Why Land Acquisition Is Easier In Some States And Not Others

Land acquisition has been a tricky subject in the country for some time now. The issue has been discussed threadbare in the media, but one point seems to have been missed out on. I came across this rather basic and very interesting point in Sanjoy Chakravorty’s book The Price of Land – Acquisition, Conflict, Consequence.

In this book, published in 2013, Chakravorty uses data from the 2005-06 agriculture census. I will use data from the 2010-2011 agricultural census in this column and make the same points that Chakravorty is making.

Chakravorty says that it is easier to acquire land in states where the average landholding is larger in comparison to states where the average landholding is smaller. He points out: “In Kerala, where 96 percent of all landholdings are marginal, the average marginal holding size is 0.35 acres (the actual number is around 0.34 acres; the writer seems to have rounded it off to 0.35 acres]. In Bihar, where almost 90 percent of all holdings are marginal, the average marginal holding size is 0.62 acres.”

How do things look if we were to use data from the 2010-11 agricultural census? The above paragraph would read like this:

“In Kerala, where 96 percent of all landholdings are marginal, the average marginal holding size is 0.33 acres. In Bihar, where almost 91 percent of all holdings are marginal, the average marginal holding size is 0.61 acres.”

As we can see the numbers haven’t changed much between 2005-06 and 2010-11.

“In both these states (ie, Bihar and Kerala)”, says Chakravotrty, “the marginal holdings make up little over half of all agricultural land area. In Tamil Nadu, Uttar Pradesh and West Bengal, over 75 percent of all landholdings are marginal. It may be very difficult to bring these lands to the market.”

In Bihar, marginal landholders own 57 percent of all agricultural land. In Kerala, the number as of 2010-11, stands at 58.6 percent. In Tamil Nadu, Uttar Pradesh and West Bengal, the figures are 90 percent, 79 percent and 82 percent.

What this means is that the moment a large amount of land needs to be acquired for an infrastructure project or for setting up a factory or a mine, a large number of landholders need to be dealt with. In many cases, some arm of the government (state or central) wants to acquire land for private businesses. And this is not easy.

Further, many other states like Gujarat, Rajasthan and Punjab have larger average landholdings. As Chakravorty writes: “From the smallest landholders (marginal farmers in Kerala, averaging 0.35 acres per holding) to the largest (50 acres in several states, even larger in some), it is not difficult to see how a price such as Rs 10 lakh per acre can be perceived very differently by different landholders based on the size of their holdings. For example, an average large landowner in Gujarat would be paid more than Rs 4 crore for his land (because the average large landholding size in the state is over 41 acres), whereas the average marginal landowner in Kerala would be paid Rs 3.5 lakh.”

How do things look if we use 2010-11 agriculture census data? The average large landowner in Gujarat owns around 52 acres. Hence, at Rs 10 lakh per acre he would be paid Rs 5.2 crore. In fact, even if we look at marginal landowners in Gujarat, things are much better. The marginal landowner in Gujarat owns around 1.2 acres. At Rs 10 lakh per acre the payment is Rs 12 lakh. In Kerala, the average marginal landowner owns 0.33 acres as per the latest agriculture census, and this amounts to a payment of just Rs 3.3 lakh. In Bihar, with an average size of 0.61 acres, the payment would be Rs 6.1 lakh.

In fact, Punjab is another state where the average marginal landholding is significantly large. The average size for a marginal landholding in Punjab is 1.5 acres. At Rs 10 lakh per acre, this would involve a payment of Rs 15 lakh. The average size of landholding in Punjab is around 9.3 acres. And at Rs 10 lakh per acre, it would involve a payment of Rs 93 lakh.

Given this difference in average landholding size, it is easier to acquire land in parts of the country where the average landholding size is larger because that ultimately leads to higher payments. As Chakravorty writes:

“Based on this information on land distribution alone, it is possible to conclude that land acquisition is likely to very difficult in some states; Kerala, Bihar and West Bengal top this list. It is also likely to be significant challenge in Tamil Nadu and Uttar Pradesh, and to a lesser extent, in Andhra Pradesh and Assam.”

In fact, information is available even at a district and sub-district level. Given this, identifying parts of the country where land fragmentation is lower should be easy. “This is not hard to do because the information already exists. Having this information should make the task of identifying land for acquisition easier, but to the best of my knowledge, has never been done,” notes the author.

This is not surprising given that there was very little resistance to forceful land acquisition carried out by the government till very recently. But now that that is no longer possible, more out of the box solutions need to be looked at.

Vivek Kaul is Editor, Daily Reckoning – a newsletter that cuts through the noise and presents actionable views on socio-economic developments in India and the world. He is the author of a trilogy on the history of money and the financial crisis. The series is titled Easy Money.

This article was first published here.