Good time for land acquisition reforms

The Supreme Court verdict on land acquisition for the Tata Nano project in West Bengal's Singur could pave the way for strong reforms in the methodology adopted for land acquistion. It may also facilitate enactment of a standard mechanism for such acquistion, industrialists and economists said.

In a setback to the Tatas, the Supreme Court on Wednesday last week set aside the land acquired by the previous Left Front government in West Bengal for the Nano car plant, saying due processes and procedures were not followed. "I have not studied the verdict in detail. In general, land acquisition has been a big problem for industries. There should be reform enabling industries to buy land," Godrej Industries' Managing Director Nadir Godrej told this correspondent.

"It is a good idea for states to keep a land bank in advance. Some states do that. States which are legally acquiring land, when there is no project in mind and keeping the land in hand to give it to industry have been successful," he added. Quashing the acquisition proceedings, the apex court also exposed the existing lack of standard land acquisition procedures. The verdict is seen as a boon for paving the enactment of Land Acquisition Rehabilitation and Resettlement Act.

"The Supreme Court's verdict is a manner of unearthing the existing lack of standard land acquisition mechanisms that state authorities follow across India. It gives real estate stakeholders another reason to push the case for a Land Acquisition Act to be enacted soon. In that sense, I would see this development in a positive light," JLL India's Chairman and Country Head Anuj Puri said.

The verdict of the highest judiciary also makes a strong case for enactment of appropriate law in this regard at the earliest possible opportunity, Puri said. Economists feel the verdict has brought more clarity in the definition of public purposes, which were debated at length but had so long remained unanswered.

"The Supreme Court verdict brings clarity on the purpose of land acquisition. It was debated earlier whether large employment can be treated as a public purpose or not when the government is acquiring land for an entity and for a project which would have a profit motive, said economist Abhirup Sarkar, a professor at Kolkata's Indian Statistical Institute. "The apex court order endorses that large scale employment cannot be a public purpose even though the judges differed with each other on the point," he said.

"The conflict was within the government. That is why the government did not acquire the land directly and West Bengal Industrial Development Corporation (WBIDC) did so," said Sarkar, now the WBIDC vice chairman. Going with the Supreme Court verdict, Puri said acquiring land for "public purposes" in the guise of transferring it for commercial development as well as invoking the "emergency clause" without giving landowners an opportunity to raise their issues are wrong practices.

Such clarity, in fact, makes a strong case for "buying land directly" said Sarkar adding it would have nil impact on the state's industrial and investment outlook. Investors do not want their funds to remain idle, and so would continue to pump in money for projects. Industrialists, in fact, felt that a progressive policy was important.

Citing the example of Andhra Pradesh, Godrej said: "When the state acquired land for a new capital, it gave landowners a stake in whatever is coming up. This is a good policy." But Godrej also cautioned that "there would be some impact if land is not available for industries."

Speaking on the possible impact of the verdict on the investment outlook, industrialists hoped transparent projects would remain unaffected, with investors preferring to park their funds in projects which are dispute-free. Asked about the possible procedure of returning land to cultivators and giving compensation, industrialists and economists said it was up to the state to take the next course of action but agreed that holding the land without any productive purpose would be difficult.

By Bappaditya Chatterjee