Of public purpose and private profit


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LAND in a single piece, capable of being fenced off so that it can be treated as a ‘foreign territory’, is the fundamental precondition of the ‘Special Economic Zone’. The SEZ policy (currently) calls for very large parcels of land, with a minimum area of 10 sq km and extending up to 50 sq km for the so called multi-product zones. It is to acquire such large tracts of land that private industry, of necessity, needs the help of the state. State governments, vying with one another to attract large business houses, are more than willing to oblige.

Coercive land acquisition by the state in recent times has generated strong opposition and extreme bitterness. In Nandigram, people have fought at great personal cost to retain their lands and homes. In Maharashtra, farmers have stalled (at least temporarily) land acquisition for the Maha-Mumbai and Navi Mumbai SEZs; in Orissa, villagers continue to offer unyielding resistance to the POSCO SEZ.

Sensing the widespread nature of the opposition and keen to move ahead with its SEZ policy, the government has proposed major amendments to the acquisition framework with the Land Acquisition (Amendment) Bill, 2007 and the companion Rehabilitation and Resettlement Bill, 2007 both tabled in Parliament this December. The government claims that the new laws ‘will go a long way in striking a balance between the need for land for development and other public purposes and protecting the interests of the persons whose lands are statutorily acquired.’1

The land acquisition framework in India is over a hundred years old. To appreciate the problems inherent in it and to be able to evaluate the governments claims, it is necessary to recapture the colonial compulsions that went into its construction and the experience of its use in 59 years of the republic.

The principle of eminent domain – that all land within its territory ultimately belongs to the state – was used by the British colonial state in the 19th century to progressively claim as state property all land without identified private ownership. The colonial administration itself assigned private ownership titles in cultivated land through elaborate survey and settlement operations. The land claimed by the state included ‘waste’ lands – village commons that were not cultivated and other uncultivated or uncultivable land farther from the villages – as well as all the forests.

The same principle was invoked to justify the right of the state to expropriate land, even if it was in private ownership, when it was needed for some ‘larger public good’. Early regulations on land acquisition were made by the East India Company to acquire land for roads, canals and other public works. With the establishment of the railway networks, railways were also declared to be public works.

In 1870, the colonial lawmakers took steps to prettify the law. What was earlier called the ‘Indian Expropriation Act’ was renamed the ‘Land Acquisition Act’. The procedure for acquiring land and steps for determining monetary compensation were described. The judiciary was accorded the role of arbitrator in case of dispute over the compensation. The law continued to be fine-tuned and took the consolidated form of the Land Acquisition Act, 1894.


What were the considerations of the colonial legislators while framing the law to make it more acceptable?2 Firstly, the law had to be seen as moral. Privately held land could be expropriated by the state, but only to serve some ‘public purpose’, for performing some public good or for satisfying a public need. However, what constituted ‘public purpose’ was not defined in the law, but left as a prerogative of the government to decide. The acquisition itself could not be questioned as the state was exercising its right of eminent domain.

Secondly, the acquisition had to follow due process. The process provided opportunity to people to prove their interest in a specific acquisition, to appeal against the acquisition with the administration and to seek court arbitration if they were dissatisfied with the compensation.

Thirdly, the forcible acquisition had to be seen as a sale, with all persons with rights in the acquired property seen to be fairly compensated. The monetary compensation was determined on the ‘market value’ of the property. An additional monetary compensation was offered to compensate for the involuntary nature of the transaction and the hardship imposed.

The colonial legislators were very clear that only the loss of individual property rights was to be compensated. Rights of people dependent on, but not owning, acquired land were outside the consideration of the law.

After the end of colonial rule, the republican Constitution of India, by article 372, allowed all colonial laws to remain in force until they were repealed by Parliament. The Land Acquisition Act of 1894, in an essentially unchanged form, continues to be used by the state, with unfailing regularity for the innumerable land requirements of the state, public sector enterprise and private enterprise. The practice of the last 60 years has thrown up many issues with the legislation that have a severe negative impact on the life of the people affected by an acquisition and these are discussed below.


In the early years of the republic, the Law Commission set up by the Government of India was asked to review the land acquisition act. The commission reported that a large number of suggestions were received urging that the term ‘public purpose’ be clearly and exhaustively defined by the act. It however, argued in its 10th report in 1958 that it was ‘neither possible nor expedient to attempt an exhaustive definition of public purposes’ and further that all that could be attempted in the law was ‘to provide an inclusive definition so as to endow it with sufficient elasticity to enable the courts to interpret the meaning of the expression ‘public purpose’ according to the needs of the situation.’3

The definition of the term ‘public purpose’ was kept sufficiently elastic in all subsequent amendments of the law.


The Nehru government not only saw large-scale state land acquisition for public infrastructure and public sector industry but also acquisition for private industry. The law allowed acquisition for private companies only if they met certain restrictive conditions. In a specific case of land acquisition for a textile manufacturing company, the Supreme Court ruled (R.L. Arora vs State of U.P., 1962)4 that the acquisition did not meet the provisions of the law. Justifying its ruling, it stated that ‘it could not be the intention of the legislature that the government should be made a general agent for companies to acquire lands for them in order that the owners of companies may be able to carry on their activities for private profit.’

The government responded by amending the law in 1962 to relax the conditions and allow land to be acquired for a private company ‘which is engaged or is taking steps for engaging itself in any industry or work for a public purpose.’5 Once again, the elasticity of the term ‘public purpose’ was used to enlarge the powers of government to acquire land for private enterprises.

Over the years, the courts held land acquisition by the state for a variety of projects of private enterprise for diverse purposes – construction of a students home, houses for members of a cooperative society, manufacture of alumina bricks, an electrochemical factory, a sugar factory, etc – to promote ‘public purpose’.6 It became clear that government’s declaration of ‘public purpose’ could not really be challenged.

The unbridled power for coercive acquisition available with governments has been used to support the development model that is in fashion at a certain point in time. In recent years this has meant, increasingly, acquisition of land for large corporations, like for a Tata Motors plant in Singur, and a 100 sq km extant Reliance SEZ in Haryana. Questions are now being commonly asked as to how the government can justify land acquisition for extremely profitable large corporations as a ‘public purpose’ and why the government has to become a land-acquiring agent for these corporations.

Clearly, there is a strong case for the law to be reformed to limit the powers of government under eminent domain by clearly defining the ‘public purpose’ for which it can resort to coercive acquisition.


The acquisition process continues to follow the methods developed by an authoritarian colonial administration, bringing years of uncertainty and fear into the lives of those affected. Once the state decides to acquire land, it tends to avoids development work in that area. Getting the best compensation possible often involves going to the courts; only those with the ability to understand the nuances of the law, engage lawyers and work the system are able to get the benefits while others, usually the poor and uneducated, are shortchanged.

The monetary compensation offered to landowning farmers is also a major cause of dissatisfaction. The compensation is linked to ‘market value’ as determined by recent, recorded transactions in land, though it is common knowledge that these are always undervalued. Land prices also shoot up after permitted land use in an area is changed by the government from agricultural to industrial or residential. The original owners however are denied the benefit of the revaluation of land.


The typical Indian village consists of many categories of persons other than landowning peasants and tenant farmers – agricultural labourers, artisans and others servicing the farmers’ needs. They are not entitled by the law to any compensation, though their livelihoods may be affected by acquisition. When land acquisition covers common property resources of villages such as village grazing lands and village forests, the loss of use rights is not compensated; the people most affected are the poorest who depend on these for their livelihood needs. The same is true of tribal and forest communities, their rights over land not being recognized in the absence of paper documents.

Large scale acquisition, such as for dams and large SEZs, often includes homestead land and causes physical displacement of the population of entire villages in addition to the loss of land and livelihood. The colonial acquisition law does not engage itself with issues such as resettlement or rehabilitation of the displaced.

In the past, even while displacement on an enormous scale occurred due to large infrastructure projects of the state, resettlement was left to the mercy of the administrators of the very projects responsible for the displacement. The first draft of a national rehabilitation policy appeared only in 1993, timed with the adoption of the new economic policy, and, since then, has been reformulated several times. However, the experience over the years has shown that existence of a policy is no guarantee that actual rehabilitation will occur on the ground. The people displaced by the Sardar Sarovar dam on the Narmada, among many others, stand testimony to the low importance attached to policy.

There is then a need for the law to be reformed to ensure that when powers of eminent domain are exercised, it looks at the entirety of loss of rights of all the affected people, not just of those owning or occupying property. Further, the loss of rights because of an acquisition needs to be compensated by the granting of new rights through resettlement and rehabilitation, not just by monetary compensation.


How does the new framework proposed by the government treat the issue of ‘public purpose’ and acquisition for private companies, an issue central to the current controversy?7, 8

An amendment to the acquisition law makes it explicit that requirements of a private company for land for a ‘purpose useful to the general public’, can be considered a ‘public purpose’ (with the limitation that government will acquire a maximum of 30% of the land needed). The phrase ‘purpose useful to the general public’ has sufficient elasticity to encompass almost any land use. This change makes it easier for government to acquire land for companies without fear of legal challenge – the government certifies the total land requirement, declares its purpose to be ‘useful to the public’ and uses its rights of eminent domain.


Further, contrary to claims, the government does not limit its powers to acquire land for companies with this amendment. An inclusive definition of ‘public purpose’ (with differently worded inclusions) has been retained in the law, where an exhaustive and limiting definition was called for. The door is left open for the government to acquire any extent of land for any purpose it sees fit, if past experience is reckoned.

The new framework gives little away on compensation issues. It recognizes that land value increases with change of land use after acquisition, but leaves it to the collector to ‘take into account’ such change while determining the compensation. Thus it is a government decision as to what part of the likely increase in value on change of land use after acquisition is to be passed on to the landowner.

Finally, how does the new framework fare on recognizing rights of people affected by an acquisition and making good the loss of rights?

The distinction between property rights on the one hand and other rights – such as the right to livelihood – on the other, is clearly made. The loss of property rights is addressed by the land acquisition law, while the loss of other rights is sought to be addressed by the resettlement and rehabilitation policy, now presented in the form of a law.

The benefits promised by the Resettlement and Rehabilitation Law come with strong conditionality. Most benefits are not available to non-property owners – such as agricultural workers, artisans etc – who are usually the poorest sections, unless a large number of families are simultaneously affected by an acquisition.

Land and employment are both offered only if available. People cannot seek redress with the judiciary but can only appeal to levels of the special resettlement and rehabilitation bureaucracy. Thus government can forcibly acquire land but cannot be held accountable to provide other land as a replacement; government can render a person unemployed but cannot be held accountable to provide alternate employment.


The proposed amendments to the land acquisition law appear to be a hasty effort by the government to sidestep the issues and allow it to proceed with its plans for setting up giant SEZs. The law does not limit the powers of government to acquire land for what can be seen to be purposes of private profit. The law does not guarantee that all those who lose their dwellings and livelihood due to such acquisition will be compensated with alternate dwellings and livelihoods. It remains to be seen if this will be acceptable to the people targeted for displacement.



1. From the statement of Objects and Reasons provided with The Land Acquisition (Amendment) Bill, 2007. Available at the URL: http://www.prsindia.org/docs/bills/1197003951/1197003952_Land_20Acq.pdf

2. The following discussion on the notions of ‘morality’, ‘fair play’, etc in colonial law draws on the paper by Ramanathan (1996).

3. Law Commission of India, 10th report, p. 18. Available at the URL: http://lawcommissionofindia.nic.in/1-50/Report10.pdf

4. R.L. Arora vs State of U.P., AIR 1962 SC 764.

5. See Sec. 40 (1) (aa) of the Land Acquisition Act.

6. P.K. Sarkar, Law of Acquisition of Land in India, 2nd edition, Eastern Law House, New Delhi, 2007, pp. 1184-1188.

7. The Land Acquisition (Amendment) Bill, 2007. Available at the URL:http://www. prsindia.org/docs/bills/1197003951/1197003952_Land_20Acq.pdf

8. The Resettlement and Rehabilitation Bill, 2007. Available at the URL: http://www.prsindia.org/docs/bills/1197003987/1197003987_Rehab_20and_20settlement.pdf



Usha Ramanathan, ‘Displacement and the Law’, Economic and Political Weekly, Vol 31, 1996.

Ravi Hemadri, Harsh Mander and Vijay Nagraj, ‘Dams, Displacement, Policy and Law in India’, contributing paper to the World Commission on Dams, 1999. Available at the URL: http://www.dams.org/docs/kbase/contrib/soc213.pdf