After playing UPA game, BJP needs to fix LARR law
It is ironical that, as the Modi government comes to power, it needs to find ways to fix the Land Acquistion, Rehabilitation and Resettlement (LARR) Act, an Act that the BJP had no compunction in supporting when the UPA brought it in—the BJP standing committee chief even recommended that state governments not help any PPP projects acquire land. At that time, the BJP wanted to be seen as pro-farmer; today, with expectations sky high, the party needs to get projects going—certainly, several of the secretaries who have been asked for their view of what went wrong in the past few years have cited LARR as a serious problem.
How the party deals with LARR will say a lot about how it plans to govern the country. Large scale changes in LARR will be difficult, more so since it will be portrayed by rival parties as the party being anti-farmer. Modi’s best bet is to push for a few changes in the Act, ensure the Rules are moderate when they are finally framed, and encourage state governments to come up with their own methods of implementing the Act. The Act, for instance, allows the government to take the highest price of a land deal in a rural area and double it—and then add a similar amount as ‘solatium’. A private firm then ends up paying 4 times the value of land in rural areas. The draft rules in Maharashtra, however, have kept the multiplication factor at 1—that is, the private sector will pay 2 times the value of the last deal, not 4 times. Similarly, while the R&R provisions are onerous even when the private sector pays several times the market price for the land, the threshold at which the R&R will be applied lies with the states. Maharashtra has kept this level at 1,000 acres, for instance. Putting in some minimum R&R thresholds in the Central law—say for a factory employing 1,000 persons or buying 500 acres—may be a good idea as it will prevent states like West Bengal from coming up with rules that prevent any industrial development.
Even so, Modi’s government will have to push some changes in the Act/Rules. For one, industry has to be added to the ‘public purpose’ list if the state is to be able to help industry acquire land. Two, compulsory R&R obligations for any land acquired by the government needs to be changed—this will hit even government programmes like the Food Security Act since SIAs and R&R will be required even to construct new godowns. As the head of the Ficci task force on land reforms put it in an article in this paper, the government should try to acquire land on the same terms that industry has to—in other words, put its money where its mouth is.