Abstract
Land acquisition by the government or a private entity to aid industrialization remains a critical policy concern. In 2013, The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act (LARR Act of 2013) became the premier land law in India. The Act creates a transparent process through which buyers can acquire land for industrialization and other commercial activities. However, the succeeding government was dissatisfied with some provisions in the original Act and floated two Amendment Bills in 2014 and 2015. In this article, we examine if the proposed removal of the “Consent” clause, a key provision in the original Act, is necessary. The removal would allow the government to impose eminent domain under certain conditions. We propose that removing the “Consent” clause is necessary for social welfare maximization and maintain that compensation based on marginal utility of income is the correct approach as it maximizes social welfare and helps maintain a balanced budget.
Highlights
Land acquisition for generating public goods such as infrastructure projects has remained an important policy concern in India
We examine the impact of the “Consent” clause in the original bill and ask if its removal is beneficial for social welfare
The LARR Act of 2013 is a huge step in the correct direction and the amendment bill, as shown through the propositions, might have enhanced the effectiveness of the Act. It would have ensured faster development of the manufacturing sector and Special Economic Zones (SEZs), which might lead to a higher job and GDP growth rate
Summary
Land acquisition for generating public goods such as infrastructure projects has remained an important policy concern in India. Land is a fixed resource and redistributing it among different groups through the market might result in second-best allocations. This implies that one group, the buyer or the seller, might be worse-off after the transaction occurs. The role of the government in land markets must be reexamined. This article examines the necessity of a key amendment proposed in the bill—the removal of the “consent clause” in five areas: industrial corridors, public-private partnership projects, rural infrastructure, affordable housing, and defense. We ask whether the removal of the consent clause would have led to efficient land allocation outcomes
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