Draft law on land acquisition gives farmer 20% of rise in land value, may carry employment clause

NEW DELHI: Rocked by protests against states acquiring land across the country, the government is trying to rewrite the rules to give farmers who have lost their property a way to realise part of the appreciation in value of the farmland after it is bought and developed.

These rules could find their way into the new land acquisition law, which Finance Minister Pranab Mukherjee on Wednesday said would be tabled in the monsoon session of Parliament starting August 1. Farmers will get 20% of the appreciation in the value of land for up to 10 years after selling it, based on the price of transactions done subsequently. This proposal, which is included in the new draft of the land acquisition bill being deliberated by the ministry of rural development under Jairam Ramesh, has not gone down well with property developers.

“Sharing 20% of the appreciation in value will not work because even if one farmer is not satisfied, he can go to court and possibly stall the project,” said Anil Sharma, chairman and managing director, Amrapali Group, a property developer. State governments, most recently in Uttar Pradesh, have used ‘eminent domain’ powers vested in the current law to buy land cheap and then sell it to property developers at vastly inflated rates.

Law may carry employment clause

The new draft law will also suggest that people displaced by acquisition should be employed in projects coming up on their land. It will lay down that at least 80% of the people who stand to lose their land and livelihood must first agree to the acquisition, whether it is by the government or private entities.

Most of the contents of the new draft bill are in line with the recommendations of Sonia Gandhi-led National Advisory Council (NAC). The ministry is also likely to side with the NAC's suggestion that the government should continue to play a dominant role in land acquisition for all kinds of projects.

This is likely to face opposition from Mamata Banerjee-led Trinamool Congress government in Bengal, which insists the government should not buy any land for private sector projects, leaving private players to negotiate purchases on their own.

"Farmers or land owners should share the appreciation in land prices after development has taken place. We suggest 20% of the difference in value go to the land owner at the time of transaction," said an official in the department of land resources within the ministry of rural development.

After farm protests in Uttar Pradesh, courts have ruled that land acquired by the Mayawati government for industry had been illegally handed over to property developers and must be returned. This has put prospective home buyers, builders and the UP government in a fix.

An earlier draft, when Vilasrao Deshmukh was minister, had proposed that private developers share 80% of the profits from transaction of developed land with original landowners.

"Basing compensation on profits was not an effective step. Sharing 20% of the appreciation in land value is more appropriate as a measure for compensation," NAC member NC Saxena told ET.

Industry is not opposed to sharing the upside with original landholders, but is not sure this is the best way of doing it. "In principle, it makes sense to share the benefits of appreciation in land value after development with the farmer," said Chetan Bijesure, additional director, Ficci.

Independent analysts also feel the proposal might make the compensation process more complicated and lead to more clandestine transactions aiding growth in use of black money in the sector.

"It is a good move for the farmer but when multiple transactions will happen over 10 years, it will become difficult to track, collect and distribute the shares to farmers," said Saroj Jha, partner with Delhi-based law firm SRGR. "It may also lead to growth in black money transactions," added Jha.