Thursday, February 21, 2008

SEZs: A history of injustice and abuse

SEZs: A history of injustice and abuse

The origins of today's law for land acquisition for SEZs act can be traced to 1824, when the British colonial power felt the need to codify the undisguised forcible seizure of land. While colonial rule has long gone, the unjust application of the principle of eminent domain remains, writes Kannan Kasturi.

01 October 2007 - The current government overdrive on Special Economic Zones has once again brought to the fore the question of where the line is to be drawn between public good and private profit. Whereas the law allows Central and State governments, as well as private developers, to set up SEZs, in practice it is the latter group that has proposed the majority of these zones. That being the case, a number of questions have come up, that point to the divergence between the role that governments are supposed to play in promoting public good, and their actual conduct in facilitating the establishment of SEZs.

Some of these questions are now centre-stage in the debate. Is it right for state governments to expropriate land from farmers or should land acquisition be the responsibility of private developers and subject to market forces? Who does the state bear greater responsibility towards - the farmers and other villagers who will lose their livelihoods as a result of establishment of these zones, or the private developers of these zones?

Two principal questions

Acquiring the land is the biggest incentive held out to private SEZ developers by the state governments. The state involvement becomes more apparent in the larger zones that are in the land acquisition phase. Nandigram is by now famous as an example of a failed forced acquisition. However, this has not deterred the West Bengal government from looking at other areas in the state for the same SEZ and for acquisition for the Haldia SEZ. In Maharashtra, the state government has transferred lands acquired by CIDCO to the Navi-Mumbai SEZ, while it has been actively acquiring land for Reliance for the Maha-Mumbai SEZ. And in the north, there is the example of the Reliance Haryana SEZ where the state government and Reliance together have signed agreement for developing what is billed as the largest SEZ in India.

All the above cases reinforce the idea that large sized SEZs implicitly depend on the state to provide land. Governments, increasingly challenged over their roles in acquiring land for private development, argue that SEZs are needed for the 'development' of their states, and that they need to do everything possible to attract the promoters of these zones to their own state. Whether SEZs will bring in the promised benefits is an entirely different discussion. What is examined here is the injustice of using the colonial land acquisition law that has become such a favourite instrument in the hands of state governments.

A second pertinent question relates to the economic philosophy behind SEZs. In the last two decades, we have witnessed a profusion of support for 'free markets'. The Prime Minister is hailed routinely as the primary architect of pro-market 'reforms' during this period. But SEZs challenge that reading of recent history, and prompts us to ask whether 'pro-business' - rather than 'pro-market' - is a more accurate description of attidues to the economy within government since the early 90s. In the case of SEZs, governments are practically over-ruling market forces in determing the price of land being acquired. The additional irony is that the private industry that is usually vocal against the 'licence and permit raj' desires, nay, needs, the state governments to acquire land.

Eminent domain

The origins of the land acquisition act can be traced to 1824, when the British colonial power felt the need to codify in law what was earlier undisguised forcible seizure of land. The Bengal Regulation I of 1824 was based on the principle of 'eminent domain' - the power of the state to take any private property for public use - and enabled land to be acquired for roads, canals and other public works. This was extended to cover land acquisition for the railways in 1850. Separate laws that had evolved in the territories around Calcutta, Bombay and Madras were consolidated into a single law applicable to all the territories of British India by 1857.

The additional irony is that the private industry that is usually vocally against the licence and permit raj desires, nay, needs, the state governments to acquire land.

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SEZs: Lessons from China
The new Maharajas
Tales of eviction in Bengal
Interact: What to do about SEZs?

In 1870, the rules for determination of compensation for the land acquired based on 'market value' were defined, a 'solatium' (additional compensation over market value in view of the involuntary nature of parting with the land) introduced, and the right of appeal to civil court in case of dispute over compensation provided. This law evolved over a period of time under British rule and took the consolidated form of the 'Land Acquisition Act 1894' which has remained almost unchanged to this day.

What were the key concerns of the colonial legislators? The state had to be able to acquire land for a 'public purpose' quickly and easily; excessive compensation, seen as wastage of government resources, was to be avoided. The law was framed with exactly the above concerns in view. The imperial stance was evident in one simple fact - 'public purpose' was neither defined nor elaborated by the law; it was sufficient for the state to declare it to be so. Further, elaborate rules were framed for determining compensation and ensuring that payouts deemed to be 'excessive' did not happen.

The end of colonial rule in 1947 and the republican constitution of 1950 did not bring about any significant change in the land acquisition law. The Constitution of India, by article 372, allowed all colonial laws to remain in force unless they were explicitly repealed. There was an enormous increase in infrastructure building and industrial activities by the state as compared to the colonial period. Numerous large dams, power plants, mines, steel and heavy engineering plants came up over land acquired using the 1894 law, causing a massive displacement of small farmers, agricultural labour, landless village workers and artisans and forest dwellers. The number of people displaced by projects and those whose livelihood was affected between 1951 and 1995 has been estimated at 50 million by some social scientists based on detailed studies.

Rehabilitation, inadequate in the best of cases, was mostly absent. Compensation followed the requirements of the colonial land law and was available to only those who could show ownership of land. Compensation was pegged to 'market' value; however, given that the land market in India was not developed for a number of reasons, and given that recorded transactions invariably undervalued real market rates - and do so to this day - this did not address the issue of fair compensation. With the result that the acquirer of land continued to be privileged under the law, as in colonial times.

'Public purpose' and private industry

Public sector and government projects were not the only purposes for which land was forcibly acquired by the state. Even in the Nehruvian period, land was being acquired for private industry by state governments. A landmark judgement (R.L Aurora vs. State of U.P, 1962) of the Supreme Court held that the government could not justify acquiring land for a textile machinery manufacturer as a 'public purpose'. It further declared that "the Land Acquisition Act did not contemplate that the Government should be made a general agent for companies to acquire lands for them for their private profit".

That might have been an opportunity to revise the injustices of the Act, but in the event, the Nehru government chose to do the opposite. The immediate response of the government was to amend the law through the Land Acquisition (Amendment) Act 1962 to allow land to be acquired for a company "which is engaged in or is taking steps for engaging in any industry or work for a public purpose" . This was applied with retrospective effect and superseded the earlier Supreme Court judgement. Thus the Nehruvian era state succeeded in preserving its authority for acquiring land for private industry. Subsequently, in the courts, a variety of projects of private enterprise for diverse purposes - houses for members of a co-operative society, manufacture of alumina bricks, construction of a students home, an electrochemical factory, a sugar factory, etc. - were all held to promote 'public purpose', and the land acquisition by the state for these enterprises upheld.

Further modifications were made to the law during the Indira Gandhi regime by the Land Acquisition (Amendment) Act 1984. This provided some minor relief for persons whose land was to be acquired in the form of an improved solatium, and some time limits on the acquisition process. However, the major demand heard over the years, that 'public purpose' be clearly and unambiguously defined and limited in the law, was not addressed. Instead, the inclusive definition of 'public purpose' was widened to include acquisition of land for 'planned development' and subsequent sale to private enterprise. With this, the death knell for original possessors of land was completely rung; once the government set eyes on someone's land and intended to acquire it, it mattered very little what the purpose was.

This enormous power available to governments led to many blatant abuses. For example, the West Bengal Government acquired level fertile agricultural land in West Medinipur for Tata Metaliks in 1992, leading to dispossessing small and marginal farmers, in preference to undulating wasteland that was available nearby. In the case of the Century Textiles Pig Iron Plant in the same area, the state government acquired about 525 acres of land for a proposed plant in 1996. However, till 2003 the factory had not come up and neither had all the original land owners been fully compensated; the company had decided that pig iron production was no longer profitable and refused to pay the compensation and take over the land .

Singur is another example of the same government acquiring prime agricultural land for a car factory, in this case, for Tata Motors. State governments have not hesitated to acquire land even (mis)using draconian emergency powers available in the Land Acquisition Act. A case in point is the Tamilnadu government's acquisition of land near Pulicat Lake north of Chennai for a petro-chemical complex.

Kannan Kasturi
01 Oct 2007

Kannan Kasturi is a freelance writer interested in issues of law, policy and governance.