Land acquisition law another solution

There is needless despair over the centre’s inability to pass a land law

After almost a year of struggling, the Union government has admitted to political roadblocks that prevent the passage of a rational land acquisition law. Efforts to replace the existing law, approved by Parliament in 2013, have failed. At a meeting of the NITI Aayog last week, Union finance minister Arun Jaitley hinted at a different, less than perfect, solution to the problem.

In comments after the meeting, Jaitley said that, “There was a suggestion from the states that those who wanted development (should) be allowed to frame their own laws that the central government could approve. This was a suggestion from an overwhelming section of the chief ministers.”

As matters stand now, this appears to be the only way out. The Narendra Modi government has repeatedly issued ordinances that embody a better, more industry-friendly law. But these have fallen in the Rajya Sabha as the government is in a minority there. Pending a political solution of some kind—consensus on the subject or a joint sitting of Parliament—letting the states do what they want is one way out.

To an extent, this makes sense. States can legislate on land acquisition (entry 18 of the state list in the Seventh Schedule of the Constitution). There are no practical barriers in the way of states that wish to bring in enlightened land acquisition legislation.

Technically, if there is a Union law, then states cannot legislate their way out of it. But this bar is not absolute. Article 254(2) of the Constitution allows states to have their way, provided the law “has been reserved for the consideration of the President and has received his assent”, then such a law shall prevail in that state. The encouraging words of the finance minister, and the concurrence of a section of chief ministers at the meeting of the NITI Aayog, points in this direction. The Modi government should help all the states that want to craft a better and rational law.

The trouble with such laws lies elsewhere. For one, a multiplicity of land laws will make it harder for industrial and other investors to cope with the burden of understanding and complying with these laws. The second, more pernicious, problem is that of inequality and divergence in growth between different states. States that understand the economic benefits of industry-friendly laws—Gujarat and Maharashtra are two examples—will implement them to attract as much investment as they can. These states, among a handful of others, are already rich. Other states, which have been traditional laggards—Bihar and Uttar Pradesh are obvious examples—are stuck in a kind of politics that makes enlightened land legislation very hard. The tragedy in this situation is that rich states will continue to grow richer and the poor ones will continue to suffer. A uniform, all-India legislation could have prevented that.

Over time, the danger will be that a two-speed India will emerge. Poor states will demand special packages—as Bihar already does in a vociferous manner—which will be a burden on the country.

Since independence, all governments have tried to address this issue in some way or another. Freight equalization (which has historically hurt Bihar and Odisha), setting up of industries in backward areas during the high noon of socialism and tax advantages to hill states such as Himachal Pradesh and Uttarakhand, have been some solutions. But these indirect means cannot replace the substance of investment which still eludes India’s many backward states.

Another option that the Union government could use to force the recalcitrant states to adopt better land laws could be to give them a lump-sum financial package if they pass a good, industry-friendly, land acquisition law. This should be contingent on having everything in place—down to the rules that give teeth to the law—before money flows to their coffers. To give one example, Bihar can be given the special package it wants provided it passes a land law that clears all roadblocks in land acquisition. The extra money spent in these packages across states will be more than compensated by industrialisation and economic growth over time.

HT Mint, New Delhi, 20th July 2015

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