Dispossession, development and democracy

While liberalisation’s backers are not squeamish in admitting that democracy is an impediment to the free market economic model, farmers who are dispossessed of land argue that they are undercompensated and that the profit of private companies is not a public purpose

Since it was passed by Parliament in September 2013, the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act (LARR) has been criticised from all sides. Farmers and social movements argued that LARR failed to adequately compensate land losers, contained large loopholes such as exempting irrigation projects, and, most importantly, continued to allow land acquisition for private companies. Industrialists, developers, and State governments, on the other hand, complained that the bill would delay projects, increase the costs of land acquisition, and impede economic growth. It was no secret that the government shared the latter view, and it was no surprise when it diluted many of LARR’s key provisions through an ordinance issued on December 31.

The ordinance effectively eliminates the main features of LARR that gave rural people some protection from arbitrary dispossession. First, it removes the requirement that the government obtain the consent of 80 per cent of affected people before taking their land for private projects, and 70 per cent of affected people for public-private partnership (PPP) projects. The ordinance thus restores the ability of the government to acquire land for any private purpose it likes, with no need to win the support of the affected. Second, the ordinance eliminates the Social Impact Assessments (SIA) that LARR had mandated as a pre-condition for proceeding with land acquisition. This restores the ability of the government to dispossess land from people without even assessing its negative consequences, much less weighing them against projected benefits. Without SIAs, there is no way to even determine who is affected, thus undermining the bill’s promise that non-land owners — such as labourers, sharecroppers, artisans, and fishworkers — will also be compensated. In addition to these major changes, the ordinance increases the amount of time that a government or company can keep unutilised land, and removes LARR’s strong penalties for non-complying officials. By making these sweeping changes through an ordinance, the government has undermined by executive fiat the spirit of a law that was passed with bipartisan support after seven years of public debate and revision.

The argument, of course, is that this move was necessary because LARR had become a large obstacle to economic growth. While there is no evidence to support this argument, economist Sanjoy Chakravorty provided one of its clearest articulations when he defended the ordinance in these pages (The Hindu, “Improving an unworkable law,” January 7, 2015). Chakravorty argued that LARR created a “windfall for land-losers” by doubling or quadrupling already high market prices, thus raising the cost of land acquisition to “unsustainable levels.” The ordinance, while keeping generous compensation levels in place, would helpfully reduce the indirect costs entailed by conducting SIAs and obtaining consent from affected people. Even with the ordinance, Chakravorty worried that compensation levels are still too high under LARR, and “may make many public projects unaffordable and private projects uncompetitive.” This position is widely shared within the private sector, state governments, and the economics profession.

Calculating compensation

“Capturing the dispossession windfall itself became the purpose of land acquisition as State governments quietly morphed into land brokers for private capital.”

But there are several problems with this argument. The first is that it rests on a misleading picture of how compensation is calculated under LARR. While it is true that land prices have skyrocketed in recent years, it is wrong to suggest that this forms the basis of how farmers are compensated under LARR. Like the Land Acquisition Act (LAA) that preceded it, LARR takes as its starting point the land’s assessed market value — what is known as the “circle rate.” The circle rate is based on the land’s past agricultural value and not its potential value as industrial, commercial, or residential land. It is no secret that it is kept deliberately low to minimise stamp duty. The difference between the circle rate and the market rate is usually vast. The Greater Noida Industrial Development Authority (GNIDA), for example, became notorious for acquiring land at Rs.820 per square metre and reselling it to developers at Rs.35,000 per square metre — which is itself a fraction of the ultimate price of the high-end flats built on the land. But we should not single out GNIDA — this is the common practice of urban development authorities and industrial development corporations across the country.

Capturing the huge gap between market prices and compensation prices is, in fact, the primary motive behind much land acquisition in India today. We might call this gap the “dispossession windfall” — it exists only because the government is willing to force farmers into selling, and provides a subsidy to whoever receives the land. The transparent injustice of this practice was one factor behind the widespread farmer protests that finally pressured the United Progressive Alliance — with Bharatiya Janata Party support — into passing LARR. But it is important to note that LARR did not eliminate the dispossession windfall. LARR’s compensation formula involves multiplying the circle rate — not the market rate — by two in urban areas and four in rural areas (a distinction, moreover, it leaves for States to establish). Although one might argue that this multiplier is arbitrary, it certainly does not bring compensation prices up to market prices. To argue that farmers are reaping a windfall from LARR at the expense of the private sector is to reverse reality. To argue for a reduction in compensation to farmers is to defend the use of eminent domain for generating corporate super-profits.

In the name of development

The second problem with this argument is that by focussing on prices, it evades the more fundamental question of politics: why should a democratic government forcibly take land from farmers and give it to private companies? Since at least the English enclosures, governments have justified taking land from one group to give to another (usually wealthier) group with claims to be fulfilling a “public” or “national” purpose. In the last century, this has usually been done in the name of development. Most economists assume that any “higher value” land use than agriculture constitutes development and thus a public purpose. But what constitutes development, and whether that development is a “public purpose” worthy of dispossessing farmers, is not a technical or even a legal question, but a political one. And it is a political question that should be put in historical perspective.

During the post-Independence years, the Indian state mostly acquired land for public sector projects. Land acquisition for private companies was legal under LAA, but was limited in practice due to the existence of a development model in which the public sector built infrastructure and controlled the “commanding heights” of the economy. Most land acquisition was for public sector dams, mines, and industry. While tens of millions of people were dispossessed of their land for these projects, the Nehruvian state was fairly effective at convincing the public that these projects served the national interest in state-led development. Eventually, people began to point out that those dispossessed for this development received scandalously little compensation. And by the 1980s, groups like the Narmada Bachao Andolan began to pose the more fundamental question: development for whom?

Dispossession under neoliberalism

This question has only become more relevant since economic liberalisation prompted State governments to start acquiring land for private companies on a large scale. The reforms of the early 1990s gave greater importance to the private sector, which began demanding land not just for manufacturing (which remained fairly stagnant), but for real estate, mineral extraction, and all manner of infrastructure under PPP agreements. State governments, now competing with each other for this investment, began systematically acquiring land for private companies for almost any private purpose, whether elite housing colonies, hotels, private colleges, or Formula 1 race tracks. This new regime of dispossession reached scale in the mid-2000s with Special Economic Zones and the practice of urban development authorities simply auctioning off acquired land to private developers. Capturing the dispossession windfall itself became the purpose of land acquisition as State governments quietly morphed into land brokers for private capital. The flagrant injustices of this land brokering produced the “land wars” of the last 10 years, and generated the political pressure for LARR.

The question now facing India is about politics, not prices: should the government systematically redistribute land from farmers to private companies? Advocates of liberalisation say yes, ironically conceding that growth in a “free market” economy requires government expropriation of private property. They claim that this growth will trickle down to the poor, including those rural people asked to give their land for it. They are often not squeamish in admitting that democracy is an impediment to their model of economic growth. Many farmers, on the other hand, have voiced their scepticism, arguing not only that they are undercompensated but also that the profit of private companies is not a public purpose. They have expressed doubt that SEZs, hi-tech parks and real estate colonies represent “development” that will provide them with jobs or other benefits. And they have used the institutions of electoral democracy to challenge dispossession for these purposes. The land protests of the last decade, in short, represent a basic disagreement over the meaning of both development and democracy.

The current government has ambitious plans to push forward rapid growth through private investment in mega-projects such as industrial corridors, smart cities, and the like. The recent ordinance demonstrates that it is willing to subvert the democratic process to get the land for it. When more farmer protests erupt, what other threats to democracy are in store?