Land Acquisition: Big Hurdle for Indian Manufacturing

As Mamata Banerjee enters the 21st day of her fast over the ‘forcible acquisition of farmland’ in Singur for a Tata Motors factory, one pauses to reflect upon one of the biggest hurdles that faces heavy manufacturing in India – land acquisition. What started with Narmada Bachao Andolan is now reaching fever pitch. And it is going to get worse before it gets better.

India needs growth in manufacturing industries. Sustainable economic growth cannot be attained through just growth in the service industries. Also, growth in manufacturing will bring balance to the beneficiaries of economic growth that have thus far been urban areas and rich states. Industrial manufacturing and mining require large tracts of land. The acquisition of land in a country like India (unlike say Australia) where every piece of land supports someone’s livelihood, is fraught with problems.

Unfortunately these problems are the greatest where the factories are needed the most – in poor states like West Bengal and Orissa. The ones in the news are the Tata Motors project in Singur and the Posco project in Orissa. Orissa in fact has 45 projects signed up of which only the 15 smallest ones have been commissioned. The rest are being opposed by the locals.

The people being displaced do have cause for concern. The landowners are worried about whether they are getting a good price for their land which is typically decided by the government. It is not directly negotiated with the company setting up the project. The difficulty of one party, the company, dealing with hundreds of landowners, requires the government to step in and use its power of ‘eminent domain’ to acquire the land by paying a fair price.

However, in India, things are never this simple. The people who are hurt most by being displaced from the land are not landowners who tend to be better off economically. The sharecroppers, the agricultural labourers, and in forests, the tribals who subsist on the forest – these are the people who lose their livelihoods and get nothing from the exchange of the land. Nor do they have the education to benefit from the jobs created.

To include all stakeholders’ interests in the deal will increase the cost of the deal, and that may still be the right thing to do. But many other problems exist. How does one establish the classes of people who subsist on the land? The entire village’s economy in India is linked to agriculture in some way, directly or indirectly. Where do you draw the line? And then how does one establish which individuals belong in those classes? Public records in these matters are generally inadequate.

From the standpoint of the company setting up the plant, they are making a big investment. They would like to minimize costs and risks associated with commissioning the plant. The fact that commissioning a plant gets so politicized is a big risk factor. A state that does not handle the process well will lose the investment. Arcelor-Mittal has more or less scrapped its planned investment in Jharkhand because the land acquisition process was moving too slowly and is moving ahead in Orissa.

While there are complicated issues that need careful management by the state administration, left to themselves they could perhaps work out a solution that keeps everyone happy. However, what makes this an impossible task is the combination of sensationalist media coverage and shrewd politicians who feed off of that.

What is needed is a framework that governs land acquisition in the hinterland under eminent domain. This framework should ideally carry the approval of the Supreme Court. Precedence set by Supreme Court rulings in similar cases carries much more weight than legislative bills in India, and have a greater chance of actually getting done. If a smooth, predictable implementation of land acquisition can be achieved, companies may actually be happy to pay a higher price for the land which can benefit the stakeholders in the land. Time after all, is money. And nobody benefits from delays except the media and politicians.

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4 Responses to Land Acquisition: Big Hurdle for Indian Manufacturing

  1. Basab,

    The issue why industries go through the local governments for land acquisition is not just because they don’t want to deal with hundreds of land owners – it is also because apparently there is a law which prevents any one other than an “agriculturist” buying agricultural land – and only the Government can buy the land and designate it for other purposes.

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  2. Siddharth says:

    ‘Land Acquisition’ is a term unique to the Indian subcontinent. No where else in the developed world this makes any sense.

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  3. Harsha Gurumurthy says:

    Why do companies want to establish “land banks” – which by the way, is a term that the esteemed Infosys used? Why don’t they efficiently utilize the land by building higher just like companies elsewhere do? Why this megalomania? Why this indifference to the plight of the people losing their lands?

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  4. Girish says:

    Land acquisition is a big deal in Kerala now. The main reason is that most of the land is already occupied with houses and agriculture. If so, Indian Land Acquisition Act of 1894 has to be rewritten if the land is being proposed for private companies. If it’s for a company, then all landlords should agree on land acquisition as well as the price before they can allow the possession. Forceful evacuation of people for companies is against the natural rules. We have 10000s acres of unutilized land in the other part of the country and that has to be utilized first before taking living or agricultural lands.

    More than that, if the company did not start or bankrupted, then the banks or other private companies or mafias usually buy that land from the government which is another shit going on in our country.

    Indian has huge population and they all need a place to live. Let’s don’t change villages to industrial parks.

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