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How Fair is “Fair Compensation” Under India’s New Land Acquisition Act?

I.U.B Reddy's picture

The much anticipated Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (“the Act”) has just come into force in India on January 1st, 2014. Unlike the replaced 1894 legislation, this act addresses the rehabilitation and resettlement of those who depend on land, in addition to land owners. As emphasized in its title the new act places a greater emphasis on transparent processes at various stages: for example, through its mandatory social impact assessments, public hearings, and dispute resolution mechanisms.  
The other key emphasis in the act’s title refers to a new compensatory mechanism. The new act now provides for up to two times market value, against one time in the previous act and this figure is then doubled by applying a one hundred percent “solatium” against 30% in the previous act (additional compensation). Though people get more compensation under new  act, an increase in multiplier does not address the fundamental question of determining “market value”  in a country where registered values under-represent land purchase price to evade high stamp duties.  The challenge is exacerbated in rural areas where there are fewer land transfers, and therefore fewer registered sales deeds to use as reference points. In such situations, a valuation that is perceived to be more “fair” can be found only through consultations and dialogue, as demonstrated by two case studies from World Bank financed projects in India:

The Rampur Hydro Project is a government-owned project in the mountain state of Himachal Pradesh. When it was being prepared in the mid-2000s, consultations with project-affected communities revealed they were dissatisfied with the standard compensation rates being offered to them by the state government because they are significantly lower than the prevailing open market rates (between USD $6,000 to USD $12,000 per hectare). Several consultation sessions were held between the villagers, the project developer and the state government which resulted in the state government agreeing to re-examine the land valuation process. Several new aspects such as the nature and use of the land, court enhanced  rates and land rates paid by the private sector were factored into in  revising the market value of the affected lands, which was between four to ten times higher than original compensation offered. The community was happier with these new rates and accepted them. Today, the project is nearing completion and will soon be supplying much-needed electricity to the Indian grid. Many villagers have used the compensation money to buy more land elsewhere, improve their homes, plant new orchards, or set up new businesses. 
Multiple consultations are an integral part of the negotiated settlements facilitated by the Bank in a number of highway projects in Punjab, Tamil Nadu and Uttar Pradesh states. In a highways project in the Indian state of Gujarat, the project authorities adopted a two-step process to determining compensation value. First, a valuation under the then prevailing land acquisition act was determined and followed by a comparison with Town Planning and Valuation Department’s methodology consisting of factors such as proximity of land to amenities and transport. Any difference was paid to land owners as a “top up” in addition to land acquisition compensation and seventy-two percent of land owners received some amount of top-up under this methodology. This approach ensured that land acquisition process was not bypassed, but that where valuations could be enhanced using different methodologies to be more closely reflect the market value.

In implementing the new act this openness to dialogue between all stakeholders, and a commitment to exploring mutually acceptable supplementary valuation methodologies will continue to be important if land owners are to benefit from the “fair compensation” envisaged by the act. 

However, the availability of a variety of alternate valuation methodologies cannot be a long term solution. The differences in resulting market rate that they establish underscore the role not just of dialogue, but of underlying power dynamics at play in negotiations over which particular methodology is adopted. A more fair long term solution will only lie in successfully addressing underlying challenges to establishing an impartial, uniform basis for evaluation of market value of land, both in rural and urban areas.


Submitted by Paul Thomas on

Hello can you pleas also advice us on many issues which is related to the same in your country. In my region there will be a construction of the Water Dam,we are now face with the issue of Dam construction and the compensation for the people who farm there in the this area.

The Government does not want to compensate it's people.

Submitted by Sharmila Singh on

Process of Land Acquisition as per the new Act

A majority of the states are not following or are not aware of how to go about the LA Process under the new act. How will then the provisions of the new act like prevention of acquisition of fertile multi cropped land, higher compensation etc be addressed?

Submitted by Abhijit Guha on

The fundamental problem of the new law lies in its non-recognition of Constitutional local self-governments as appropriate governments which can acquire land along with Central and State Governments.The new law is a violation of the Indian Constitution.

Submitted by Mrudula on

Our irrigated crop land is going to be acquired soon by state government.
Its actual market value is almost 15 lakhs,but we don't know how government is going to evaluate market value.
we read whole act,in that it has been mentioned that market value is decided by collector using previous land deals of that area but to evade stamp duty many people under value their land on paper,which is only 4 lakhs.
which value will be considered as market while giving us the compensation????

Submitted by ABHIJIT GUHA on

The recent Ordinance on the new law has almost aborted it by exempting socioeconomic impact assessment and the special provisions on food security for industrial projects. The role of the social scientists is further minimised by this ordinance. Strangely, the party now in power was very much within the democratic process when the law was formulated.

Submitted by advocate s s sayyed,bombay. on

It will be far better if the compensation aspect is explained to the farmers clearly and in the simple manner they shall understand. For example if the land nearby is being actually sold at the rate of Rs.4 crore per acre but none of the agreements of sale shows the real value however the farmer gets that money which is not possible if he has to sale that land to the government.In such situation if the market rate is decided by the government is fifty lacs per acre , then how can farmer be said to have been compensated properly.The real problem is this and if that could be solved and farmers are promptly paid they may notnobject.I expect a proper and convincing and simple reply...can I get it !

Submitted by Abhijit Guha on

The question is not really the payment of compensation in terms of money but proper rehabilitation.Researches on the payment of and use of compensation money have shown that in most cases the compensation is not used in rebuilding the household economy which has been destroyed by land acquisition.The recent ordinance on LARR 2013 in India has virtually closed all avenues for rehabilitation by stopping socioeconomic impact assessment.No compensation can really take into account the future potential of a piece of agricultural land rather in the anme of "fair" compensation allows the fertile land to be used for non-agricultural purposes indiscriminately.Why we forget the value of land as a life-support system and food security asset? Monetary compensation=rehabilitation is the not the right kind of approach, which the present government has taken up.Why then the political parties agreed with the LARR 2013 bill when it was in the opposition?

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