Sunday, 7 June 2015

Land acquisition legislation IV:
Abridging the Consent Clause

Abridging of the Consent Clause in the Act of 2013 is among the most contentious of the amendments proposed by the Government. 

The Consent Clause of the original Act mandated the following:
a)  No requirement of consent in case of any acquisition for the purposes of the Government;
b)  Prior consent of 70 percent of the “affected families” in case of acquisition for public-private partnership         (PPP) projects, where the ownership of the land continues to vest with the Government; and,
c)  Prior consent of 80 percent the “affected families” in case of acquisition for private entities.

The consent in the latter two cases was to be obtained “through a process as may be prescribed by the appropriate Government”.

The amending bills and the ordinances provide for removal of the Consent Clause for the PPP projects. The requirement remains unchanged for acquisitions for private entities.

Background of the Clause

The Consent Clause formed one of the important pillars of the Act of 2013. The need for the new Act to replace the Land Acquisition Act of 1894 had arisen because of the widespread feeling of distrust and disaffection that had been caused by en masse acquisitions undertaken particularly for the Special Economic Zones, which were all in the PPP mode. One of the main objectives of the Act of 2013 was to ameliorate the feeling of distrust and disaffection by prescribing a participative and transparent process of land acquisition. Seeking consent of some proportion of the “affected families” was one way of making them a party to the process. The requirement of Social Impact Assessment, which we would discuss in a later post and which also has been abridged through the amendments, was another process devised to involve the institutions of local self-Government in the process of acquisition. The Consent Clause, though limited only to acquisitions on behalf of the private entities, was thus a core component of the Act of 2013.

Discussions in the Standing Committee and Revenue Ministers' Conference

The clause was discussed extensively in the Standing Committee of the Parliament headed by Shrimati Sumitra Mahajan. According to the Report of the Committee, the States of Madhya Pradesh, Chhattisgarh, Maharashtra and Uttar Pradesh and the union ministries of Power and Commerce did express some apprehensions against the Consent Clause. On the other hand, several States, Ministries and other stakeholders wanted the clause to be retained and made more stringent. The position of the Department of Land Resources was clear: the Consent Clause was essential to ensure that there was no forcible acquisition of land. The Standing Committee, however, did not have to take a position on this issue because, as we mentioned in the previous post, it took the position that the Act should not provide for any acquisition for PPP or private projects. The question of obtaining consent, therefore, did not arise.

The Government have said that the suggestion for amending the Consent Clause came from the States in the course of a Conference of the States Revenue Ministers held under the Chairmanship of the then Minister for Rural Development, Mr. Nitin Gadkari, on June 14, 2014. It is remarkable that this Conference was held within about a fortnight of the formation of the new Government. In the summary of suggestions of the Conference released by the Ministry, the Revenue Ministers suggested that: “The Consent Clause should be re-examined. As ownership of land vests with the Government in the PPP projects, the Consent Clause should be removed from the PPP projects. Alternatively, Consent requirement may be brought down to 50 percent”. Incidentally, the proposed amendment in this regard closely follows the language of this suggestion.

According to the detailed proceedings of the Conference, specific objections to the Consent Clause were raised only by Madhya Pradesh, Chhattisgarh and Kerala; Rajasthan and Goa wanted the entire Act to be redrafted. The position that Madhya Pradesh and Chhattisgarh took in this Conference was similar to their stand before the Standing Committee headed by Shrimati Sumitra Mahajan, which had been considered and found unacceptable. On the other hand, several States participating in the Conference of Revenue Ministers had little problem with this Clause of with the Act as a whole; many stated that they had begun drafting rules under the Act of 2013 and had begun the process of acquisition under the new Act; Punjab even put on record that they had completed Social Impact Assessment in one case.

In the Standing Committee proceedings, Bihar had insisted that the Act should not only have the requirement of consent in case of acquisition, but no acquisition process on behalf of private parties should be initiated until the concerned parties have already obtained the consent of 80 percent of the landholders. This to some extent was the spirit in which the consent clause was introduced in the Act of 2013. It was presumed that in the normal course private or PPP project proponents would go to the land-owners and negotiate a consented price with them; the government would come in the picture only to ensure that the project is not held up because of the recalcitrant or obstructive attitude of a small minority of the owners.

Our Suggestion

There is perhaps a genuine problem with the Consent Clause as it requires the consent of a certain percentage of the “affected families”. The latter can be determined only through a detailed Social Impact Assessment; that is why the Act provided that the consent shall be obtained in the course of such Assessment. It would be much simpler if the consent requirement were to be restricted to the affected land-owners alone; the list of these can be obtained directly from the revenue records. The exact proportion of owners whose consent must be obtained before the process of acquisition sets in may also be negotiable. But in no case the consent should be of less than 51 percent.

Thus the Consent Clause for PPP projects can perhaps be amended to replace the term “affected families” with “affected land owners” and to replace the consent of “80 percent” with “not less than 51 percent”.

Doing away with the Consent Clause altogether as the amending ordinances and bills propose to do shall militate against the intent of the Act. The purpose of the Act was to make the process of acquisition transparent and consensual. It was enacted in the background of a series of protests among rural and tribal communities against forcible acquisition of land by the governments for private interests. Such protests had put the process of industrial development itself in jeopardy, as was seen most dramatically in the context of Singur. The Act of 2013 sought to ensure that incidents of that kind do not happen again; that lands for industrial and infrastructural development are acquired through the willing consent and participation of the affected communities; and that all the people feel involved in the process of development and nation building. Keeping the requirement of some level of consent in the acquisition process is essential to this national goal.

Tailpiece: Public-Private Partnership (PPP)

Public-Private Partnership is a business venture or public service that is funded and operated through a partnership between the Government and one or more private companies. The capital and the management expertise in such projects are normally provided by the private partner. The Government often provides the land, one-time capital grant, guarantees for the debt incurred by the private partner, guarantees for purchasing the service or product at a cost that is profitable to the private partner, and certain monopoly rights. The land, though formally vesting in the State, gets leased to the private partner on a long-term basis and the private partner is often able to draw substantial revenues and profits from the use of the land also, as in the case of Delhi Airport project and in the case of many of the SEZ projects. Therefore, it is not unreasonable for the landowners to expect that the private partner should negotiate the price of land directly with them, so that they may get at least a small share of the potential profits.

The PPP mode has become fashionable because it shifts the burden of capital borrowing to the private partner thus lowering the budget-deficits. The private partner also brings in the supposedly superior business and management skills. The risk of business is also generally supposed to be borne by the private partner, but the risk is considerably mitigated through Government guarantees and support. In the current budget, the Finance Minister has even promised to review the PPP mode to ensure that the risk in such projects is borne largely, though not wholly, by the Government. The exact words of the Finance Minister in this context were:

“Fourth, the PPP mode of infrastructure development has to be revisited, and revitalised.  The major issue involved is rebalancing of risk. In infrastructure projects, the sovereign will have to bear a major part of the risk without, of course, absorbing it entirely.”

Such shifting of the risk to the sovereign would make the PPP mode even more attractive from a purely business point of view; it would correspondingly decrease the need for subsidising the land component through compulsory acquisition by the State. This is one more reason why the Consent Clause for PPP projects must stay at least in some form.

Your opinions and observations on this specific issue of Abridgment of the Consent Clause are welcome. 

— Dr. J. K. Bajaj