Ashok Yadav was optimistic when Uttar Pradesh authorities took 589 hectares of land from his village, Patwari — including his fields — for new factories. Officials paid Rs850 per square yard, and promised jobs would soon follow.
“They said ‘give us your land for industrial purposes and your family — your children — will get jobs’,” recalls Yadav, whose extended family received compensation of Rs17 million — at the time worth $400,000 (Dh1.46 million) — for its holdings in the area, 42 kilometres from central Delhi.
But instead of the promised factories, apartment blocks rose on the fields. Farmers discovered their land — taken using powers of eminent domain laid out in India’s colonial-era land acquisition law — had been sold to private developers to build housing for New Delhi’s expanding middle-class.
The builders paid Rs10,000 per square metre for the land — more than 14 times what the farmers received.
Furious, the Patwari farmers went to court to challenge the 2008 acquisition, arguing that authorities had abused their powers in order to benefit private businesses.
In May, India’s Supreme Court agreed. It ruled that the state’s acquisition of the fields was illegal. Judges criticised the government’s invocation of an emergency clause in the land acquisition act that had prevented the farmers from contesting the seizure beforehand.
But the judges said the property could not be returned, as thousands of families had already paid for flats in the partially completed buildings. Instead, the court ordered a 64 per cent increase in compensation payments.
Akhilesh Tomar, a 38-year-old engineer, is an unwitting casualty. He put down a deposit for a two-bedroom flat in 2010, hoping to move in within three years. But with construction delayed by the litigation, he has spent five years paying a mortgage on the unfinished apartment and rent for accommodation.
The price he will have to pay for his flat, originally Rs1.8 million, is rising too, as builders try to pass on cost increases, including the extra compensation. Still facing a long wait, Tomar bears no malice to the farmers.
“As we are the sufferers, they are also the sufferers,” he says. “We are both being harassed by the system. We blame the system.”
As Prime Minister Narendra Modi tries to accelerate India’s transformation from a predominately rural, agrarian society to an industrialised, urbanised economy with smart cities and industrial corridors, the question of how to manage competing demands for land, and ensure a fair, efficient and transparent conversion of farmland to non-agricultural uses is one of his most vexed political challenges.
India’s corporate sector has grown accustomed to the government using its powers of eminent domain to provide it with inexpensive land for a wide range of commercial projects and insists this is necessary to enable large-scale, job-generating investments.
But in a litigious democracy with a long tradition of private property rights, state land acquisition has often triggered fierce battles stalling the very projects the state wanted to facilitate.
While many of India’s estimated 90 million farming families are struggling, few among them have the education or skills to secure stable employment, making them highly resistant to perceived threats to their way of life and only tangible income.
“There is a real tension between the model of economic growth India is pursuing and the weight of farmers in [terms of] India’s electoral democracy,” says Michael Levien, a Johns Hopkins University sociologist, who has studied land acquisition in India. “The rural population are looking for jobs but they are not finding ones that pay enough or are of high enough quality to make them want to leave agriculture for good.”
India’s political and business elites are feverishly debating how the state can give companies access to land in a politically palatable manner. Analysts are sceptical that India’s increasingly assertive — even combative — public will accept widespread compulsory land acquisition any more.
Instead, they argue, India must make its opaque property markets work more smoothly to allow companies to buy land from willing sellers.
“Eminent domain is not something one uses for essentially commercial, profitmaking activities,” says Nitin Desai, an economist and former UN official. “The minute you take land from somebody against that person’s wishes — or on terms he doesn’t consider appropriate, he will go to court.
“If it’s a free transaction, at least that doesn’t arise. Industry basically has to go to market and buy the land that it needs.”
At independence in 1947, India inherited the 1894 Land Acquisition Act, which allowed the state to take private land for “public purposes” if owners were fairly compensated.
In 1984, the law was broadened to permit the state to acquire land on behalf of private companies too.
But as controls on private capital were relaxed in the 1990s, state governments began amassing vast landholdings to sell to private companies — a process that accelerated as property values soared in the past decade.
While some land went to infrastructure projects such as power plants, states also provided it for commercial endeavours with only tenuous claims to a public purpose.
Companies hand-picked their desired sites and took far bigger tracts than their projects strictly required. Meanwhile, farmers received compensation far below the legally-mandated “market rates”.
“Every state government has become like a property dealer,” says Ajay Jakhar, chairman of the Bharat Krishak Samaj, or Indian Farmer’s Forum. “They acquire land from the farmers then they rezone it into urban land and sell it at 10 times the value to urban dwellers. It has entered into the farmers’ minds that they have been exploited.”
Farmers mobilised to resist, aided by social and political activists, resulting in protracted, sometimes violent, stand-offs on the ground — and long battles in court. When judgements were finally issued, courts routinely ordered significant rises in compensation — often as much as six times the original payout.
In 2013, the then Congress-led government pushed through legislation designed to strike a balance between property-owners’ interests and the need to make land available for industry and urban expansion. It laid out a complex process for states to take land for private companies — even for public-private partnerships in infrastructure, which it said would prevent conflicts and protect farmers from abuse of state power.
At the heart of the law was the requirement that authorities obtain the consent of 70-80 per cent of “project affected families”, including both property owners and those, such as farmhands, losing their livelihood, before taking any land. It also mandated detailed social impact assessments evaluating the costs and benefits of diverting land from agriculture to the designated project.
Compensation rates were raised to four times the market price for rural land, twice the market price for urban land. It also laid out generous resettlement and rehabilitation packages for the displaced.
Dismayed companies complained that the law’s onerous bureaucratic requirements would make it virtually impossible for the state to acquire land.
“It’s completely and absolutely impossible to implement,” says Rajiv Lall, managing director of the Mumbai-based Infrastructure Development Finance Corporation. “You are not living in a university, debating.
“We are running a country which is complex to administer. You have to balance what is morally and ethically correct and fair, with what is feasible and doable.”
The law also imposed new obligations on companies trying to buy large tracts of land through the market, requiring them to resettle anyone affected — not just landowners but also their workers — by the purchase. Businesses warned it would have a crippling affect.
“It’s almost as if someone has written this bill not for social justice but more to stall India from growing,” says Ajit Gulabchand, chairman and managing director of Hindustan Construction Company. “It would take 58 months — if everything went right — for the process to be followed.
“Add to it the usual bureaucratic delay it will easily double that. When are you going to acquire land?”
Determined to kick-start India’s stalled investment cycle, Modi is trying to amend the two-year-old law so authorities can again take land without farmers’ consent or social impact evaluations — though the enhanced compensation will remain. But the proposed changes have met fierce resistance.
Modi’s government hopes to push the changes through during the current session of parliament but meanwhile, land transactions have basically frozen. His political reputation and business sentiment both stand to suffer if the government cannot push through the changes.
“The government did not expect the intensity with which this was opposed — not just in parliament but outside of parliament,” says Jahangir Aziz, chief Asia economist at JP Morgan.
“For most non-urban people, the most well-understood, widely accepted fear of living is that the outsider will come and ‘take away my land’. These proposals feed into that traditional fear.”
“The existential question India faces is: what is a public purpose that justifies a democratic government forcibly taking land from farmers? Is it a factory? Is it real-estate development? Is it a Formula One racetrack?” says Levien.
“That is a political question. There is nothing inevitable about it. The question is: what is the meaning of development? Who gets the benefit and who pays the cost?”
Financial Times
