Land Acquisition: Little Respect for Property Rights

The changes proposed by the NDA government to the Land Acquisition Act brought by the UPA government does not ensure an individual’s right, which we libertarians strive for

It is not often that proponents of liberty find themselves on the same side of the line with West Bengal Chief Minister and Trinamool Congress head Mamata Banerjee, but stranger alliances have occurred in politics. The ordinance recently promulgated by the BJP government to modify the Land Acquistion Act is one such circumstance. The Ordinance is biased against private land owners and in favour of state action to seize private land, with or without adequate consent and compensation, when deemed suitable by the government of the day.

Indians have long lost the fundamental right to property, but this Ordinance continues to empowers rapacious state action sanctioned by previous Land Acquisition laws. The authors of this article have for years worked towards sensitising the people to the need for individual liberty through the Freedom Team of India’s Sone ki Chidiya agenda, which proposes a land acquisition policy that is consistent with liberty and property rights.

Background – Indian context

The right to property is as fundamental as the right to one’s life and liberty and, indeed, is the basis of the formation of a modern nation state. Without a right to one’s property, there can be no civilised society or the rule of law. Instead, the law of the jungle would prevail, and the weak would be at the mercy of the mighty.

A citizen of a state committed to the rule of law has the unalloyed and sole rights to the benefits accruing from his or her own labour. Neither any other person nor the state has the right to infringe upon this benefit or abrogate this right. (Taxation by the state does infringe upon this right, but that is part of a social contract, a quid pro quo for the primary functions that a state is supposed to undertake. Let’s keep taxation out of the purview of this discussion for now.)

The Constitution of India, when it came into force in 1950, gave Indian citizens an unfettered and absolute right to property. This fundamental right was held equally important as the right to life and liberty, the right to practice one’s religion and the right to practice any vocation. The right was abrogated from almost the very beginning under first Prime Minister Jawaharlal Nehru’s time, with land ceiling laws sheltered under Schedule 9. Things worsened in the 1970s when Indira Gandhi nationalised the private banking system that existed in the country. Finally, the Janata Party abolished the right to property through the 44^th Constitutional amendment of 1978.

The result of this usurpation of private property rights is that the state now acts as a middleman for connected private interests, acquiring private property on their behalf, consolidating these acquired properties and then turning them over to the former for ‘development’ purposes.

This abuse of state power touched its nadir in the period of 2002-2012, in sync with the boom in commodities prices and the economic drive to extract as much mineral resources as possible. This misuse of state power created reactions: local revolts and protests. Inadequate compensation levels and poor rehabilitation programs added to the discontent and protests.

In response, the UPA government passed the Land Acquisition, Resettlement and Compensation Act, 2013, to regulate the behaviour of the state when acquiring private property and to ensure that consent was taken from the private owners for such acquisition and that a proper pricing mechanism was established for compensation.

Significant parts of this Act has now been overturned by the recent Ordinance by expanding the scope of acquisition where compulsory consent will not be required — this includes defence, rural electrification, industrial corridors and housing for the poor. Effectively, these sectors can be so designated as to include any potential new acquisition of private property.

The classical liberals, who have proposed a draft Sone ki Chidiya Agenda, offer India the following principles:

“Land to be acquired only under extremely limited circumstances

“Eminent domain gives the state the coercive right to abrogate or seize private property. This was intended originally for use in rare cases, mainly land required for public infrastructure. However, as a result of the abolition of the fundamental right to property, we have seen this extended to private property. Strong property rights necessarily reduce the scope of eminent domain.

“We will enact laws to drastically limit land acquisition by government to matters that clearly affect the wider community (such as public infrastructure or defence). Land in such cases should, in the first instance, be acquired through voluntary consent by offering prices higher than the market. Options should be available to the poor whose land is being acquired to receive annuities instead of a lump-sum. Where the public interest involved is not wide-ranging, however, local governments will be required to verify the nature of the public interest through public consultation, including possibly through a local referendum.

“The current method to determine compensation (‘amount’), being based necessarily on figures derived from nearby registered sales, is flawed since sale prices are under-reported. We will consider innovative ways of proper valuation by applying the latest experimental economics literature and economic modelling. Sharing of benefits of infrastructure could also be considered as part of the valuation. For example, if a net present value of Rs.100 is created from the infrastructure, then up to Rs.50 should be available for sharing with those whose land is being acquired, either as a one-off payment or as a long-term annuity.”

Federal character of India must be respected

Land revenues are a state (as in regional) right and land records are meant to be managed by the state, devolved to its lowest administrative unit. However, land records are a mess in most parts of India, with no clear title and no clear geographical identifiers available for most private property outside of urban areas. Even in urban areas, there are significant conflicts relating to ownership rights/tenancy rights in multiple areas.

A Central Act, as proposed above, would set the bare bones expectation of what is expected when the State acquires private property, how consent is to be sought and compensation to be derived. Thereafter, each region can use this structure to set up its own zoning laws, development guidelines and a regional property acquisition law.

We propose a radical reform to the property rights management system at the State level:

“Our great failure is the absence of a well-thought out property rights system. A sound system will include numerous components, with five most important being:

1. independent record-keeper of ownership of land;

2. independent collector of stamp duty;

3. independent valuer of all lands;

4. independent private real estate agents whose licence is conditional on ensuring integrity and probity; and

1. market-based salaries (and contractual accountability) of all government functionaries”

Such systems are operational across the world where the idea of non-disclosure of true value is almost non-existent.

Independent record-keeper of ownership of land

“Adequate efforts have not been made by successive State governments in India to update land records. Further, land revenue has fallen away into insignificance, so the system is not even cost-recovered, which adds to its neglect and creates incentives and opportunities for corruption (people are known to pay bribes to get their land revenue receipts).

“A key problem is the identification of land. Cadastral surveys, that identify the location, coordinates, owners and other details of land, are based on traverses starting and closing from a village tri junction. However, this system is not linked to any national reference system. Land parcels therefore cannot be located easily on the earth’s surface, leading to encroachments and litigation, and enormous suffering to land owners. Land disputes languish in courts for years. The National Land Records Modernization Programme needs a comprehensive review and overhaul.

“In particular, we will create a national organisation charged with directly maintaining land records and titles (a task which will be removed from the purview of the States), including location, coordinates, owners and other details. Surveys (including by the use of digital technology such as GIS, aerial photography, GPS, etc.) will be done on a regular basis. We will also move to a Torrens title system of land registration from the current deed system. We support the Land Title Bill.

“Such a land records system will allow conclusive titles to be issued, make land acquisition easier, allow land owners to provide collateral for credit, support environmental management, and allow the States and local governments to impose appropriate land and properly taxes.”

Planning and Zoning

Land planning and zoning will be partially delegated to local councils (under detailed policy parameters specified by the State Government) who will employ professional land planners, environmental scientists and landscaping specialists to provide outstanding planning services.”

These outlined principles, which have a balanced approach to the issue of land ownership, take into account both private property rights and the need for economic development that is necessary for the people of a state to prosper. It relegates the role of the state primarily to that of a regulator and an unbiased umpire, which is as it should be, rather than a player in the development games. Further, it brings true market costs to any industrial project or development instead of getting an unfair subsidy at the expense of private property owners, whether urban or rural, whether rich or poor.

Finally, implementing a proper land records system and a land revenue recovery system would make pricing and ownership of land transparent, reducing transaction costs, friction and inefficiency in the market place, and indeed make land acquisition an easier process for industry and private developers.