acquisition through the Bill.

Ultimately, it will be the state‟s prerogative on how to approach the issue. Specific land areas need to

be identified for industrial use which will lead to better infrastructure support to industries, ease of

operation and minimum displacement of people. For example, in Tamil Nadu the land acquisition for

industry has largely been smooth, as barren lands have been identified for industrial use by creating

Special Economic Zones. As the Bill does not prescribe much on government involvement in

acquisition for private purposes, there is ample scope for states to formulate their policy in this regard.

States like Gujarat and Karnataka have been acquiring land through state promoted agencies and

have been providing compensation as per negotiated rates or prescribed formulae. In terms of

compensation, states with large tracts of agricultural land like Haryana and Uttar Pradesh have

devised elaborate compensation policies. While Haryana was one of the first states to introduce an

annuity like compensation structure, the earlier Uttar Pradesh government had announced its

compensation policy which included the option of appreciation benefits to farmers in addition to

annuity based compensation. The States are free to provide R&R norms superior to that specified in

the Bill. The States have flexibility to specify distance based slabs for applying the multiplying factor

(upto 2 times) for determining market value. The Bill has also indicated an option of leasing instead of

acquiring land for public purpose. In the long term, some states may move to a land bank concept

which can act as a support to speed up industrial development.

9 Source: CMIE newsletter June 2012



Conclusion The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and

Resettlement Bill lays down the much needed policy framework which will act as a facilitator between

the land owner and the acquirer. The Bill empowers the government to some extent for defined

purposes in order to support infrastructure development and industrialization. Further, even in case of

private projects where a large quantum of land is acquired, the Bill safeguards the interests of the

affected families by making an elaborate R&R applicable. However in doing so, it also increases the

overall cost and time required for land acquisition, thereby compelling project owners towards more

efficient utilization of land.

The implementation of the proposed institutional structure and mechanism for acquisition and R&R

will be a key in creating a transparent and swift land acquisition process. Only then will the higher cost

borne by developers be compensated by faster project implementation and reduction in disruptions

due to protests10

and litigations, etc. Large investment plans and projects have been stalled due to

land acquisition issues or are moving slow in anticipation of clarity on land acquisition policy. The

enactment of the law is expected to expedite investment decisions and aid economic growth.

Ultimately the states‟ approach towards adopting and implementing the new policy will be critical in

determining its effectiveness in the long term.

September 2013

10

Refer Annexure 4 for recent protest regarding land acquisition



Annexure

Annexure 1 Rehabilitation and Resettlement package stipulated by The Right to Fair

Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill

2013

Table 4 Proposed R&R package in LARR 2013

Package

component

Affected

person Detail

Determined

market value

of land

Land

owners

a) Market value if specified in the Indian Stamp Act 1899 for the registration of sale

deeds or agreement to sell where the land is situated at

b) Average sale price for similar type of land situated in nearest village or vicinity area

c) Consented amount of compensation as agreed upon in case of acquisition of

land for private /PPP companies

Whichever is higher

Average sales price shall be determined taking into account sales deeds or

agreements to sell for similar type of area in vicinity during immediately preceding

three years

Above average sale price will be determined by taking into account one half of the

total number of sale deeds or agreements to sell in which highest price has been

mentioned

Any price paid as compensation under this Act in the district on an earlier occasion

will not be considered as market value or average sale price

Any price paid as per above which in opinion of Collector is not indicative of

prevailing market price may be discounted for purposes of calculating market value

Where market value cannot be determined if land is situated in area where land

transactions are restricted or sales deeds/agreements to sell in similar area are not

available or market value has not been specified as per a) above- State

government concerned shall specify floor price based on price calculated in

respect to similar land in adjoining areas

Solatium

Rural x * determined market value + value of assets attached to land, where x is 1 or 2

based on distance from urban area

Urban Determined market value + value of assets attached to land

R&R

Land owners

(A)Subsistence allowance Rs 3000*12 month

(B-1)Annuity Rs 2000*12 month*20 years, with indexation

(B-2)Employment For 1 member per family

(B-3) One time Rs 5 lac per family

(C)Transportation Rs 50,000

(D)Constructed house If house is lost, constructed house in urban area

(E)Land 1 acre if land acquired for irrigation project

(F)Land 20% of developed land reserved for land owner, if

acquired for urbanization in place of compensation

(G)Appreciation benefit 40% of appreciated land value if undeveloped land sold

within 5 years

(H)Others Fishing rights, artisan grant, small trader grant etc

Livelihood

losers

A, B,C,D,E above and additional resettlement allowance of Rs 50,000

Scheduled

tribes (ST)

Special provisions including preparation of development plan, land for land, etc

Infrastructural

amenities

In case of

resettlement

25 amenities including roads, drinking water, sanitation, individual electric

connections, school, basic irrigation facilities, health centre etc.

Note: Option to affected family from B-1, B-2, B-3

Additional 12% per annum on market value from the date of SIA notification;

Stamp duty and registration fee to be paid by requiring body;

Requiring body has an option of providing shares to land owners as 25% of the determined market value at

the option of the landowners.



Annexure 2 State wise land profile

As per the statistics published for 2009-10 by the Directorate of Economics and Statistics under

Ministry of Agriculture, India‟s geographical land area is 305 mn hectares. About 61% of the land is

spread across seven states, namely Rajasthan, Madhya Pradesh, Maharashtra, Andhra Pradesh,

Uttar Pradesh, Karnataka and Gujarat.

140 mn hectares or 46% of the total area was under net area sown in the reporting year (i.e. the total

area sown with crops and orchards, counted only once, even if multiple crops have been sown in the

reporting year). Further, 63.2 mn or 21% of the total land area was irrigated land (area irrigated for

cultivation through various sources like canals, tanks, tube wells etc once a year). However, this

irrigated land was concentrated over a few states. Around 92% of the irrigated land was spread

across 12 states, which however comprised 74% of the total geographical area. For 10 states, more

than 20% of their land area fell under irrigated land. These states accounted for 37% of the country‟s

total geographical land. The % is higher if cultivated land is considered. 51% of the total land area in

the country was cultivated as of 2009-10. For 16 states, more than 40% of their land area fell under

cultivated land. States like Punjab, Haryana, Uttar Pradesh, Bihar and West Bengal had more than

35% of their land falling under net irrigated area in 2009-10. Hence state wise distinctions for

acquisition of irrigated land will be crucial for economic development in these states.

Source: Directorate of Economics and Statistics, Ministry of Agriculture, All data for 2009-10



Table 5 State wise % of cultivated and net irrigated land

State Total land

as % of all India

cultivated land

as % of total land

Net irrigated land

as % of total land

Rajasthan 34270 11% 19030 56% 5850 17%

Maharashtra 30758 10% 18773 61% 3254 11%

Madhya Pradesh 30756 10% 15519 50% 6891 22%

Andhra Pradesh 27504 9% 13352 49% 4214 15%

Uttar Pradesh 24171 8% 17821 74% 13458 56%

Karnataka 19049 6% 11705 61% 3391 18%

Gujarat 18811 6% 10681 57% 4336 23%

Orissa 15571 5% 6180 40% 2181 14%

Chhattisgarh 13790 5% 4956 36% 1323 10%

Tamil Nadu 13033 4% 6009 46% 2863 22%

Bihar 9359 3% 6189 66% 3395 36%

West Bengal 8685 3% 5579 64% 3112 36%

Jharkhand 7970 3% 2814 35% 102 1%

Assam 7850 3% 2889 37% 197 3%

Uttarakhand 5672 2% 775 14% 338 6%

Arunachal Pradesh 5661 2% 252 4% 56 1%

Punjab 5033 2% 4195 83% 4072 81%

Himachal Pradesh 4549 1% 602 13% 109 2%

Haryana 4372 1% 3684 84% 3069 70%

Kerala 3887 1% 2156 55% 387 10%

Jammu & Kashmir 3781 1% 819 22% 316 8%

Meghalaya 2229 1% 341 15% 62 3%

Mizoram 2101 1% 189 9% 10 0%

Manipur 2011 1% 234 12% 52 3%

Nagaland 1621 1% 420 26% 73 5%

Tripura 1049 0% 281 27% 59 6%

A&N Island 757 0% 17 2% 0 0%

Sikkim 692 0% 82 12% 14 2%

Goa 361 0% 144 40% 28 8%

Delhi 147 0% 34 23% 22 15%

Pondicherry 49 0% 22 45% 16 33%

D & N Haveli 48 0% 22 46% 4 8%

Chandigarh 7 0% 1 14% 1 14%

Lakshadweep 3 0% 3 100% 1 33%

Daman & Diu 0 0% 0 0% 0 0%

ALL INDIA 305610 100% 155770 51% 63256 21%

Land area in thousand hectares

Source: Directorate of Economics and Statistics, Ministry of Agriculture

All data for 2009-10



Annexure 3 Example of R&R implemented by a private steel manufacturer over 2006 to 2011

The following is an example of the R&R implementation of a steel manufacturing company from 2006

to early 2011 for its integrated steel plant in Orissa. The company has a 4 R policy to implement R&R

which comprised Reassuring Communication, Resettling the displaced population with care,

Rehabilitation – ensuring a better quality of life, income and happiness and Recheck implementation

through self and independent social audits. The highlights of the R&R initiatives taken by the

company are given below:

Exhibit 2 R&R being implemented by a private steel manufacturer

Source: Company website as on July 7, 2012, presentation on R&R initiatives

R&

R B

Y A

PR

IVA

TE

MA

NU

FA

CT

UR

ING

MA

JO

R

Land to be acquired 3260 acres

Land ownership 81% private, 19% state

No. of villages 6

Affected families 1195 (~3866 persons)

Commissioning of first phase 2014 Land acquired 24% till Jul 2011

Families rehabilitated 909 till Feb 2011

Persons trained for employment 492 till Dec 2010

Persons provided employment 186

6

Affected families 1195 (~3866 persons)

Commissioning of first phase 2014

Signing of MoU with State 2004

Start of project construction 2010

Commissioning of first phase 2014

Cost Rs 21.6 bn

Expected annual revenues Rs 2.2 bn

Investment towards R&R Rs 0.2 bn

Expected employment generation 20,000

Timeline

Area &

people involved

Acquisition and

R&R status

Project metrics

Highlights of R&R initiatives Employment regeneration:

Technical skills training to a family member OR a one-time compensation in lieu of a job. Option of one time compensation if the family submits a definite plan for return generating utilization of the cash.

Self Help groups for both non-farm and farm based income generation activities like handicrafts, farming of seasonal vegetable. 16 acre agricultural land leased out for this purpose.

Relocation:

Allotment of plot in resettlement colony and financial and operational support in building house

Provision of basic infrastructure amenities like roads, street lighting, drinking water

Construction of medical centre, provision of education, scholarships etc. Compensation (over and above price of land acquisition)

One-time compensation of Rs 2.2 lakh in lieu of the job. Option of one time compensation only when the family submits a definite plan for return generating utilization of this cash.

Monthly maintenance allowance of Rs 2300 to extended family after confirmation of dismantling of house on project land

House building allowance of Rs 1.5 lakh in installments.( in addition Rs 1 lakh R&R entitlement)

Transportation allowance of Rs 2000



Annexure 4 Recent prominent land acquisition protests

Acquiring authority

Year of protest

Location, State

Affected Land area (acres)

Project Issue Status

Delhi Mumbai Industrial Corridor

2012 Haryana & Rajasthan

3000 Delhi Mumbai Industrial Corridor

Inadequate compensation

Government in process of taking consent from landowners, Protest ongoing

State government

2012 Jharkhand 227 Educational institutions (IIM Ranchi, IIT Ranchi & Central Law University)

Land acquired by erstwhile Bihar government , unutilised by government Villagers farming on the said land

State government has formed committee for dialogue with villagers, Probable change in location

Greater Noida Authority

2011 Greater Noida, Noida Extension, UP

NA Real estate development; Formula one track Yamuna Expressway

Use of urgency clause, Government role in acquiring land for private purposes Below par compensation

Settlement of additional compensation and land. Acquisition cancelled in some cases by HC. Acquisition cancelled in some cases by SC in August 2013

Noida Authority

2011 Noida, UP NA Real estate development

Below par compensation

Settlement with farmers

Jaipur Development Authority

2011 Rajasthan Jaipur ring road Below par compensation Acquisition of excess land than required

Protest ongoing

Various 2011 Chhattisgarh NA Thermal power plants

Sale of tribal , multi crop irrigated land

Protests ongoing, allotment of some lands cancelled by HC

Bellary airport

2010 Karnataka Airport Fertile land Acquisition cancelled by HC

Tata Motors 2006 West Bengal 997 Automobile manufacturing plant

Farmers not agreeable to acquisition

Plant had to be shifted to Gujarat. Farmers in West Bengal demanding return of unutilised land

Posco Steel 2005 Orissa 4004 Integrated steel plant

Fertile land , displacement of large population

Company reduced land requirements to 2700 acres

Source: Media reports



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