Industry experts claim UPA’s landmark Land Acquisition Bill will de-industrialise India

Rohan Venkataramakrishnan | Mail Today | New Delhi, September 8, 2013 | UPDATED 12:58 IST

Police on guard at UPPolice on guard at UP’s Bhatta-Parsaul where farmers held protests against forceful land acquisition.

In pandering to farmers ahead of next year’s elections, the government might have made the land barren for another crucial constituency: Indian industry. The ambitious Land Acquisition Bill, passed in both houses of Parliament, is set to turn obtaining land into a four-year nightmare that has some industry experts claiming it will “de-industrialise” India.

The law will make it mandatory for owners of rural land to be compensated with an amount four times its market value, while those in urban areas will be owed twice the market price. A convoluted acquisition process also requires 80 per cent of land owners to give their consent before it can be handed over to private companies. Put together, if private companies were to acquire land by the book with all the processes laid out in the law, it could take more than four years for them to get possession.

“It is going to have bad effects across the economy,” said Rajiv Kumar, a senior fellow at the Centre for Policy Research and former head of industry body FICCI.
“From the timeline – which will cause delays – to the consent requirements to the price of the land, this will just kill business prospects. It will de-industrialise India.”

The Bill, which now awaits Presidential assent to become law, updates the 1894 Act that governed land acquisition in the country. The colonial law had become tremendously controversial through conflicts like the Singur protests in West Bengal, because it required no consent from those living on the land for its acquisition and took the market value as the baseline for compensation.

A rally in Singur in protest against Tata Motors.A rally in Singur in protest against Tata Motors.

“I feel any law which favours farmers, the weaker sections, Dalits and tribals, is in the national interest,” said Jairam Ramesh, the rural development minister following the passage of the Bill in the Rajya Sabha. He also claimed it would “change the face of the country.”

Real estate moguls appear to agree, although they don’t believe this will be a good thing.
“Every part of the economy needs land – for industry, for infrastructure – so this will hurt everyone, not just real estate companies,” said RK Arora, Chairman and MD of Supertech Limited. “It will impact our company in a big way, if only because of the delays that can be expected from such a process.”

Industrialist Adi Godrej also added that the law will have unusual effects on the market, by making land that has already been acquired much more valuable.
“It will have a dual effect, because, in addition to making the cost of land acquisition to go up – especially for industry that is into infrastructure and housing – it will also raise the valuation of the existing land that people have in real estate companies,” he said. “I’m surprised the valuation of these companies hasn’t already risen.”

The lengthy process might also drive more companies to go directly to the government to get land rather than attempting to acquire it directly – a model that Godrej said has already become standard in the states. “We must forget about acquiring land for each individual projects,” he said. “It will take a lot of time, but what will happen is that state governments will acquire large tracts of land, and the state will then have to allocate that to industries that want to set up units.”

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