National Manufacturing Policy

A Hundred Million More Jobs in Manufacturing by 2025 is the clever advertisement for the government's soon to be unveiled National Manufacturing Policy. The jobs are to be created by rapidly growing the share of manufacturing in the GDP from the current 16 per cent to 25 per cent by 2025. The government's seriousness in pushing the new policy is evident from its involvement of senior executives of Tata Steel, Vedanta Aluminum, Maruti Suzuki and other major maufacturers in putting together the plans to implement it.

The situation on the ground, however, is quite in contrast to the ambitious plans. The share of manufacturing in GDP has remained almost flat over the last decade, sharply differing with the historical pattern seen in countries transitioning from being agrarian to industrial societies. The total employment in manufacturing, inferred from the results of the National Sample Survey 66th round (NSS-66) conducted in 2009-2010, is just short of 53 million. Eighty percent of this employment is in 'unorganised' manufacturing (units using electricity that employ less than 10 workers, as well as units not using electricity that employ less than 20 workers). Organised manufacture employs fewer than 11 million workers.

On top of these poor numbers, the employment in India's manufacturing sector is actually showing a declining trend, despite the high GDP growth rate of the recent past. Employment growth in the period 2005-2010 has been entirely in services and in the construction industry, while an estimated 3.6 million jobs have been lost to manufacturing, almost all of them in rural India (inferred from an NSS-66 report of June 2011). It would be a safe assumption that this loss has been entirely in unorganised manufacturing.  Read the full India Together piece here

What lies behind the amazing export performance of SEZ's?

This piece from Business Standard makes for interesting reading. I quote some parts: 

"There is something odd about India’s export numbers.....Exports from 111 such (Special Economic) zones totalled $49 billion in 2009-10, up 123 per cent from the $22 billion earned in the previous year.....What is odd, therefore, is not the export figure for the zones but that for the rest of the country. Total exports last year, at $176 billion, were about 5 per cent lower than in the previous year. If you take out the SEZ numbers for the two years, then non-SEZ exports fell from $163 billion to $127 billion — a sharp drop of 22 per cent....Indeed, non-SEZ exports in 2009-10 were at the same level as three years earlier ($129 billion in 2006-07). The law on SEZs was passed in 2005, and it took a while for the government to start clearing the zones after the controversy over land acquisition and related issues. It was only after this that the zones could start functioning. So, it is safe to assume that hardly any of the exports that took place in 2006-07 would have been from the SEZs."

The writer goes on to pose the question if the growth of exports from SEZ's is purely on account of diversion of exports  from non-SEZ areas to SEZ's to enjoy the tax concessions.

ORF seminar on land acqusition issues related to "Mega Projects"

Observer Research Foundation (ORF) held a seminar on “Mega Project Development: Issues in Land Acquisition” on 20th Jan 2010.

The participants included top serving and retired bureaucrats, senior officers from the corporate sector and a few representatives from academia and civil society. I was invited to speak to represent a civil society viewpoint. ORF will no doubt bring out the seminar proceedings in time as per their usual practice. The following are the notes I used for my speech.

Development sans the people


Large scale development needs land and other natural resources such as water and minerals; in the current model of development, it has no use for the people living on the land. Boundaries have to be erected around the area of the development as quickly as possible after evicting the original occupants so that the work can proceed. The original occupants are not part of the development nor will they benefit from it except perhaps in some incidental way; they therefore have no stake in the project.

SEZ's - Failed Economic Policy

The lack of economic activity in most SEZs leads to the suspicion that many were incapable of attracting economic production units in the first place. The rush to 'denotify' them only reinforces this view. SEZs: engine derailed?

Whose land is 'wasteland'?

Republican India has not broken with colonial law and policy even in the 21st century, continuing with the policy of considering as public land all land not assessed for revenue and taking over such land after declaring it ‘forest’ or ‘wasteland’ irrespective of the history of occupation and use.

Infochange Agenda article

The politics of land acquisition

( Link to original article in Seminar)

                    Of public purpose and private profit

LAND in a single piece, capable of being fenced off so that it can be treated as a ‘foreign territory’, is the fundamental precondition of the ‘Special Economic Zone’. The SEZ policy (currently) calls for very large parcels of land, with a minimum area of 10 sq km and extending up to 50 sq km for the so called multi-product zones. It is to acquire such large tracts of land that private industry, of necessity, needs the help of the state. State governments, vying with one another to attract large business houses, are more than willing to oblige.

Coercive land acquisition by the state in recent times has generated strong opposition and extreme bitterness. In Nandigram, people have fought at great personal cost to retain their lands and homes. In Maharashtra, farmers have stalled (at least temporarily) land acquisition for the Maha-Mumbai and Navi Mumbai SEZs; in Orissa, villagers continue to offer unyielding resistance to the POSCO SEZ.

Sensing the widespread nature of the opposition and keen to move ahead with its SEZ policy, the government has proposed major amendments to the acquisition framework with the Land Acquisition (Amendment) Bill, 2007 and the companion Rehabilitation and Resettlement Bill, 2007 both tabled in Parliament this December. The government claims that the new laws ‘will go a long way in striking a balance between the need for land for development and other public purposes and protecting the interests of the persons whose lands are statutorily acquired.’¹

The land acquisition framework in India is over a hundred years old. To appreciate the problems inherent in it and to be able to evaluate the governments claims, it is necessary to recapture the colonial compulsions that went into its construction and the experience of its use in 59 years of the republic.

The principle of eminent domain – that all land within its territory ultimately belongs to the state – was used by the British colonial state in the 19th century to progressively claim as state property all land without identified private ownership. The colonial administration itself assigned private ownership titles in cultivated land through elaborate survey and settlement operations. The land claimed by the state included ‘waste’ lands – village commons that were not cultivated and other uncultivated or uncultivable land farther from the villages – as well as all the forests.

The same principle was invoked to justify the right of the state to expropriate land, even if it was in private ownership, when it was needed for some ‘larger public good’. Early regulations on land acquisition were made by the East India Company to acquire land for roads, canals and other public works. With the establishment of the railway networks, railways were also declared to be public works.

In 1870, the colonial lawmakers took steps to prettify the law. What was earlier called the ‘Indian Expropriation Act’ was renamed the ‘Land Acquisition Act’. The procedure for acquiring land and steps for determining monetary compensation were described. The judiciary was accorded the role of arbitrator in case of dispute over the compensation. The law continued to be fine-tuned and took the consolidated form of the Land Acquisition Act, 1894.

What were the considerations of the colonial legislators while framing the law to make it more acceptable?² Firstly, the law had to be seen as moral. Privately held land could be expropriated by the state, but only to serve some ‘public purpose’, for performing some public good or for satisfying a public need. However, what constituted ‘public purpose’ was not defined in the law, but left as a prerogative of the government to decide. The acquisition itself could not be questioned as the state was exercising its right of eminent domain.

Secondly, the acquisition had to follow due process. The process provided opportunity to people to prove their interest in a specific acquisition, to appeal against the acquisition with the administration and to seek court arbitration if they were dissatisfied with the compensation.

Thirdly, the forcible acquisition had to be seen as a sale, with all persons with rights in the acquired property seen to be fairly compensated. The monetary compensation was determined on the ‘market value’ of the property. An additional monetary compensation was offered to compensate for the involuntary nature of the transaction and the hardship imposed.

The colonial legislators were very clear that only the loss of individual property rights was to be compensated. Rights of people dependent on, but not owning, acquired land were outside the consideration of the law.

After the end of colonial rule, the republican Constitution of India, by article 372, allowed all colonial laws to remain in force until they were repealed by Parliament. The Land Acquisition Act of 1894, in an essentially unchanged form, continues to be used by the state, with unfailing regularity for the innumerable land requirements of the state, public sector enterprise and private enterprise. The practice of the last 60 years has thrown up many issues with the legislation that have a severe negative impact on the life of the people affected by an acquisition and these are discussed below.

In the early years of the republic, the Law Commission set up by the Government of India was asked to review the land acquisition act. The commission reported that a large number of suggestions were received urging that the term ‘public purpose’ be clearly and exhaustively defined by the act. It however, argued in its 10th report in 1958 that it was ‘neither possible nor expedient to attempt an exhaustive definition of public purposes’ and further that all that could be attempted in the law was ‘to provide an inclusive definition so as to endow it with sufficient elasticity to enable the courts to interpret the meaning of the expression ‘public purpose’ according to the needs of the situation.’³

The definition of the term ‘public purpose’ was kept sufficiently elastic in all subsequent amendments of the law.

The Nehru government not only saw large-scale state land acquisition for public infrastructure and public sector industry but also acquisition for private industry. The law allowed acquisition for private companies only if they met certain restrictive conditions. In a specific case of land acquisition for a textile manufacturing company, the Supreme Court ruled (R.L. Arora vs State of U.P., 1962)⁴ that the acquisition did not meet the provisions of the law. Justifying its ruling, it stated that ‘it could not be the intention of the legislature that the government should be made a general agent for companies to acquire lands for them in order that the owners of companies may be able to carry on their activities for private profit.’

The government responded by amending the law in 1962 to relax the conditions and allow land to be acquired for a private company ‘which is engaged or is taking steps for engaging itself in any industry or work for a public purpose.’⁵ Once again, the elasticity of the term ‘public purpose’ was used to enlarge the powers of government to acquire land for private enterprises. 

Over the years, the courts held land acquisition by the state for a variety of projects of private enterprise for diverse purposes – construction of a students home, houses for members of a cooperative society, manufacture of alumina bricks, an electrochemical factory, a sugar factory, etc – to promote ‘public purpose’.⁶ It became clear that government’s declaration of ‘public purpose’ could not really be challenged.

The unbridled power for coercive acquisition available with governments has been used to support the development model that is in fashion at a certain point in time. In recent years this has meant, increasingly, acquisition of land for large corporations, like for a Tata Motors plant in Singur, and a 100 sq km extant Reliance SEZ in Haryana. Questions are now being commonly asked as to how the government can justify land acquisition for extremely profitable large corporations as a ‘public purpose’ and why the government has to become a land-acquiring agent for these corporations.

Clearly, there is a strong case for the law to be reformed to limit the powers of government under eminent domain by clearly defining the ‘public purpose’ for which it can resort to coercive acquisition.

The acquisition process continues to follow the methods developed by an authoritarian colonial administration, bringing years of uncertainty and fear into the lives of those affected. Once the state decides to acquire land, it tends to avoids development work in that area. Getting the best compensation possible often involves going to the courts; only those with the ability to understand the nuances of the law, engage lawyers and work the system are able to get the benefits while others, usually the poor and uneducated, are shortchanged.

The monetary compensation offered to landowning farmers is also a major cause of dissatisfaction. The compensation is linked to ‘market value’ as determined by recent, recorded transactions in land, though it is common knowledge that these are always undervalued. Land prices also shoot up after permitted land use in an area is changed by the government from agricultural to industrial or residential. The original owners however are denied the benefit of the revaluation of land.

The typical Indian village consists of many categories of persons other than landowning peasants and tenant farmers – agricultural labourers, artisans and others servicing the farmers’ needs. They are not entitled by the law to any compensation, though their livelihoods may be affected by acquisition. When land acquisition covers common property resources of villages such as village grazing lands and village forests, the loss of use rights is not compensated; the people most affected are the poorest who depend on these for their livelihood needs. The same is true of tribal and forest communities, their rights over land not being recognized in the absence of paper documents.

Large scale acquisition, such as for dams and large SEZs, often includes homestead land and causes physical displacement of the population of entire villages in addition to the loss of land and livelihood. The colonial acquisition law does not engage itself with issues such as resettlement or rehabilitation of the displaced.

In the past, even while displacement on an enormous scale occurred due to large infrastructure projects of the state, resettlement was left to the mercy of the administrators of the very projects responsible for the displacement. The first draft of a national rehabilitation policy appeared only in 1993, timed with the adoption of the new economic policy, and, since then, has been reformulated several times. However, the experience over the years has shown that existence of a policy is no guarantee that actual rehabilitation will occur on the ground. The people displaced by the Sardar Sarovar dam on the Narmada, among many others, stand testimony to the low importance attached to policy.

There is then a need for the law to be reformed to ensure that when powers of eminent domain are exercised, it looks at the entirety of loss of rights of all the affected people, not just of those owning or occupying property. Further, the loss of rights because of an acquisition needs to be compensated by the granting of new rights through resettlement and rehabilitation, not just by monetary compensation.

How does the new framework proposed by the government treat the issue of ‘public purpose’ and acquisition for private companies, an issue central to the current controversy?^{7, 8}

An amendment to the acquisition law makes it explicit that requirements of a private company for land for a ‘purpose useful to the general public’, can be considered a ‘public purpose’ (with the limitation that government will acquire a maximum of 30% of the land needed). The phrase ‘purpose useful to the general public’ has sufficient elasticity to encompass almost any land use. This change makes it easier for government to acquire land for companies without fear of legal challenge – the government certifies the total land requirement, declares its purpose to be ‘useful to the public’ and uses its rights of eminent domain.

Further, contrary to claims, the government does not limit its powers to acquire land for companies with this amendment. An inclusive definition of ‘public purpose’ (with differently worded inclusions) has been retained in the law, where an exhaustive and limiting definition was called for. The door is left open for the government to acquire any extent of land for any purpose it sees fit, if past experience is reckoned.

The new framework gives little away on compensation issues. It recognizes that land value increases with change of land use after acquisition, but leaves it to the collector to ‘take into account’ such change while determining the compensation. Thus it is a government decision as to what part of the likely increase in value on change of land use after acquisition is to be passed on to the landowner.

Finally, how does the new framework fare on recognizing rights of people affected by an acquisition and making good the loss of rights?

The distinction between property rights on the one hand and other rights – such as the right to livelihood – on the other, is clearly made. The loss of property rights is addressed by the land acquisition law, while the loss of other rights is sought to be addressed by the resettlement and rehabilitation policy, now presented in the form of a law.

The benefits promised by the Resettlement and Rehabilitation Law come with strong conditionality. Most benefits are not available to non-property owners – such as agricultural workers, artisans etc – who are usually the poorest sections, unless a large number of families are simultaneously affected by an acquisition.

Land and employment are both offered only if available. People cannot seek redress with the judiciary but can only appeal to levels of the special resettlement and rehabilitation bureaucracy. Thus government can forcibly acquire land but cannot be held accountable to provide other land as a replacement; government can render a person unemployed but cannot be held accountable to provide alternate employment.

The proposed amendments to the land acquisition law appear to be a hasty effort by the government to sidestep the issues and allow it to proceed with its plans for setting up giant SEZs. The law does not limit the powers of government to acquire land for what can be seen to be purposes of private profit. The law does not guarantee that all those who lose their dwellings and livelihood due to such acquisition will be compensated with alternate dwellings and livelihoods. It remains to be seen if this will be acceptable to the people targeted for displacement.

Footnotes:

1. From the statement of Objects and Reasons provided with The Land Acquisition (Amendment) Bill, 2007. Available at the URL: http://www.prsindia.org/docs/bills/1197003951/1197003952_Land_20Acq.pdf

2. The following discussion on the notions of ‘morality’, ‘fair play’, etc in colonial law draws on the paper by Ramanathan (1996).

3. Law Commission of India, 10th report, p. 18. Available at the URL: http://lawcommissionofindia.nic.in/1-50/Report10.pdf

4. R.L. Arora vs State of U.P., AIR 1962 SC 764.

5. See Sec. 40 (1) (aa) of the Land Acquisition Act.

6. P.K. Sarkar, Law of Acquisition of Land in India, 2nd edition, Eastern Law House, New Delhi, 2007, pp. 1184-1188.

7. The Land Acquisition (Amendment) Bill, 2007. Available at the URL:http://www. prsindia.org/docs/bills/1197003951/1197003952_Land_20Acq.pdf

8. The Resettlement and Rehabilitation Bill, 2007. Available at the URL: http://www.prsindia.org/docs/bills/1197003987/1197003987_Rehab_20and_20settlement.pdf

References:

Usha Ramanathan, ‘Displacement and the Law’, Economic and Political Weekly, Vol 31, 1996.

Ravi Hemadri, Harsh Mander and Vijay Nagraj, ‘Dams, Displacement, Policy and Law in India’, contributing paper to the World Commission on Dams, 1999. Available at the URL: http://www.dams.org/docs/kbase/contrib/soc213.pdf

Links:
National Council for Teacher Education Syllabus: Diploma in Elementary Education

SEZ's and the land acquisition law

My India Together article on this subject can be seen here. Reproduced below

SEZs: A history of injustice and abuse

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.

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 electro-chemical 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.

01 October 2007