The Act, which was passed in September and will become effective from 1 January 2014, aims to establish “a humane, participative, informed and transparent process” for land acquisition, creating an effective mechanism for the rehabilitation and compensation of displaced people and land owners.
However, according to Majmudar, the new measures could “drastically escalate the overall cost of any project” and “make the entire process long-drawn and tedious”.
Under the Act, the process of land acquisition for a public purpose will now begin with a “social impact assessment”, which will be appraised by an independent expert group and summarised in a preliminary notification, stating the reason for the displacement of affected residents.
Although the firm’s critique acknowledges that these measures are “very well intentioned” it also notes that “no attempt has been made to narrow the definition of ‘public purpose’,” adding that such a broad definition will “allow a considerable degree of administrative discretion, which may defeat the purpose” of the Act.
The Act will also empower governments to decide what level of relief and rehabilitation a private company is obliged to provide to residents upon purchasing and developing land. The critique warns against the significant increase in cost implicit in the process, saying that projects could be “adversely affected unless a nuanced approach is taken to balance the expectations of promoters and persons to be rehabilitated.
“Moreover, there is no clarity as to the applicable threshold, and uniformity is unlikely […] the commercial implications for relief and rehabilitation will be different in different states.”
The firm goes on to criticise the mandatory consent provisions of the Act, which require private projects to receive an 80 per cent approval rate among affected communities, while public-private partnerships must receive 70 per cent approval. “This means that the consent of groups of people other than land owners […] may also be required,” which, the critique suggests, will extend the timeline of the project, and “can also be misused by private players.”
The Act’s numerous compensation measures, such as the required payment of an additional 12 per cent per annum to the market value of acquired land or the payment of four times the market rate in urgent acquisitions, will drastically increase the cost of projects and “also increase the commercial gestation and break-even periods.”
“By bringing private land deals under the LARR Act, the intent appears to be to overprotect smaller and/or illiterate land owners,” Majmudar concludes, and while praising lawmakers’ good intentions, the firm warns that various new measures “may prove to be unrealistic and unjustified.”