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How to get ourselves a better land law -Sanjoy Chakravorty
-The Hindu Business Line

The Congress law and the BJP's amended version both fail to address the lack of transparency in property deals

A toxic mix of hypocrisy, amnesia, opportunism, ignorance, and paternalism has led to a mess on the land acquisition legislation. It seems certain that whatever law we end up with is going to be bad law. It will not serve the primary purpose of any eminent domain law - which is to make land available for the public good by overriding private interest where needed. In the name of protecting farmers' interests, a self-serving political class has forgotten about the public interest.

The Congress law was created in response to widespread, sometimes violent, resistance to land acquisition methods that, for over six decades, were harsh, unjust, and unequal. For many communities, especially the most marginalised, these methods created widespread devastation. The Congress was at the helm of this process and that all the other major political parties went along. Over 90 per cent of the acquisitions and conversions were for public sector projects.

That was then, one could argue, but what about now?

Change - for the worse

The private sector is a bigger actor and has greater land needs than before. The non-agricultural economy is increasingly more important, which means that the most acute land needs are in peri-urban regions. The mix of state projects has changed as a result, and the focus is on intra- and inter-urban infrastructure. Most important, the land market has changed fundamentally. Comparing equivalent locations in other countries, land in India is about the most expensive in the world; at the high end in metros, more so at the medium end in peri-urban regions around India's cities, and at the low end in remote rural regions. Almost everyone can sense this change even if they cannot quantify it; everyone, that is, except a political class that acts as if we are living in the land markets of the past. How should a new acquisition law be designed in light of this history and present reality? Some of the clearest thinking on the subject is by Maitreesh Ghatak and Parikshit Ghosh. They argue that there are three possible broad approaches. "One is to let money speak - hiking minimum compensation amounts significantly to win farmers' support. The second is to let farmers speak - making project clearance contingent on a referendum among affected households. The third is to let the bureaucrats and experts speak - getting it vetted by an empowered committee doing its own social cost-benefit assessment." The problem, Ghatak and Ghosh argue, is that rather than being alternative methods, the Congress law uses the "kitchen sink" approach and makes these complementary methods. All are now in the law. The result is a law "that carries within it the seeds of its own destruction".

That destruction has begun with the BJP's proposed amendment. The core purpose of the amendment is to remove the "farmers speak" and "experts speak" elements from the Congress law in some situations - ones where the BJP expects the most private sector activity, specifically in vaguely-defined "industrial corridors". Even the Congress law doesn't allow farmers to "speak" in public sector situations. The unstated assumption is that farmers will not fight this because compensation rates are 20 to 400 times higher than the net present value of all future income from agriculture.

Information assymetries

It is vital to understand that farming in India simply doesn't pay. The average net income per acre is among the lowest in the world - well below 10,000 a year. Therefore, the productivity-based price of farmland should be no more than 1.5 lakh an acre on average (the average price of farmland in the US is about 1.4 lakh an acre). In reality, almost nowhere in India is the price of farmland less than 5 lakh an acre now, and around cities and in prosperous rural regions it is 1 crore and more. That is, farmland prices in India are driven by scarcity, not productivity.

It is hard to imagine that farmers will refuse payouts that are dozens to hundreds of times more than they can earn. That is the basis of the BJP amendment.

But if farmers do refuse these payouts we must conclude that farmers are not well-informed about what they stand to gain; or they are afraid that corruption and middlemen will make the real gains; or they are fearful of their own ability to handle so much money. Certainly, there is a section of the political class that stands to gain from maintaining and even furthering these information asymmetries and fears. This political opposition is a reality. How to deal with it? There are two ideas on the table: the "kitchen sink" Congress law and its tweaked BJP amendment. Neither is good enough, because neither has a good method for setting prices in the world's most expensive land market. Wholesale reform of the Congress law is politically infeasible right now. Therefore, the path forward in the short term is to encourage States to choose their own paths: accept the BJP amendment, stay with the Congress law, or create even more incentives and protections for land-losers than in the Congress law. One should see a range of choices emerge, from fundamentalists like Mamata Banerjee in Bengal, to middle-roaders like Naveen Patnaik in Odisha, to pragmatists like Anandiben Patel in Gujarat. Some astute leaders will extend this categorisation to the district level - use the BJP method for the more urbanised and the Congress method for the less urbani ed districts.

Make everything known

It is essential to do the hard work of mitigating the information asymmetries that have enabled both the past injustices in land acquisition and the present legal follies. There is a parallel conversation taking place on digitising land records; some States have made some headway on this project. But this is a very large and rather difficult enterprise. More feasible and more immediately necessary is the project of making information on every future land transaction record public - all private sales and all government acquisitions.

Let everyone know what the "nominal" prices are; that alone should begin to blow the lid off the septic tank of corruption and land mafias. Let everyone know who is buying and who is selling and exactly where this is happening. Let everyone know what the government is paying for acquisition. Put this information online and display local information in every tehsildar's office. Send copies to panchayats and gram sabhas. At the same time, create an institution to promote financial literacy.

We are stuck with a paternalistic state which survives by keeping citizens ill-informed and is embedded in the DNA of the new land acquisition law and the reactions to its amendment. The old law lasted 120 years. This new one will last 1 to 5. Another law will be needed soon. The citizens of India need the political leadership to enable an information market so that better-informed citizens can help formulate a better land acquisition law in the long run.

The writer is a professor at Temple University. This article is by special arrangement with Center for the Advanced Study of India, University of Pennsylvania

(This article was published on April 6, 2015)