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Examining the Economic Impact of Amending the Land Acquisition Act, 2013

Major industry leaders and experts have thought of the old process as cumbersome and had hoped the government would provide with a feasible alternative. The original act had mandated that projects would require the consent of 80% of the land-owners if the acquisition was for private projects and 70% of land owners if it is a public private partnership. By exempting the requirement of consent and doing away with the prerequisite assessment the government has left the farmers on a loop and thereby have cut out possible beneficiaries from the system of compensation. The Social impact assessment was important as it was key to identify those who would be most impacted by the project like land-owners and other dependents who were living close to the land and derived certain benefits out of it. The impact assessment would also assess the impact of pollution and other environmental issues on people living around the proposed project.

On a plus side, the land acquisition act in its original form had raised the price of land acquisition by increasing the transaction cost. As money was not only paid to the landowners for acquisition, rehabilitation and final resettlement but also but also included payments to be made out to bureaucrats, cost of undertaking impact assessments, and other specific impact assessments rehabilitation costs. Before the ordinance, most land acquisition were conditioned on the environmental and social suitability of the proposed projects, but after the exemptions given to the five specific sectors, payments meant to be made to otherwise entitled beneficiaries can be done away with. The process of undertaking social assessments can take years and which means no investments made, no projects implemented and absolutely no production or utility for the interim period. Therefore the ordinance has reduced the transaction cost of acquisition and requisition by removing the mandate of social and environmental assessments. Only the land-owners will be compensate, and the people depending on the land will not be accounted for.

But this exemption of consent based acquisition that has been extended to these sectors will benefit farmers as private parties in partnership with government under a PPP model for a private propose based projects will directly negotiate with the farmers to offer them with the most attractive pricing for their land. This exemption has also been done to provide for an expedite project inception for projects of national importance like power plants, highways and railways. But investors need to keep it in mind that because land related laws are on the concurrent list, states can choose to accept the ordinance as the law of the land or opt for the SIA & consent based model of acquisition. This will bring about investor apprehension about the legitimacy of the ordinance. Investors might become hesitant, as there would be widespread uncertainty with regards to the actual law of the land. But this stands to be very good news for the farmers as there can get up to 4 times the market price for their land and are also given an option to retain 20% of their original land after the project has been completed by just paying the developing and acquisition cost, but how this will benefit the farmer is yet to be studied. Will the farmer be given a stake in the project or will certain assets of the company be transferred to the farmer. There is much ambiguity with regards to this provision.

This ordinance by exempting five sectors from consent-based acquisition will have direct impact on the food security of the country. The original act was also drafted with the intent to secure multi cropland from acquisition as to not impact the food security of the nation. Considering all of this, this ordinance will allow land to be acquired for the above-mentioned sectors without studying the impact on national food security. Doing this will indirectly increase the cost of food and will then be at a disadvantage to farmers who were already self sufficient with regards to their own food security.

Business will look at this ordinance favorably but their faith in this law will only be reinforced after the parliament has made a final decision on the matter.

Harsh Loonker is a student at Jindal Global Law School.

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