LAND acquisition has been much in the news for the last decade. First, there were the conflicts: in mining sites like Jagatsinghpur and Niyamgiri, then in Special Economic Zones like Nandigram and Maha Mumbai, later in various locations, from car factories like Singur to highways like the Yamuna Expressway. Next, there was the putative resolution to the conflicts – the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (henceforth LARR) – designed by the Congress-led UPA. Most recently, there was the ordinance and proposed amendment to the LARR by the BJP-led NDA. As I write this, the BJP has backed off its amendment because, after a string of electoral defeats over a year, the Congress finally (re)discovered and effectively mobilized on a galvanizing issue: land.

It would be a mistake, however, to view this intense politicking over land acquisition law through the narrow time frame of the immediate present. Land is arguably the most important subject in modern Indian history. Capturing land first, then its use and value from it, has arguably been the most important exercise of state authority in all of recorded Indian history. What is unfolding now is but the latest chapter of a living epic. In this essay, I take the long view on land and the structural forces that stimulate the struggles over it, so as to better understand precisely what is at stake right now.

The state is the most important institution on issues relating to land. It has three broad powers. On land ownership (or what ownership means, who can own what and how much, how to change ownership from one entity to another); On the division of land output (between the producer of the output and the state; i.e., the rate of taxation); On land use (or the activity – such as agriculture, industry, infrastructure, housing – that takes place on a given parcel). In India, the state has usually been defined by its rules on land. To put this in another way: what the Indian state did with land identified its true purpose. I submit that the colonial state was an ‘expropriating state’; for about the first five decades after independence the state was a ‘developmental state’; and for the last two decades it has been a ‘rent-seeking state’. The remainder of this essay explains these categories and their consequences.

In this, the 800th anniversary of the Magna Carta, we are reminded that the document marked an important point in a long process of negotiation of powers between the individual and the state on land rights. This process was not linear in time, nor concurrent in space. At one extreme there are no individual rights, but only limited collective rights (such as in many ancien régimes, leading up to collectivist modern states like the Soviet Union and China). At the other extreme are the contemporary liberal democracies of the developed world, in which the protection of private property – mainly land – from state authority is the foundational principle of the rule of law. Here, there are land markets that operate under state regulations (like zoning), which are justified by a public good or ‘externality’ argument. The same set of arguments is used to create ‘eminent domain’ or ‘taking’ laws; i.e., the conditions under which the state can force an unwilling owner to sell his land.

 

The terms that frame this discourse – individual and collective rights, rule of law, land market, private property, public goods, eminent domain, and so on – were introduced in India by the colonizers, whose ideas may have been lofty but actions far less so. Their actions revealed their true purpose, and, until about 125 years ago, that purpose was to maximize land revenue. All rules, on land and otherwise, were geared toward that goal. This is a simple point, but very important. The pre-colonial states – the Mughals in the north and east, the Marathas in the west, smaller kingdoms in the south – expropriated 50-75 per cent of the peasant’s output. Extracting land revenue was the primary task of pre-modern bureaucracies. The colonial state continued, in the early decades, similar taxation methods and rates as the pre-colonial states. In fact, till the late 19th century, the primary objective of the colonial state was to extract land revenue; everything else was secondary.

Over time, with the rise of the trading economy, the significance of land revenue declined. It provided 60 per cent of all revenues in 1840, but less than a quarter in 1920. The land tax burden on the producer also fell – from a revenue rate of 90 per cent of rent in the early years of the Permanent Settlement to less than 20 per cent by 1920. At the same time, since the British were ‘men of law’, a legal framework was gradually created to ‘take’ land for new uses (transportation, mining, urbanization, public works, etc.). Its culmination was the now notorious Land Acquisition Act of 1894.

 

Land was a subject of overriding importance in the independent Indian state, but the issues were diametrically opposed. On one hand were the problems created by the colonial state – primarily feudalism and usurious credit systems – tackled by the first, fourth, and seventeenth amendments to the Constitution. On the other were the massive new land needs to modernize and industrialize as rapidly as possible. As a result emerged what I have called the ‘lena-dena sarkar’, or ‘sarkar mai baap’, the Janus- or Agni-like entity that ‘gave’ or redistributed land with one hand and ‘took’ or acquired land with the other.

Consider the positives first. One significant difference from the past was that agricultural output was no longer taxed for revenue (breaking a system as old as recorded Indian society). The zamindari system was abolished and the village moneylender was severely curtailed. Some land redistribution took place; around six per cent of agricultural land changed hands. Some of this came about because of tenancy reform, and a little from new laws on landholding ceilings. Much of the redistribution, perhaps around 40 per cent of the national total, took place under leftist governments in Kerala and West Bengal. Adivasi lands, forest lands, and community lands were protected by restricting sales to outsiders.

The land market changed in fundamental ways because of the new laws and policies; and because land is a state subject, different land laws and markets eventually emerged in India’s states. In general, however, these laws had regressive or unintended effects: making land transactions difficult and opaque, unleashing litigation and fraud and land fragmentation, allowing landowners to push tenants around, while very little actual redistribution took place.

 

If the ‘giving’ was tepid – and its effects, scholars now conclude, were negative on growth and inequality – the ‘taking’ was staggering. It is doubtful that land acquisition on such scale had been done anywhere in the 20th century other than in revolutionary communist states that abolished private property rights in land. On this newly acquired land were installed numerous dam and irrigation systems (like Bhakra Nangal and DVC, extending to more than 5,000 medium and large dams), industrial townships (like Durgapur, Rourkela, and Bhilai), mines (for coal, iron ore, bauxite, etc.), and new and expanded roads, highways, train lines, airports, and so on. The economic geography of contemporary India was created by the acquisitions of the developmental state.

We do not have any account by the state of how much land was taken by it, or from whom, or where. This is my summary from the work done by a dedicated and independent research community: 50 million people were displaced, 50 million acres were taken or converted. Somewhere around 10 per cent of the nation’s usable land was acquired or, in the case of common property resources, converted. Ninety per cent plus were displaced by the state, for the state; less than 10 per cent was for the private sector. This was because the really large categories of displacement-impact were all entirely in the domain of the state – water (meaning dam and irrigation projects) created close to two-fifth of the displacement, transportation created close to one-sixth, welfare and administration close to one-seventh, and environment close to one-tenth.

The most marginalized were the worst affected: A disproportionate burden of the displacement impact fell on India’s Adivasi population; also disproportionately burdened, but possibly not as heavily, were Dalits (who lost livelihoods more than land, which they did not possess). Abysmal compensation, absent rehabilitation: Most land-owners were paid little – for instance, Rs 50 to 200 per acre for the Hirakud dam project commissioned in 1957 in Odisha; as little as Rs 10,000 per acre in the 1980s and Rs 50,000 per acre into the early 2000s. Many were never paid. Livelihood losers were, as a matter of course, paid nothing; neither were losers of common property resources. A significant majority of the affected population was never resettled nor provided alternative livelihoods.

 

Therefore, independent Indian state’s policies on land were fundamentally contradictory. It gave (or redistributed) land with one hand, and took (or acquired) land with the other. It took more than it gave, and the giving stopped long ago, whereas the taking intensified in recent years. Just as important, the populations that got the development benefits of the land takings were very different from the populations whose lands were taken. These marginalized and other land- and livelihood-losing communities frequently faced wipeouts. Their losses effectively subsidized India’s development or, to be more accurate, its winners – that is, the populations that got bijli, sadak, pani, naukri. This regressive redistribution system lasted well into the 2000s. Not a single political party was against it, very likely because the direct winners of this system far outnumbered and were more powerful than the direct losers.

 

The developmental system began facing some resistance from civil society groups from the mid-1980s (initially isolated, and later, after the Narmada Bachao Andolan, in a more organized and widespread form), and reached a breaking point around 2007, partly as a result of the SEZ Act of 2005 and partly as a result of several high profile, violent cases. The LARR was created to replace the dying acquisition system of the developmental state. It has five important elements:

(i) Increased compensation for farmers – market prices are doubled in urban and quadrupled in rural areas. (ii) Expanded coverage of compensation – non-owners facing livelihood loss are compensated. (iii) Rehabilitation and resettlement of people evicted from their lands is made compulsory. (iv) Taking informed consent of land-losers – using referendums, but only when the acquisition has any private sector involvement. (v) Social impact assessments to determine a project’s impact on people’s lands and livelihoods; more specifically, to identify all affected persons. The first three elements contribute to the direct price of acquisition (which are also the direct benefits for land and livelihood losers); the latter two elements contribute to the indirect price (transaction and opportunity costs).

I have written extensively about the direct cost impacts of this law. They are so large, I have argued, that where land is needed most, that is, where land use is most likely to change – in peri-urban India – this law will simply end acquisition. Most acquisitions – for public and private use – will no longer be affordable. Not all of this increase will come from the new law. A significant proportion will come from the very large increase in the price of land in all urban and many rural areas.

 

This is very important. The price of land in India has exploded in the last decade (for reasons that cannot be detailed here because of space limitations). It is now very likely the highest in the world. The available evidence suggests that the current market price of remote, low-productivity rural land is not less than Rs 5 lakh per acre anywhere in the country; less remote and more productive land is broadly priced in the range of Rs 10-25 lakh per acre; well-connected land (whether it is productive or not) now costs Rs 1 crore per acre in states like Punjab and Haryana. At the urban fringe – where buildings end and fields begin – these prices are upwards of Rs 10 crore per acre around Mumbai and Delhi and no less than two crore per acre near any significant city.

To put these prices in context: the average price of farmland in the U.S. is Rs 1.5 lakh per acre. The lowest prices (less than Rs 0.5 lakh per acre) are in barren states like New Mexico, and the highest (Rs 7 lakh per acre) is in the urbanized state of New Jersey (sandwiched between New York City and Philadelphia). Therefore, the price of farmland in India is completely unconnected from agricultural productivity; it is 5-100 times larger. As a result, the LARR will make direct payments that are 20-400 times larger than the earnings that would be possible by keeping the land in agriculture in perpetuity.

Consider Singur, where the West Bengal government acquired about 1,000 acres of land for Tata Motors to build its Nano factory in 2006. It was a giveaway to Tata, but let us look beyond that. The state government paid about Rs 10 lakh per acre, which was Rs 2 to 3 lakh less than the market price for a portion of the land. Mamata Banerjee used this as a wedge to drive Tata out to Sanand in Gujarat (and later the CPM from Bengal). In Sanand, the state led by Narendra Modi provided a package of government owned and acquired land (at around Rs 50 lakh per acre). Today, Sanand is an emerging automobile hub and Singur a desolate landscape of desperate farmers.

 

If the same Singur acquisition is attempted with LARR rules now, the landowners will be paid in excess of Rs 50 lakh per acre. The additional costs for landless workers and resettlement and rehabilitation will total another Rs 35 lakh per acre. Added to this Rs 85 lakh per acre (50+ times the price in the U.S.) will be the cost of waiting for 4 to 5 years to complete the acquisition process. Will the Singur landowners reject this windfall? It seems irrational and unlikely, but what if they do? What will a project promoter do when it fails to get the land even after 4 to 5 years? What will be the cost of waiting, and who will pay?

These are the questions that surely drove the BJP’s aborted amendment to LARR. Their amendment removed the ‘informed consent’ and ‘social impact assessment’ requirements for a range of projects, including those relating to defence and national security, rural infrastructure, affordable housing, industrial corridors, and infrastructure (where government retains landownership). These changes would probably have reduced the acquisition time for these project types by several years and thereby significantly lowered the indirect costs of acquisition.

It is likely that the BJP took this approach in the belief that landowners would not refuse their windfalls, especially in peri-urban regions, which is where most future acquisition will take place. Therefore, they implicitly argued against raising the opportunity cost for everyone by making private promoters wait. They must have been aware, as must other political parties, of the condition of Indian agriculture revealed again in the NSSO’s 70th round on agriculture (covering 2012-3): that average monthly income (from farm and non-farm activities combined) for farming households was less than Rs 6,500; that over 75 per cent of farming households earned even less than this average; that in states like Bihar and West Bengal this average was below Rs 4,000. These findings were confirmed in the just released Socio Economic and Caste Census of 2011: in almost 75 per cent of rural households, the monthly income of the highest earning member was less than Rs 5,000; this condition existed for over 83 and 86 per cent of Dalit and Adivasi households respectively. 30 per cent of rural households were landless; they and another 20 per cent of rural households derived their primary income from manual casual labour.

 

We know this already, but need to be reminded: Farming doesn’t pay, mainly because there is too little land per household (less than 3 acres average in India vs. hundreds in Europe and the Americas). It is the root cause of poverty in India. Therefore, if farmers do refuse payouts that are dozens to hundreds of times more than they earn from farming – as the opposition argues they would or could – one has to conclude that there are significant information asymmetries at work: farmers are not well informed about what they stand to gain; or they are fearful of their inability to handle so much money (and so much change, especially inter-generational change); or they are afraid that middlemen – politicians and their agents – will make the real gains.

 

This fear of the middleman is well justified. Indian politics today is a rent-seeking system where the biggest source of rent is land. At the ground level, the political system is choked with ‘leaders’ whose special skill is to extract value from land – typically through insider information and muscle power when the use changes from agriculture to something else. The rise of what has been called the ‘real estate politician’ is visible everywhere – from state assemblies to the Lok Sabha. Real estate is the name of the game in every city and almost every district, as land has more than quintupled in value in the last decade. It is India’s most scarce resource – ‘they ain’t making any more of the stuff’ – and its brokers are the arbiters of local power.

It is necessary to understand, however, that the nature of the political rent is dependent on scale. At the local scale – the domain of the small actor like Robert Vadra or Nitin Gadkari (when he was just a Maharashtra politician) – the rent is money and is derived from the land itself. At the regional or national scale, however, land is the source of another kind of rent – of political significance, the kind sought by Mamata ‘Ma, Mati, Manush’ Banerjee and Rahul ‘Sipahi for the Dongria Kondh’ Gandhi and Narendra ‘Vikas Purush’ Modi.

This is why, after six decades of indifference from all political parties, land acquisition has become the ‘biggest problem’ in Indian development. The core reason, I argue, is the rise of political competition and ‘wedge-issue’ politics. In general, the higher the level of political competition or political fragmentation, the more likely is the use of wedge issue political strategies that ostensibly favour only minorities. In the last decade, resistance to land acquisition became a viable political option for all political parties, especially those attempting to make a mark in spaces dominated by other parties, and created a condition that seems counter-intuitive – political agitations that favour the rights of groups too small to win elections.

Therefore, Mamata Banerjee promises that nothing will change on anyone’s land, and the farmer is safe with her. Rahul Gandhi promises that he will give the poor farmer and the Adivasi a voice, and therefore, justice. Narendra Modi promises the peri-urban farmer a lot of money, very quickly, and development, so that he can become part of the new glittering India. At the heart of all of their narratives of leadership is a relationship to the ‘Indian farmer’. And the way to the farmer’s heart is through his land. Therefore, land law has become a tool to extract the greatest rent of all – great power; whereas the land market has become the principal device to extract local rents – money and power in a pas de deux of corruption.

 

One result is the absurd debate on ‘consent’ in land acquisition: Narendra Modi will eliminate it, we are told, but Rahul Gandhi created and will retain it. Why is it absurd? Because the ‘consent’ clause in LARR does not apply to the public sector, which used over 90 per cent of acquired land in the past, and will likely use a smaller portion but still a vast majority of the acquired land in the future. It is almost a meaningless clause, and the fight over it is simply hypocritical.

Another result is the myth that all agricultural land is the same, and therefore a single, national law is appropriate everywhere. The fact is, even at independence there was so much land variation in the country that land was made a state subject. In the seven decades since, that variation has increased substantially. Agricultural receipts per household are tenfold higher from the most to the least productive state; average landholding size is twentyfold higher from the most abundant to the most constrained state; and the price of agricultural land possibly ranges between Rs 5 lakh and 10 crore per acre, a 200-fold difference.

 

A fundamental reason for the absurdities and myths to persist is the lack of information on land. That is what led to the bad law of LARR, and the BJP’s bad amendment. Neither is bad in toto, but relevant only to limited parts of the country – the Congress version in deep rural regions, the BJP version in peri-urban India. Therefore, whatever law finally emerges – though the BJP amendment has failed, we have not heard the last of it – it will not last five years; another law will be needed. That law should be based on good information: on ‘nominal’ land prices, the identities of the buyers and sellers and affected parcels, and the details of every acquisition (specific location and specific compensation). It is necessary to collect and disseminate this information widely: on-line, in every tehsildar’s office, and copies sent to panchayats and gram sabhas. Good information should begin to blow the lid off the septic tank of local corruption and land mafias and, one can only hope, the myths propagated by ‘big leaders’ burnishing their brands.

India has to urbanize. Some land use has to change. It is essential to have a good law to enable this critical and inevitable rural-urban transition. That good law is one that will deliver land for growth, justice for the displaced, and just as important, rein in the ever-enlarging rent-seeking state.

 

* Some of the ideas and data in this essay originally appeared in my book, The Price of Land: Acquisition, Conflict, Consequence. Oxford University Press, Delhi, 2013.