A recent paper by Maitreesh Ghatak, Sandip Mitra, Dilip Mookherjee and Anusha Nath calls for well-informed and flexible ways of compensating displaced landowners to ensure fast growth along with an equitable distribution of its benefits in India

Ghatak, Maitreesh

Mitra, Sandip

Mookherjee, Dilip

Nath, Anusha

LSE Research Online

2013-9-13Learning from Singur: Land acquisition and compensationin Indiablogs.lse.ac.uk /southasia/2013/09/13/learning-from-singur-land-acquisition-and-compensation-in-india/A recent paper by Maitreesh Ghatak, Sandip Mitra, Dilip Mookherjee and Anusha Nath calls for well-informed and flexible ways of compensating displaced landowners to ensure fast growth along with an equitabledistribution of its benefits in India.Disputes over compensation of rural communities that are displaced for the purpose of industrialisation havebecome widespread in India as well as various countries in Asia and sub-Saharan Africa. One of the most prominentexamples in India occurred in the second half of 2006, when the West Bengal government acquired 997 acres ofprime agricultural land under the aegis of the 1894 Land Acquisition Act to enable Tata Motors to build a factory forNano, its new model for a small and cheap car.In order to woo Tata Motors away from other Indian states offering favourable tax concessions, the West Bengalgovernment allowed Tata Motors to specify the location of its factory, and offered it a long lease on favourable terms.Tata Motors chose an area in Singur located on the Durgapur Expressway about 90 km from Kolkata. The WestBengal government subsequently decided to acquire the area required for the factory and offer compensation tothose whose lands were being acquired as required by the 1894 Act. The local community of Singur was incensedby this action, generating resistance from households facing forced acquisition. This resistance soon snowballedinto a protest movement, which the main opposition party, the Trinamool Congress (TMC) subsequently galvanised.As time went by and Tata Motors started building its factory, some of those who had originally agreed to thecompensation changed their mind and joined the ranks of the protesters. The TMC demanded that the governmentreturn the lands of those who refused the compensation. Local outbreaks of violence occurred, and the protestsacquired national and international media attention. Two years later, Tata Motors decided to withdraw from WestBengal, and took the Nano car factory to Gujarat.While the events of Singur are well known, there is substantial disagreement regarding the underlying causes.Critics of the erstwhile Left Front government argue that the livelihoods of large numbers of poor cultivators andagricultural workers were imperilled by the land acquisition; the government did not pay adequate compensation forthe lands acquired; under-compensation and adverse economic impact explains (and thus justifies) the refusal of1/3many landowners to accept offered compensation. The opposite point of view is that the refusal to acceptcompensations by some landowners and the uprisings in the local community were politically motivated rather thanjustified by adverse economic impact or under-compensation.In this context, this paper addresses the following questions: Whose lands were acquired: poor cultivators orwealthier landowners and non-cultivators? How much land was acquired: was it large relative to lands ownedpreviously for the majority of affected landowners? Did the government offer compensation at the market value oflands acquired? Could the decisions of landowners to refuse the government’s offer be explained by under-compensation, and/or the extent to which their livelihoods were affected? What was the impact of the acquisition andcompensation offered on incomes, consumption and assets of those whose lands were acquired, as well as tenantsand workers that had previously been employed on acquired lands?To answer these questions, detailed household surveys were conducted in 12 Singur villages: six where land hadbeen acquired (including both households whose lands were and were not acquired), and six not subject to any landacquisition to use a standard of comparison to assess the impact on those whose lands were acquired.The following are our main findings:How much land was acquired, and from whom? The majority of plots acquired were non-negligible in size,compared to the average in Singur. Most of the land was acquired from marginal landowners, and from thoseengaged in cultivation on the acquired plots. For most affected owners, more than half the land they owned in 2005was acquired.Did the government offer compensations at the market value of the lands acquired? While this was true onaverage, a significant fraction of landowners were under-compensated owing to misclassification of their plots as sali(single-cropped low land that does not receive assured irrigation from state canals) rather than sona (multi-croppedland receiving assured irrigation) in the official land records, besides inability of the latter to incorporate othersources of plot heterogeneity.What explains decisions of owners to accept the offered compensations? Owners with under-compensatedtypes of plot were significantly more likely to reject the compensation offer. Those whose livelihoods were more tiedup with cultivation and those with possible speculative motives (absentee landlords or those who purchased theplots rather than inheriting them) were more inclined to reject.What was the impact of the acquisition on incomes and assets of those affected? Acquisition of land resultedin 40 per cent lower income growth for owners and half that for tenants. Consumer durables grew more slowly forundercompensated affected owners, compared to others in the same village. Agricultural workers that were directlyaffected experienced significant reductions in employment earnings compared with unaffected agricultural workers,who in turn, experienced smaller earnings growth compared with non-agricultural workers.Hence, land acquisition in Singur imposed significant economic hardships on a large fraction of affected owners,tenants and workers. A large fraction of owners were undercompensated relative to market values. Tenants wereundercompensated and agricultural workers were not compensated at all. While it is difficult for us to say how muchlocal reactions were politically motivated, these economic hardships provide a plausible explanation for some of theobserved refusals and protests.An obvious implication for future land acquisition policy is the need to base compensation on better measures ofland values than is permitted by official land records. Getting the soil grade right will reduce the incidence of under-compensation, chances of rejection and subsequent protest significantly. Displaced tenants and workers whoconstitute the poorer sections of these rural communities also need to be compensated in some way to avoidundesirable adverse impacts on their livelihoods, as well as to minimise any political fallout.Another difficult issue concerns the principle of basing compensations on market values. Many owners value their2/3land more than their market values on account of other attributes of land, such as financial security, complementaritywith farming skills, locational factors, or considerations of identity or social prestige. That is why long-standingowners have not exercised the option to sell their land at market prices. To ensure that such owners are adequatelycompensated would require raising compensations above market values.What makes this difficult to achieve in practice is that valuations of land have an inherently subjective nature varyingfrom owner to owner. Current land acquisition bills in the Indian Parliament and state legislatures have peggedcompensations at arbitrary ratios of market value. Getting these ratios right is critical. Setting the compensation toolow risks providing inadequate compensation to large numbers of owners; setting them too high risks undulylowering the pace of industrialisation and overall economic growth.Even if market values are used, our results indicate a greater need to carry out surveys of the affected properties toevaluate their current characteristics, and use the results of such surveys to value the lands, instead of relying onofficial land records which are in poor shape in many parts of India. Creating a more well-informed and flexible wayof compensating displaced landowners can go a long way in ensuring fast growth along with an equitabledistribution of its benefits.For more information on this topic – including details about the survey design, data collected, and detailed findings –see M. Ghatak, S. Mitra, D. Mokherjee, A. Nath, “Land Acquisition and Compensation: What really happened inSingur?” in Economic & Political Weekly, Vol. XLVIII No. 21, 25 May 2013.   About the AuthorsMaitreesh Ghatak is Professor of Economics at the London School of Economics; Sandip Mitra is with the IndianStatistical Institute, Kolkata; Dilip Mookherjee is at Boston University; and Anusha Nath is a graduate student atBoston University.Copyright © 2016 London School of Economics3/3

Learning from Singur: land acquisition and compensation in India

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