The Right to Fair Compensation and Transparency in LARR Ordinance, 2014

  • by Manoj K. Jha

History of land acquisition laws in India

Colonial period: History of Land acquisition laws even precede the year 1894, most notable was Bengal Regulation I of 1824. The colonial administration of Presidency towns made such land acquisition laws which later spread across the country to facilitate the easy acquisition of land and other immovable properties for  roads, canals and other public purposes with compensation to be determined by specifically appointed arbitrators. After 1857 strategic interests of the colonial administration expanded to cantonment areas, garrisons, telegraph, railways etc. None of those legislations provided any opportunity to object to the acquisition of land itself, however allowed the opportunity to raise issues regarding compensation. The debate on compensation was never settled. Even then the market value and public purpose wasn’t properly defined. The allegations of inadequacy, corruption and misconduct related to land acquisition were common.

The Land Acquisition Act of 1894, meant to bring some uniformity to the acquisition decisions of the Empire. It meant to amend the law for the acquisition of land for public purposes and for companies and to determine the amount of compensation to be made on account of such acquisition. This meant a single law to regulate all land acquisition across the country. In a predominantly agricultural landscape, such a law was aimed at generating revenue from the productive uses of land.

Post Independence India: Even after adoption of the Indian Constitution, the 1894 Land Acquisition Law continued to be in force, albeit with periodic amendments. The new cities of Jamshedpur, Chandigarh, Bhilai and others were made as a part of the Nehruvian vision of modernity. The State also expanded its economic reach by focusing on heavy industries and linked infrastructure, for which availability of land was a pre-requisite.

In light of the State’s predominant role in national development the land acquisition in the constitutional scheme was put in Concurrent list, with power to both Centre and States to make laws on acquisition of land. The right to property was initially considered a fundamental right. It was inevitable that this right and laws related to land acquisition will collide. The Constitution was ultimately amended with insertion of Article 300A in the Constitution, which states that ‘no person shall be deprived of his property save by authority of law’ and hence the right to property was made a constitutional right only and not a fundamental right. The protection was given only against actions of executive not the legislature. So legislature of both states and center could make laws to take away the land from the land owners.


Present Day Land Acquisition Laws: The act of 1894 survived till 2013 and finally paved way for the new law namely the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 (LARR).

The preamble of LARR is as follows: It aims to “ ensure a humane, participatory, informed consultative and transparent process for land acquisition for industrialization, development of essential infrastructural facilities and urbanization with the least disturbance to the owners of the land and other affected families and provide just and fair compensation to the affected families whose land has been acquired or proposed to be acquired or are affected by such acquisition and make adequate provisions for such affected persons for their rehabilitation and resettlement thereof, and for ensuring that the cumulative outcome of compulsory acquisition should be that affected persons become partners in development leading to an improvement in their post acquisition social and economic status and for matters connected therewith or incidental thereto”.

The preamble itself declares the intent for bringing the new land acquisition law to fore. For the first time the land acquisition law and laws related to compensation, rehabilitation and resettlement was combined together. Salient features of LARR are:

  • Somewhat defines public purpose: it states the context in which land acquisitions can be termed as public purposes. The list even includes private sector projects to qualify as public purpose. Specifically mentioned public purposes are strategic purposes relating to armed forces of the Union, national security or defence, police, safety of the people, land for railways, highways, ports, power, irrigation, public sector companies, land for the project affected people, etc. It restricts the use of urgency clause to defence, national security and natural calamities. It means urgency clause is limited to very urgent situations.
  • Combined law: Land Acquisition and Rehabilitation & Resettlement(R&R) need to be seen necessarily as two sides of the same coin. Earlier R&R were provided by different laws. Not combining the R&R and land acquisition within one law leads to neglect of R&R.
  • Both LA and R&R Provisions will apply when: (a) Government acquires land for its own use, hold and control (b) Government acquires land with the ultimate purpose to transfer it for the use of private companies for stated public purpose (including PPP projects but other than state or national highway projects) (c) Government acquires land for immediate and declared use by private companies for public purpose. For both B and C public purpose stated once can’t be changed.
  • Provides for procedural safeguards of consent by project affected people: The act provides that consent of 70% of project affected people must be taken if the acquisition is made by the government for its own use, hold and control. If taken for private sector projects then consent must be given by 80% of project affected people.
  • Provides for other procedural safeguards: Other procedural safeguards like Social Impact Assessment by independent people to weigh pros and cons of the land acquisition in particular area. For SIA Gram Sabha must be consulted. Another procedural safe guards are Multi-crop irrigated land will not be acquired except as a demonstrably last resort measure, which in no case should lead to acquisition of more than 5 percent of multi-crop irrigated area in a district. Wherever multi crop irrigated land is acquired an equivalent area of cultivable wasteland shall be developed for agricultural purposes. In districts where net sown area is less than fifty per cent of total geographical area, no more than ten per cent of the net sown area of the district may be cumulatively acquired under all land acquisition projects put together in that district.
  • Fair compensation mechanism: The mechanism includes compensation up to four times the average market value according to the Stamp Act in rural areas and for urban areas the compensation is two times the market value. In addition to the compensation there are other payments for resettlement and rehabilitation. The act also provided to timely payment of compensation to the affected people. In case the acquired land is sold later at a higher rate, then 40% of the profit made must be shared with the people who last the land in the process of acquisition.

A comprehensive R&R package is given in Schedule II of the act.

R&R is applicable to both land owners as well as people dependent on the land acquired:

  1. Subsistence allowance at Rs. 3000 per month per family for 12 months;
  2. The affected families shall be entitled to one of the following based on choice of the project affected family:
  • where jobs are created through the project, employment for one member per family;
  • rupees 5 lakhs per family; and
  • rupees 2000 per month per family  as annuity for 20 years, with appropriate index for Inflation.
  1. If a house is lost in rural areas, a constructed house shall be provided as per the Indira Awas Yojana specifications.If a house is lost in urban areas, a constructed house shall be provided, which will be not less than 50 sq mts in plinth area. In either case the equivalent cost of the house may also be provided in lieu of the house as per the preference of the project affected family;
  2. One acre of land to each family in the command area, if land is acquired for an irrigation project;
  3. Rs 50,000 for transportation.
  • The infrastructural facility to be provided in area of resettlement are: Schools and playgrounds, Health centres, Roads and electric connections, Assured sources of safe drinking water for each family, Panchayat Ghars, Anganwadi’s providing child and mother supplemental nutritional services, Places of worship and burial and/or cremation ground, Village level Post Offices as appropriate with facilities for opening saving accounts and Fair price shops and seed-cum-fertilizer storage facilities .
  • Application of bill on prior acquisition: This Bill proposes that LARR 2011 will apply to all cases of Land Acquisition where before date of commencement of LARR Act either (a) Award has not been made under LA Act 1894; or (b) Possession of land has not been taken.
  • Compliant with other laws: The bill is compliant with other laws Like The Panchayats (Extension to the Scheduled Areas) Act, 1996, The Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006, Land Transfer Regulations in Schedule V Areas etc.
  • Stringent and Comprehensive Penalties Regime for Companies and Government: the act provides for Punishment for false information, mala fide action, etc. Penalty for contravention of provisions of Act.
  • LAAR does not apply to many significant enactments pertaining to land acquisition and use, including, the following enactments: a) The Special Economic Zones Act, 2005, b) The Cantonments Act, 2006, c) The Land Acquisition (Mines) Act, 1885 [will the new Mines and Minerals(Development and Regulation) Bill, 2011 also be among the exceptions?), d) The Metro Railways (Construction of Works) Act, 1978, e) The National Highways Act, 1956, f) The Petroleum and Minerals Pipelines Act, 1962,  g) Resettlement of Displaced Persons (Land Acquisition) Act, 1948 h) The Coal Bearing Areas Act, 2003, i) The Electricity Act, 2003, etc.


Background for bringing the ordinance

LARR was meant to make the acquisition process just. It was designed in the mode of the previous government’s other landmark laws on information, education, and food — using a rights-based approach — where the primary objective was to deliver “fairness” to the people affected by land acquisition. LARR expanded the definition of project-affected people and expanded the rights, protections and compensations for people who lose land or livelihood as a result of acquisition. All these were laudable and necessary. But LARR was also a purely political and fundamentally bureaucratic approach based on little or no recognition of some simple economic principles — on land markets and on transaction and opportunity costs. The underlying presumption was that the price of land matters to the land-loser but not to the land-acquirer; as a result, LARR raised the price of land acquisition to unsustainable levels.

This price is not simply the money paid for acquisition and rehabilitation and resettlement. That is just one component of price, its direct component. There is a second component, an indirect price. This includes (a) transaction costs, which include the cost of doing social impact assessments, conducting referenda, running the massive new multilayered acquisition bureaucracy, etc. and (b) opportunity costs, which arise from the time taken to conclude an acquisition — doing social impact assessments, conducting referenda, etc. — time during which capital is not invested, infrastructure is not created, and production does not take place. If all the steps defined in LARR were accomplished in the allotted time, each acquisition would require about five years; in practice, it could take a lot longer. Longer period of time means longer gestation period for projects which will render them unviable. LARR had placed an impossible double-burden on land acquirers: pay double or quadruple the highest prices in the world, and wait for several years to begin work on the ground. The first burden remains and its consequences are grave. What those consequences may be must be carefully worked out by people competent to do so. But the second burden has been mitigated by this ordinance. It should make life easier for the land-acquirer. The stringent consent requirement makes it very difficult to acquire land even for public purposes. The punishment provision for the bureaucrats also makes acquisition difficult as many fears any mistake will make them liable for punishments. The current government seeks to speed up the development process which needs the balance between interests of people affected by the land acquisition and the needs of the industry. The ordinance is also expected to remove the difficulties faced by bureaucrats approving the land acquisition.

The salient features of the ordinance are as follows:

  • Expansion of the scope of compensation: The amendment has extended the scope of compensation by including the various acts listed in schedule IV which were exempted by LARR. Some of the 13 acts are Ancient Monuments and Archaeological Sites and Remains Act 1958, Atomic Energy Act 1962, etc.
  • Relaxation of consent and social impact assessment requirements: the amendment have relaxed the requirements of consent and social impact assessment survey for projects in five areas of national security and defense, rural infrastructure and electrification, affordable housing for poor, development of industrial corridor including infrastructure and social infrastructure including PPPs in which ownership rests with the government.
  • Higher rate of compensation as provided in LARR has been retained without any change.
  • Relaxation of procedural requirement: the procedure of land acquisition with bureaucracy has been changed to make the acquisition faster. Bureaucracy has been given protection by including the requirement of the prior permission of the government before a court can take cognizance of the offense under the Act.