A day after the UPA-II announced its decision to open up certain sectors to attract more foreign investment, multinational steel giants ArcelorMittal and POSCO pulled out two of the biggest projects in the country. While ArcelorMittal decided to withdraw FDI from a $12 billion project in Odisha, the Korean steel company pulled the plug on a $5.3 billion project in Karnataka.
At a time when the country is going through a dark economic phase, these withdrawals, though not wholly unexpected, have come as a rude awakening. Acquiring land for industrial purposes in India has proven to be a sore point for both the corporates and the political class. From Singur and Nandigram in West Bengal to the Lavasa project in Maharashtra, every mega land deal in the recent past has been scuttled because of some problem or the other. While at Singur it was a case of displaced farmers enraged at being forcibly evicted from their land, Nandigram became a scene of confrontation between the State and the tribals who felt that they were being robbed of their land and livelihood.
The latest pullouts have exposed a disturbing symptom of an economic plateau. At the same time, it has raised — once again — questions on what is clearly a flawed land acquisition policy. Should people be forced to give up their land only because it is resource-rich? Even if they do, who decides their future? What happens to their livelihood then?
The solutions lie somewhere in between, but the current discourse is given to extremes. It is a problem that requires an economic, political and environmental solution. With the increasing pace of liberalisation, the challenge before the government is to strike a balance between invigorating growth and sharing the fruits of development among its various stakeholders.
“Until and unless we have a sensible policy which shares the costs and benefits ‘equally’ among all the parties — from landless labourers to business houses — our development is going to be stalled and delayed,” says Bornali Bhandari of the National Council of Applied Economic Research.
One of the biggest demands of industry has been to redefine the law of the land with an assertive, but simple rule. Tata Steel calls for “simplification of the process of land acquisition, expediting the process of environmental and forest clearances and putting in place a mechanism for mining allocations and lend certainty to project execution”.
ArcelorMittal has cited land acquisition issues as the primary reason for pulling out their investment. The company’s statement says it “has not been able to acquire the requisite land for the steel plant, nor has it been able to ensure captive iron ore security, which is a necessary requirement for the project”. All the more reason to have a properly etched out law that defines the parameters of land acquisition.
In its present avatar, the Land Acquisition Bill allows the government to acquire large pieces of land at cheap prices if it believes it will be for the larger good of the country, create jobs and generate development. The new proposed Bill puts the onus on the corporations to buy land on their own and ensure rehabilitation. This has met with criticism from the industry, as corporations feel that acquiring disparate pieces of land from different landowners is not something they can do due to the absence of land records and scattered land holdings.
“In its present form, the Land Acquisition Bill will not solve a POSCO-type problem,” says FICCI President Naina Lal Kidwai. “There is a need to ensure that people who have lost out in the past are now properly compensated. But at the end of the day, if you are not going to have any industry, there will be no jobs, then that also won’t be right.” It is this problem that poses a dilemma: what is the alternative to acquiring land?
There are no easy answers. Subodh Bhargava of the Tata Group believes industry has no problem with harsh regulations as long as the government announces it in plain terms and then sticks by it. The new Land Bill attaches valuations to land acquisition but industry feels that could escalate costs of setting up projects. The Bill proposes the payment of compensation that is up to four times the market value in rural areas and two times the market value in urban areas, something that is not sitting well on the companies’ balance sheets in a cost-benefit analysis. Some even read a political will to overcompensate in this latest proposal.
“We are now tilting too much towards the landowners, perhaps making up for the excesses and unfairness of the past,” says economist Abheek Barua.
“The industry is in favour of fair compensation for landowners, but at the same time we need to ensure that land is available to industry at competitive rates, without delays and with certainty,” says FICCI President Kidwai.
What industry is looking for is “tangible norms”. According to Barua, it is “best to have everything built into the cost of acquisition”.
But, this is where the dilemma lies. Since the value of land multiplies once it is developed, the buyer can never factor in the cost of what a plot of land will eventually be valued at.
The Mahindra Group put an interesting formula to work in Jaipur. They acquired non-irrigated land with the consent of sellers and also gave them part of the developed land, which ensured that original landowners also benefited from the rising value of the land in the area. However, it is not easy to pull off in a mineral- rich area, where early land acquisition estimates remain quite skewed.
The problems primarily arise when it comes to rehabilitation of the displaced people. And this is where corporate India believes the onus must lie with the social sector and the government. “It is necessary but best to leave it to accredited NGOs and the government,” says Arun Nanda of the Mahindra Group.
But land, particularly rural land, isn’t used by its owners alone. Many others depend on this land for their livelihood. How corporate India can include them in the development process remains a grey area. Another key issue, points out social activist Harsh Mander, is “not about who implements the process but what resources and entitlements should be involved. That needs to be binding on both the private and the public sector”. The rehabilitation, even though executed by government agencies, must get its due entitlements from corporations that have acquired the land.
Something like the Mahindra experiment in Jaipur, only with a long-term and planned approach. So far, the State has been acquiring land in the name of public purpose and industrial growth, but we need to rethink development. Experts on the other side of the industrial fence argue that the kind of development the government is promoting caters only to the top 10 percent of the population.
“We have a growth model that is skewed in favour of the privileged,” says Mander. “About 2,000 people are leaving agriculture every day. A migrant in a city is made to feel unwelcome. We lack affordable housing. People have to keep badgering hostile fate.”
That brings us back to the importance of a fair law. Until that is in place and a transparent pitch is made to the industry, these nebulous zones of conflict promise to stay. All these issues are once again in the spotlight as India tries to open the FDI floodgates across several sectors. Just as PM Manmohan Singh and Finance Minister P Chidambaram woo investors abroad to fix India’s worrisome deficits, the exodus of big projects and long-term investments have come as an embarrassment. That the economy is at crossroads is now a reality. As is the fact that India also needs industry to grow.
What is needed is a balance in the form of a law that restores investor-confidence and yet keeps the locals’ interests in mind. Without that, we could be facing what Kidwai calls a “no industry, no jobs” situation. That cannot be good.