Delays and risks in land acquisition are the overwhelming retardants in infrastructural construction. The problems are widely believed to arise in politicking and poor governance, but it is important to understand the deeper reasons lying in the law and in the practice of acquisition.
The law is one-sided. It gives too much power to the executive of the day, continuing the imperial tradition of the British India government. Citizens cannot fundamentally question acquisition but only the compensation that they get. While the notion of eminent domain of the state would demand the right of the state to acquire land, such rights need to be enshrined in a process that is fair. An important element of fairness is that the law must upfront define the public purpose over which eminent domain can be exercised. Another is that the valuation of the land has to be done by an independent and fair body, not the government.
On both counts, the law is faulty. It is the collector who values the land, and the ‘public purpose’ is left open to enable the government of the day to use the law to acquire for such purposes as industry, housing estates, institutions and even private ashrams—none of which require specific land and, therefore, would not invite eminent domain in other countries. The answer is not to use the eminent domain for all needs.
A missing aspect is a framework for private and public acquisition of ‘non-public purpose’ land. Importantly, resorting to market prices, which itself is a change over completely arbitrary valuation it replaced only since 1984, results in under-valuation of a high order, especially in densely populated areas. This is inter alia because of taxes on land transactions, which can be as high as 15% of the transaction value.
Rational working of land markets presumes moderate transaction taxes. Elsewhere, the value can go up ex-acquisition because of infrastructure. So, the land-owner giving up land would always lose vis-a-vis his neighbour who does not have to give up land but can enjoy the positive spillover from infrastructure. Such is always the case when roads are made with local access that converts ribbon development to corridor development. This is the economics behind the political problem of the planned Mysore-Bangalore highway.
A correct structuring by allowing for transfer of development rights (TDRs) as offsets from those benefiting to those giving up land would be the answer. It would also overcome the problem of distortions in the land market and would allow for optimal planning of facilities.
The TDR could be made to work in the following manner. Imagine the owners around the planned road giving up their land. They could be asked to do so at the current market price plus a ticket, say, per 100 sq meters of land taken over. Such tickets would have to be imposed upon development taking place in the corridor that the road serves, say, over 3 km on either side or at specific access and exit points on the highway, or in particular small towns where development is likely.
Developers, in having to obtain the tickets, would buy them from those who are assigned the same, and a market in tickets can develop. The state can further the cause of infrastructure, by supporting the market price of such tickets, at a level that provides upfront confidence to those whose lands are taken over.
Typically, given that the economy is infrastructure-constrained, and the social value of roads and other land using projects is very high, the cost of such support would be practically nil in an ex-post realised sense. The current mode of land acquisition imposes huge inequities on those giving up land and hence invites their resistance. No major infrastructural upgrading is going to be possible in places like Kerala, and Dakshin Kannada with high densities without TDRs or other compensatory mechanisms, certainly not without hurting many landowners.