Land acquisition mess: Will the real Narendra Modi please stand up?

narendra_modiVivek Kaul

The Narendra Modi government seems to have agreed to drop the politically unpopular clauses in the Bhartiya Janata Party’s version of the land acquisition bill. This is not a move in the right direction.

One of the key planks of Narendra Modi’s electoral campaign for the 2014 Lok Sabha elections was economic development and job creation. In a country where most electoral rhetoric has been based around “garibi hatao”, this was like a breath of fresh air.

And given that 13 million Indians are entering the job market every year, creation of new jobs should be one of the top priorities of any government.
What also needs to kept in mind is the fact that the average holding size of agricultural land has come down over the years.  As per Agriculture Census 2010-11, small and marginal holdings of less than 2 hectare account for 85 per cent of the total operational holdings and 44 per cent of the total operated area. This could have only gotten worse since 2010-11. And what this means people need to be moved away from agriculture into other areas where they can make a living.
How does a country like India create jobs? As Cambridge University economist Ha-Joon Chang writes in Bad Samaritans—The Guilty Secrets of Rich Nations & the Threat to Global Prosperity: “History has repeatedly shown that the single most important thing that distinguishes rich countries from poor ones is basically their higher capabilities in manufacturing, where productivity is generally higher, and more importantly, where productivity tends to grow faster than agriculture and services.”

An important part of building a vibrant manufacturing sector is the ease with which land can be acquired. Over and above this, the quality of physical infrastructure (roads, railways, ports etc.) in India remain abysmal. If this infrastructure has to improve, the ease of land acquisition remains very important.
Narendra Modi became the prime minister of India on May 26, 2014. One of the things he did at the very beginning was to try and figure out what were the factors holding back investment in India. The answer that he got was the Land Acquisition Act of 2013 was one of the key reasons holding back investment.

In fact, the latest economic survey released in February earlier this year pointed out that “land acquisition” was a top reason for 161 stalled government projects. The Survey also pointed out: “India’s recent PPP [public-private partnership] experience has demonstrated that given weak institutions, the private sector taking on project implementation risks involves costs (delays in land acquisition, environmental clearances, and variability of input supplies, etc.).”

Arvind Panagarya the vice-chairman of the NITI Aayog in a recent speech said: “The Land Act, 2013 is an onerous Act under which by all calculations it will take up to five years for acquiring land assuming that all steps progress smoothly,” Panagariya said.

The question is what led to the Land Acquisition Act 2013? Before 2013, the process of land acquisition in India was governed by the Land Acquisition Act 1894. This was a law introduced during the time when the British ruled India and it managed to survive for more than 65 years after India attained independence from the British in 1947.

Given that the law was passed during British times it essentially ensured that the government could acquire land for almost any purpose and pay a pittance for it. As Jairam Ramesh and Muhammed Ali Khan write in Legislating for Justice—The Making of the 2013 Land Acquisition Law: “The 1894 Act was a comparatively short legislation that left much to the discretion of the acquiring authorities.”

The government basically acquires land from the public for what it calls “public purpose”. Given this, it is very important to define the term public purpose properly. But as Ramesh and Khan write: “‘Public Purpose’ which was the raison d’etre for any acquisition initiated was drafted in such wide terms that essentially any activity could be constituted as public purpose, as long as the Collector [of the district where the land was being acquired] felt it did…’Public

Purpose’ became what ever the Government or acquiring authority defined it to include.”
And if this wasn’t enough, a 1984 amendment to the 1894 Act allowed the government to “acquire lands for a public purpose ‘or for a private company’”. So, as per the 1894 Act the government could acquire land even for a private company. This clause was at the heart of the nexus that evolved between builders and politicians, over the years.

Given this, such a law had to be done away with it. This finally happened in 2013. The land acquisition law that was brought in was towards the other extreme, and seems to have made land acquisition almost next to impossible. (For those interested in the entire procedure, they should read Ramesh and Khan’s book, to realise how complicated and time taking the 2013 law is).

The 2013 law calls for consent from 70% of families in case of public private partnership projects and 80% if the land is being acquired for a private company. A social impact assessment also needs to be carried out. This assessment needs to answer questions like whether the “proposed acquisition serves public purpose” and “whether land acquisition at an alternate place has been considered and found not feasible”.

As mentioned earlier, after coming to power, the Modi government figured out that land acquisition law of 2013 was acting as a substantially barrier to investment. It brought in The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Ordinance, 2014, which made a few changes to the 2013 Act. The ordinance was signed by President Pranab Mukherjee on December 31, 2014.

In the ordinance the requirement of getting prior consent from those affected has been done away in certain cases. As Swaminathan Aiyar writes in a column in The Economic Times: “It substantially diluted the clauses relating to a social impact assessment and consent of 70-80% of people affected. It provided exemptions for 1 km on either side of railway and industrial corridors, rural infrastructure, affordable housing, and PPP infrastructure projects.”

This was a step in the right direction to get investment going again. Land required for the defence, electrification, affordable housing, and industrial corridors etc., also needed to be made available as soon as possible. Also, Ramesh and Khan write: “The law was drafted with the intention to discourage land acquisition.

It was drafted so that land acquisition would become a route of last resort.” Ramesh was a key player behind the Act.
A land acquisition Act which discourages land acquisition cannot be of much help to an economy which needs to create jobs for 13 million individuals entering the work force every year.

Now with the government planning to go back to the 2013 law the status quo will return. If Arvind Panagariya is right in estimating that it will take five years to acquire land then there is no way that the Narendra Modi government is going to get around to delivering its promise on creating jobs and economic development.

Also, Modi’s pet “Make in India” programme is unlikely to get anywhere. You can’t make in India without being able to get land to set up the necessary infrastructure.

Aiyar summarised it the best when he said: “[Modi] seems happier coining slogans than in implementing tough decisions.” Tough decisions on the economic front is what this country needed. Alas, it is not going to get them even under Modi, who for a while flattered to deceive. And by the time the 2019 Lok Sabha election is here, “garibi hatao” might be the order of the day again.

It is worth asking here, if the plank of economic development and jobs, was also an electoral jumla? From how things are going right now, that is how it seems like.

To conclude, the Narendra Modi that we saw in the run-up to the 2014 Lok Sabha elections was a different man, from the Narendra Modi we are seeing now. Will the real Narendra Modi please stand up?

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)
The column originally appeared on Firstpost on Aug 5, 2015

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About vivekkaul
Vivek Kaul is a writer who has worked at senior positions with the Daily News and Analysis(DNA) and The Economic Times, in the past. He is the author of the Easy Money trilogy. Easy Money: The Greatest Ponzi Scheme Ever and How It Is Set to Destroy the Global Financial System , the latest book in the trilogy has just been published. The first two books in the trilogy were published in November 2013 and July 2014 respectively. Both the books were bestsellers on Amazon.com and Amazon.in. Currently he works as an economic commentator and writes regular columns for www.firstpost.com. He is also the India editor of The Daily Reckoning newsletter published by www.equitymaster.com. His writing has appeared across various other publications in India. These include The Times of India, Business Standard,Business Today, Business World, The Hindu, The Hindu Business Line, Indian Management, The Asian Age, Deccan Chronicle, Forbes India, Mutual Fund Insight, The Free Press Journal, Quartz.com, DailyO.in, Business World, Huffington Post and Wealth Insight. In the past he has also been a regular columnist for www.rediff.com. He has lectured at IIM Bangalore, IIM Indore, TA PAI Institute of Management and the Alliance University (Bangalore). He has also taught a course titled Indian Economy to the PGPMX batch of IIM Indore. His areas of interest are the intersection between politics and economics, the international financial crisis, personal finance, marketing and branding, and anything to do with cinema and music. He can be reached at vivek.kaul@gmail.com

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