Land acquisition Act, UPA's poison pill, is likely to be defanged before budget session

It’s official now. The UPA’s worst legacy, a badly drafted land acquisition law, is going to be transformed under NDA to revive growth.

We can expect the changes to start happening in two stages any time after the current wasted Rajya Sabha session ends next week, and again after election season is over in mid-February. I would bet on early January for the non-legislative changes, and mid-February for the changes that require amendments to the UPA version of the law.

The Mid-Year Economic Analysis for 2014-15, drafted under the tutorship of new Chief Economic Advisor Arvind Subramanian, makes it clear that while the intent of the UPA land law, dubbed the Right to Fair Compensation and Transparency in Land Acquisition, Resettlement and Rehabilitation Act 2013, was noble, its actual clauses were partly unimplementable. The law was sold as a pro-poor, pro-rural law, but many of the future beneficiaries of the Act may be rich, urban land-owners.

More from Economy

Inflation likely to be a big focus area for budget 2024, say sources Explained: Will the Bank of Japan break tradition and raise interest rates?

The analysis notes that while “the provisions under the new Act are conceptually sound.. (but) from a legal perspective, there is scope to improve the drafting of the Act in order to avoid confusion and litigation.” This clearly suggests that the law was rushed through with little application of the mind since it was intended to benefit the UPA government in an election year. That it didn’t help is another matter.

To remedy its ill effects, the analysis thus has called for a two-stage correction: first, by changes in rules and regulations through executive orders and which don’t require legislation; second, by changes in the law itself, which will need a parliamentary consensus - an unlikely prospect anytime soon.

The changes that can be made without legislation are the following:

1. Exempting land acquisition procedures prescribed under other laws by easing rules, especially those for social impact assessment (SIA), which largely impact large infrastructure projects. SIA procedures under the new law are estimated to be very time-consuming, making nonsense of project costs.

2. Make the rigorous SIA rules applicable largely when it is the interests of the rural poor that are at stake. The analysis noted: “The Act seems to be written largely based on the premise that the person whose land is acquired is rural, poor, and vulnerable. This may result in adverse consequences (extraordinarily high costs and undue enrichment) when land is acquired from those who are urban, rich and educated. (In future, most acquisitions are likely to be in urban or semi-urban areas.) The precise nature of the SIA process under the new Act is to be prescribed in the Rules. The rules should be modified by targeting the process towards the poor rather than all sections of society. For those not involving the weaker sections a greatly simplified and easy procedure can be prescribed.”

3. Another simplification suggested is prescribing a higher limit for private land purchases: “The Act requires even a private purchaser to provide for R&R (rehabilitation and resettlement) if the extent purchased (voluntarily without state involvement) exceeds prescribed limits. The limit, so far not been laid down, may be fixed at a level that can balance the interest of the seller(s) on one hand and developmental needs on the other, so as to provide incentives for private purchasers to acquire and develop the land.”

4. The last change - again one that requires no legislation - is to allow states full freedom to change the laws according to their needs. In short, fiscal federalism - something the NDA government would have no problems with.

The changes which require modifications in the Act - meaning, they have to be passed by parliament - include a clause to exempt government officials and corporate directors from being made criminally liable for transgressions of the Land Acquisition Act when these may have happened unintentionally or through the acts of lower-level officials.

The other three relate to the following: offering the prices prescribed under the Act (two times market prices for urban land and four times for rural land) only if the land sellers agree not to litigate; allowing government to acquire land without SIA for needs other than defence and national security; and making R&R mandatory for private purchasers only if the land is in scheduled areas.

Given that many of the key changes suggested do not need legislation, we should see a flurry of changes as soon as the current Rajya Sabha session ends next week. The legislative changes suggested may need consensus building in the budget session.

But there is light at the end of the tunnel. The growth-retarding land law is about to be rescued from poison pill status to something more palatable.