Land Acquisition Bill Explained in Simple Words:
The problem
To benefit the society as a whole we need to build large infrastructure projects such as lakes, dams, power plants, roads, factories, warehouses and so on. That is the only way out of poverty. There is not a single developed nation that climbed out of poverty without building industries. The question is how do we get the lands to build those projects?
Almost every piece of land is occupied. Thus, you need to acquire the land for these projects from someone. Given the highly fragment land ownership in India, you need to deal with not just 1 big land owner, but 1000s of small ones.
Why can’t we just buy the normal way?
As I mentioned for each project we have to deal with 100s of even 1000s of sellers. That produces a complex dynamic. What if 990 sellers agree to sell the land and 10 sellers hold out? That would block the project preventing the 990 sellers from having good value for their land as well as not allowing the society to progress.
Why don’t those 10 people sell at the market price like the others? There could be a variety of reasons:
- There might be property disputes in the family and no one in a position to call the shots.
- They might be obstinate or otherwise too sentimentally attached to that piece of soil.
- There could be caste, religious or other clashes that would prevent the 1000 farmers from dealing with the same buyer.
- Most importantly, they might be asking for ransom in what the economists call the Holdout problem. That guy with a small land in the center could say that I would give up my land only if you pay me 100 crores. At that point would you either stop the project or pay the ransom? Either thing is unfair to the other people selling at market prices.
In summary, it is not always possible to acquire land for major projects by getting everyone agree. This brutally painful process has made India a very difficult place to run business. India ranks at the rank bottom when it comes to being business friendly(I think in the last decile of the list)
This means, unlike China India doesn’t get enough industrial development from both local investors and foreign investors. Tata had to painfully invest abroad as the domestic investments often get bogged by land acquisition. Despite having a large market, India continues to not have industrial development and that prevents us from getting people out of poverty.
Remember, the only real way to get people out of poverty is by building industries.
Now, we have two choices:
- Go ahead with the project by forcefully acquiring land from the minority of holdouts.
- Abort the project and get back to poverty.
We have been doing #2 for a long time and have seen China & other countries jump past us. Almost every good economy has a policy for forcefully acquiring land.
So, why is this such as problematic one in India compared to other nations:
- India has a very powerful landed class that has brutal hold over the villages and the politics. This group gets much of the subsidy benefits and benefit at the cost of landless labourers who might be better off moving to the industry. The poor landless farmers are in fact very open to foreign investment & land acquisition. However, they have much less voice
- India has an unhealthy fear of private enterprises. Many of us believe that India is somehow friendly to entrepreneurs, while every bit of reality point otherwise. Thus, every time India acquires land to build factories our alarmists jump up and down. This possibly stems from an age old distrust of the merchant castes by the priestly castes.
In the name of poor, a small group of landed farming class and an anti-merchant class is holding out ways to acquire land. Without that land acquisition, there won’t be industrial development nor moving people out of poverty.
This is the decision to make
Ultimately we cannot have the cake and eat it too. Either we suffer in the current system with farmers dying everyday & get tortured in poverty or we do what every other successful country have done in the past – industrialization with a forceful land acquisition.