India's Unfinished Land Reform Agenda- Part II

UNFINISHED AGENDA OF LAND REFORMS INDIA NEEDS

(Part II of my blog on Land Reforms in India)

SUBHASH CHANDRA GARG

(Economy, Finance and Fiscal Policy Strategist;

Formerly Finance and Economic Affairs Secretary, Government of India)

In this second part of the blog, I examine and propose the land reforms which India needs for higher growth, farmers’ welfare and greater employment.

India Graduates Past an Agricultural Economy

India of 2020 is radically different than India of 1950.

Although agriculture and allied activities make up only 15% of GDP, India is self-sufficient in food production and most other agriculture produces. Too many workers (about 20 crores as farmers and landless labourers making a little less than 50% of total workforce) are still dependent on agriculture. They earn too little which makes rural India the poverty trap of India. There is no way such a large number of people can remain dependent on agriculture and India’s agriculture productivity can rise or people dependent on agriculture for livelihood can hope to become middle income families.

All the usable land still remains deployed in agriculture. 140 million hectares of land remains under plough still. There are numerous restrictions on farmers with respect to freer use of agriculture land for agriculture purposes.

Over 160 lakh crore GDP is generated in non-agricultural activities. Only small land mass of India- less than 3 million hectares- is used for non-agriculture economic GDP. Non-agriculture GDP is 35 times more productive in land use than the agriculture GDP. Non-agriculture economy employs more than 50% of workforce as well. It is the dynamic segment of economy for not only generating faster growth but also employment.

Freedom to farmers to use its agriculture land for agriculture purposes and liberalised transfer of agriculture land for non-agriculture use constitute the thrust of present land reform agenda.

Side Effects of First Round of Land Reforms

First round of land reforms- land to the tiller, abolition of intermediaries and imposition of ceiling on agriculture land holdings- were driven by two principal considerations.

First was the humanitarian concern. The peasants were miserable because of low availability of farming land, loss of their produce as they had to share a sizeable amount of their produce with the zamindar/state and no permanent ownership/tenancy of land. It was widely shared that farmers’ lot would improve if intermediaries were removed, they get ownership/ permanent tenancy over the land which they tilled and if additional land was made available by way of taking away excess land from large farmers and allotting government land to them.

Second was the economic logic. It was argued that farmers would invest in their land to make it more productive if the land was owned/controlled by them. The policy makers also believed, though it does not appear to be correct, that small holdings as opposed to large holdings are more productive.

The State became paternalistic and overprotective while delivering these reforms. Peasant was considered incapable of protecting his interest. This led to widespread side-effects.

The tenancy laws of most states provided that the agricultural land could not be leased out even for agriculture purpose. Some states which allowed leasing, placed so many conditions that the leasing went out of use. Either you cultivate yourself or keep the land fallow. This led to widespread informal land leasing arrangements. It also discouraged development of village and cottage industry.  

The SCs and STs land owners were considered still less capable to protect their interest. Forget leasing, they could not even sell their land, which others were permitted, to any non-SC or ST person. This led to lands of such farmers becoming still more discounted as such lands could be sold only without formal transfer of ownership.

All these policies led to agriculture remaining a low productivity enterprise. No capital investment was made to improve the productivity of land. No contract production or branding of agriculture produce was possible with peasants producing small quantities of dissimilar quality products.

Population explosion kept on fragmenting agriculture land holdings. Operational holdings which were about 70 million in 1970 have become about 150 million in 2015. With land holdings continuously becoming smaller and smaller and consequently more and more uneconomic, there was very natural large-scale migration to non-agricultural jobs. Informality in agriculture land arrangements has become the normal order of the day.

Requisites of Post-Agriculture Indian Economy

Non-agricultural economy has been expanding faster.

Industry requires only a fraction of land to produce same amount of value addition. Still, land is scare for industrial purposes. It is not available where needed. Numerous restrictions apply on land use for industrial purposes. Services require still less land to produce equal amount of value addition. Service economy, however, runs on large infrastructure. It also requires lot of social infrastructure- houses, schools, hospitals and numerous other facilities. Urbanisation is the result of service economy.

Land is required for construction of infrastructure and urban facilities to meet housing and other requirements of the managers and workers of non-agricultural economy. A house becomes an aspirational asset which lot of non-agriculture economy people find worth making investment in. Infrastructure like roads, flyovers etc. are needed for post-agriculture economy.

All this, however, require much less land than agriculture. Even today, not more than 1% of Indian land mass is occupied by non-agriculture economic use, to produce over 80% of GDP and providing infrastructure and housing for living of more than 1/3^rd of Indian people. The productivity of land use in industry, infrastructure, services and urbanisation is 200 times the productivity in agriculture.

It should be no brainer that we should liberally allow transfer of land from agriculture to non-agriculture use. Unfortunately, there are massive misgivings about the land required for non-agricultural use. There is a widely shared feeling that any transfer of land from agriculture use to non-agriculture use would hurt agriculture and farmers.

This has made transfer of agriculture land into non-agriculture use an extremely difficult preposition. Usable land (total land excluding forests, lakes, rivers, mountains, defence land etc.) is agricultural by default. Transfer of land from agricultural use to non-agriculture use is permissible only exceptionally. The land transfer is mired in so much procedural hassles that direct purchase of agriculture land for non-agriculture purpose and its conversion into such a non-agriculture purpose is rarely executed successfully.

As a result, the State stepped in and used land acquisition law, the eminent domain authority of the state, to acquire land, in the name of public purpose, for industrial, housing and infrastructural use. Land Acquisition law passed in 2013 made it necessary to pay about 4-5 times the market cost of acquiring land for non-agricultural purposes. Land acquisition through the state for non-agricultural purposes has become a casualty of the land acquisition law. 

All these have resulted into extreme shortage of non-agriculture land making land prices go through the roof in India. Land prices have risen to unjustifiably high levels. Land prices are pricing out manufacturing in India now. Infrastructure creation is suffering. The residential housing sector is also in deep trouble.

Five Land Reforms Which India Needs Today

For faster growth and employment creation, India needs four basic land reforms today.

First, Creation of a National Land Record Registry.

Second, Abolition of all restrictions on agriculture land leasing and sale.

Third, Freely permissible conversion of agriculture land into non-agriculture use, subject only to environmental considerations.

Fourth, Purchase and Sale by free will to be the default mode of land transfer; acquisition under eminent domain only for exceptional situation. 

Five, Better management of Government lands; allotment or auction of government land encroached upon.

Creation of a National Land Record Registry

Land record system in the country has evolved over centuries essentially to record agriculture land. For most of the time, non-agriculture use meant only the land which was used for living- the ‘abadi’ land. Industrial and infrastructure use, including urban housing is of more recent origin. Our land record system does not recognise and record what non-agriculture use the land has been put to.

Land record system was meant to serve primarily the relationship of state and the tiller of the land. All land in titular sense at least belonged to the State. Agriculture, for millennia, was the producer of surplus. The land record system was designed to assess and record the land revenue tax to be collected and collected from each land.

Village was the lowest administrative unit for recording ownership of land and collecting land revenue. Land records have been maintained at the village level. Although land revenue as a tax has ceased to be of any significance in post independent India, the land record system essentially continues to be in the same format and system.

India is trying to digitise the land records for quite some time. Currently, a Programme named Digital India Land Records Modernisation Programme (DILRMP) is under implementation. Latest data available on the Digital India Land Records Modernisation Programme-MIS 2.0 Dashboard of the Department of Land Resources inform that computerisation of the key land record- the Record of Rights- has been completed in 5.91 lakh villages out of total 6.56 lakh villages. The Record of Right has been completed in over 90% of villages. The Dashboard further informs that there are, in all, 291.10 million records of rights in the country. There are about 2 records of rights for 1 operational holding in the country.

There are three major deficiencies in the DILRMP.

First, it computerises the record of rights as it exists in the states. There is no national template. These records of rights are also available in local language only. As a result, you do not have a national registry of land records.

Second, the record of right records essentially status of tenancy/ownership rights of the person over the surveyed plot of land. If the land has been converted into non-agriculture use, at best, a note would be recorded in the last column of the record to that effect. It is also a static record and assignment of different rights in the land- leasing, mortgage etc. are either not recorded or updated. The Record of Rights system is not a comprehensive record of ownership and other attributes of ownership over land.

Third, the record of rights is maintained basically for agricultural land. The urban areas or abadi areas usually get clubbed into one or a few survey numbers. Responsibility of maintaining record of buildings is entrusted to urban bodies. In practice, there is no system of recognising land in non-agriculture areas (residential, industrial and infrastructure). The record or rights therefore make up only a part of the land parcels in the country.

It is an extremely important and necessary for us to evolve an integrated system of land survey and record, covering both rural and urban areas. There should be a national template, which can provide for additional information meeting local necessities. We need to move beyond only recording ownership and other rights only from agricultural relationship. A National System of Land Records is necessary and we should take up a 10- year Mission to complete all land records- agricultural, residential, businesses, housing, infrastructure- recording the type of activity the land is subject to, the ownership and other attributes. This National Record should be managed by a Depository Institution. The Land Register should be dynamic register with every change relating to ownership or rights in land being recorded in the Land Register, as part of the transaction itself. The Land Register should be publicly available for information.     

Restrictions on Land Leasing Led to Development of Informal Share-Cropping Arrangements All Over the Country

As self-cultivation was considered a nobler thing in the socialistic state of India and exploiting absentee landlord who got his lands tilled by poor peasants was the arch-typical villain, policy makers decided to outlaw agriculture land leasing in the country. Almost all the land reform laws of the country either completely disallowed land leasing or made it so conditional that the formal land leasing just could not have taken place.

Such statutory bans and restrictions, however, could not overcome the real economy necessity of leasing lands. There were several reasons why the agriculture lands had to be given to another farmer for cultivation. The landowner might not in a physical state to undertake cultivation. Landowner might take up another work or might migrate to cities or towns. Land parcel of someone might be too small to be cultivated. A little larger scale of operations might yield better crops. Another farmer might be more skill-full. These factors also operated equally on the demand side.

Land leasing became an economic imperative and over last few decades has become rampant. The land leasing restrictions have been relaxed in some states over the years. Andhra Pradesh passed- Andhra Pradesh Licenced Cultivators Act in 2011. Some other States brought contract farming through amendment in other laws. Yet, there are millions of landowners who still do not formally lease land.

Informal leasing system developed and became widespread in India. It operates on commercial principles. The lessor and the lessee enter into an informal agreement- commonly described as share-cropping arrangement. The informal lessee cultivates the land and share a part of the crop or its proceeds with the lessor- the share depending upon several factors relating to who bears the inputs cost, type of land, etc.

Indian genius of doing right economic thing but under informal arrangements impose several costs and have numerous bad consequences especially for the lessee share cropper (the tenant). This has been recognised even by the Committees which are very heavily socialistic or left leaning.

To quote from 2008 Committee Report, appointed by the UPA Government:

“Several research studies have pointed out that restrictions on land leasing have reduced the welfare of poor tenants by forcing them to enter into informal arrangements in contravention of the rules and also by restricting the poor peoples’ access to land through leasing. Besides, restrictive land leasing laws have discouraged the land-owners to lease out land and take up non-farm enterprises which is vital for rural transformation. Moreover, due to legal restrictions on land leasing, some land-owners prefer to keep their land fallow than to lease out for fear of losing the land in case they lease out. The lifting of ban on leasing in such cases will result in better utilisation of the available land and labour and also promote both farm and non-farm development by improving the large land owners’ incentive and ability to invest. Also, legalisation of tenancy would create additional incentive to produce more and enable them to access institutional credit and other services.”

The Report, referring to evidence from NSSO, also refer to the reasons why everyone, including the state, preferred the informal land leasing or share-cropping arrangements. Again, to quote,

“Both NSSO data as well as independent field studies show that tenancies are mostly unrecorded and based on oral agreements. This is because of two reasons. First, the land owners do not like the names of tenants to be recorded due to the fear that they may lose their rights. Second, the states which have legally banned leasing out of land, do not make any efforts to record tenancies, assuming that there is no tenancy in existence.”

Comprehensive Reform of Land and Property Leasing Will Serve Legitimate Interests of Lessor and Tenant

Indian policy makers, motivated by socialistic mindset, deformed the land and property leasing systems in the country. The Agriculture Tenancy Laws and Land Revenue Laws of States banned or massively restricted leasing of land. Several laws imposed severe restrictions on rent which can be collected from such leasing. Laws also made it very difficult to remove the tenant from the land. Similar mindset was visible on renting of buildings as well. Rent control laws made renting of residential and commercial buildings an almost exceptional thing in India.

NITI Aayog constituted an Expert Committee on Land Leasing in 2015. The Expert Committee documented the state of land leasing laws and restrictions in the country, which is very well summarised in the Report. It came to the conclusion “Most state governments have either legally banned or imposed restrictions on agriculture land leasing. Restrictive land leasing laws have forced tenancy to be informal, insecure and inefficient. Informal tenants are most insecure and inefficient, as they do not have legal sanctity and access to institutional credit, insurance and other support services. In addition, restrictions on land leasing have reduced the occupational mobility of many landowners who have interest and ability to take up employment outside agriculture and yet are forced to stay in agriculture due to the fear of losing land if the lease out and migrate. In short, the restrictive tenancy laws have proved to be anti-growth and anti-poor even though India’s policy makers thought it differently, while making such laws.”

The Committee recommended negating all the provisions in land laws of the states banning and restricting land leasing. The Committee also proposed a new Model Agricultural Land Leasing Act, 2016. The Act is quite commercial in nature and protects legitimate interests of both lessor and lessee. The Committee also recommended a standard land leasing agreement.

The draft model law was circulated to States. A few States enacted laws to give effect to recommended model law. Madhya Pradesh, Maharashtra, Uttar Pradesh and Uttarakhand either passed new laws or amended their existing legislation. All these laws have however not come into effect as the Centre has not provided its concurrence to such laws. Apparently, the Department of Rural Development objected to the draft law.

Government appointed a Group of Ministers in November 2019 to go into the question of land leasing law again. It is not known what recommendations the GOM made. Finance Minister announced in her budget speech 2020-21 “We propose to encourage those State governments who undertake implementation of following model laws already issued by the Central government: a) Model Agriculture Land Leasing Act, 2016...” Nothing has been heard about progress made in this regard. This matter did not find mention in the reforms announced along with stimulus package.

The enactment of Model Agriculture Land Leasing Act is an absolute must for farmers’ welfare, growth of agriculture and Indian economy.

In fact, the leasing reforms should be wider than proposed in the model law. The scope of the law should be extended to allow leasing for non-agricultural purposes as well. The enactment of this law should accompany deletion of all restrictive provisions in respective tenancy and land revenue laws of the states. The agricultural land taken under leasing arrangements should not be subject to agriculture ceiling laws. Leasing period should be entirely at the will of the parties to the contract. Leasing can be for one crop or for 25 years, it should not matter to the State.

Habits are unlikely to change soon even after this model law is enacted. Apprehensions of land-holders are unlikely to go away. The law would however open a legitimate way to put agriculture land through land leasing which would provide much needed credit and schematic benefits to lessees. Over a period of time, the hiatus between reality on ground and on paper would change.

Free Conversion of Agriculture Land into Non-Agriculture Use

Agriculture yielded revenue to the state. Land was the tax base for collecting revenue from agriculture. Tax on agriculture was called land revenue. The state went into very elaborate ‘settlement’ surveys of land to determine land revenue payable on each plot of land. British conducted comprehensive land settlements every 20 years. Though land revenues ceased to be significant source of tax revenues, yet the settlement system continues in many states still. It works more as actual state of land surveys these days.

Agriculture land operates under severe restrictions. The biggest constraint is that it can be used only for agriculture purpose. Agriculture has become a very low-income yielding business over the years. As a result, asset value of land, as an agriculture property, is quite depressed. Whatever multiple you use for valuing agriculture lands; it would throw up a small valuation as the basic profit emanating from agriculture operations is quite small.

Situation changes dramatically with respect to non-agricultural lands. There is enormous demand supply gap of non-agricultural land. As noted above, less than 1% of India’s landmass is available for use for all its residential, commercial, infrastructure and business needs. Incomes generated from non-agriculture use of land is manifold. GDP produced per unit of land is at its minimum 35 times more for non-agriculture land than agriculture land.

Two major reasons motivate state governments to follow highly restrictive policies to convert lands from agriculture to non-agriculture use. First, there is a mistaken belief that there is shortage of agriculture land and it would hurt farmers if agriculture land is transferred to non-agriculture use. This leads to their preference for land to remain for agricultural use only. Second, it is difficult for the system to handle the big value jump the agriculture use land receives upon conversion in non-agriculture use. Which non-agriculture use the converted land would be put to? What would the difference in value upon the converted land being put to non-agriculture use? How should the real difference in value be captured? Should this difference go to farmers? How much government should take share out it? And so on.

Unable to resolve these issues, the state governments have opted for no or very low conversion as a default policy. Conversion is an exception. The state governments want to capture as much of the expected value increment upon conversion as possible for themselves. Andhra Pradesh Agricultural Land (Conversion for Non-Agricultural Purposes) Act, 2006 provides- “No agricultural land in the State shall be put to non-agricultural purposes, without the prior payment of Conversion Tax to Government.” This law further provides that 3% of the basic value of land notified by the State Government would be payable as Conversion Tax.

Rules for conversion are riddled with too much discretion with the conversion authorities. Odisha Land Reforms Act 1960 provides that only a raiyat can apply for the conversion of agricultural land for purposes other than agriculture and the authorised would allow conversion only if he is satisfied that such conversion shall not violate any master plan, improvement scheme, development plan or town planning scheme or any condition or conditions prescribed for the purpose of dealing with bonafide cases of such conversions.

All these convoluted rules are perfect recipe for inaction and corruption.

Non-agriculture use is more productive. Non-agriculture use of land is also absolutely necessary for meeting residential, commercial and infrastructure demand of the country. Non-residential use will not require vast agriculture areas to be converted in non-agriculture use. If India were to convert only 1-2% of its land mass into non-agriculture use, the entire demand supply would change. Non-agriculture use land would not be as costly as it is today. Industry, infrastructure and housing would become affordable and promote businesses and growth of the country. It would help farmers get little more money. Land availability for agriculture would not be affected at all.

The reform of land conversion regime is, therefore, absolutely justified. Conversion of agricultural land into non-agricultural use should be freely permitted. There should not be any requirement of a state officer passing a conversion order. In fact, the distinction that land is agricultural or non-agricultural should disappear. The environmental, health, safety and other legitimate common consideration are regulated by the laws which govern emissions. Pollution, safety etc. The land, whether called agricultural use or industrial use or infrastructure use would remain subject to these laws.

Purchase of Land for Non-Agriculture Purpose: Sale Should be the Primary Mode; Compulsory Acquisition an Exception

Agriculture land, in legal parlance, usually belongs to the State. However, for all practical purposes the land ownership vests in the person recorded as tenant in the record of rights. In this sense, the agriculture land is a private property of the landholder. Private property is normally transferable by sale and purchase contracts. Lot of agriculture land also gets purchased and sold by such private contracts. The sale gets recorded by the registrar and land is mutated in the name of buyer by the land revenue system. The land remains agricultural land in the record owned by the transferee.

Normal system of free sale and purchase collapses in two situations. First, when the state needs land for public purpose. The State is powerful and relationship between the State and small landholders is grossly unequal. More than that, it is generally difficult for state authorities to accept the price demanded by the seller and extremely determine, in an accountable and objective manner, right price. Consequently, barring exceptions, State does not enter into purchase and sale contracts. Second, whenever private enterprises require large chunks of land for an industrial, infrastructure or residential project, dealing with numerous small holders subjected to restrictive provisions like SC land holder cannot sell to non-SC land holder or the land cannot be converted to non-agriculture use etc. under various laws makes private purchase and sale a completely messy affair.

As a result, larger procurement of land for non-agricultural purposes, has been made under the land acquisition laws. There was another real practical problem. Until converted for non-agriculture use, the agriculture land purchased remained agricultural. Agricultural land is subjected to ceilings. Ceilings were small. Consequently, industry or entrepreneur could not procure agriculture land by private purpose. Land Acquisition Act 1894 became the principal instrument of land acquisition for public and private projects in India post-independence. As development required good amount of agriculture land to be used for non-agriculture purposes, Land Acquisition Act, 1894 came to be used quite frequently.

Land Acquisition Act 1894, both in design and in operation, worked against the landholder farmer. Land could be acquired for almost any purpose as the ‘public purpose was quite widely defined and interpreted in practice. Compensation payable was the market value of similar land. Market value of such similar land, as recorded in registrar’s record, was quite depressed on account of agriculture being hardly a good value creator and the real transaction prices not being disclosed in registration documents. Solatium offered was meagre 30%. For first 30-40 years, the farmers literally got a pittance as compensation. As land was usually taken possession much before the compensation was provided, lakhs of farmers were rendered destitute.

Lands which private sector got out of acquired land produced enormous profits as the value of non-agriculture use such land was put to was much higher. Lot of intermediaries also saw the opportunity. Whenever there was a proposal of land acquisition, some functionaries would get wind of it, buy lands and record the same at high rates and rip the cream off. Farmers also got wiser but not as much. There was still lot of unfairness as regards farmers at the turn of century.

The 2013 Law- Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013- moved the pendulum to the other extreme. Compensation was made 4 times in rural areas and 2 times in urban areas. Such multiples hurt more as the base price as recorded in registrar’s office was manipulated to be much higher than the normal market price. So many other compensation and assistance was mandated to be provided to not only the landowners but also various others affected persons. Provisions of social assessments and obtaining free consent of large number of people (70-80%) in case of projects with private participation were made quite stringent. The process also became impossible to navigate.

Result was quite foregone. Private sector stopped making land acquisition under the 2013 Act. The Government is making payments which are way above anything justifiable. Even projects like NHAI Road Projects, which are exempt from some of the procedural provisions like consent, are paying massive amounts as land compensation. Paying Rs. 10 crore per acre for NHAI projects is becoming normal. Land makes up 50% of the cost of road project. Road building has become an unviable preposition. No road projects are built on Build, Own and Transfer (BOT) basis.

The Government tried to roll back some provisions- prior consent and social impact assessment- in five types of acquisition- projects vital for national security or defence, rural infrastructure projects, affordable housing and housing for the poor, industrial corridors and infrastructure, including social infrastructure projects. The 2015 Amendment Bill could not get through Rajya Sabha. The Government also virtually abandoned the effort. Scene shifted to States. Five-six States have enacted the provisions of the central amendment law by taking consent of the central government.

Irreparable damage, however, is done. Urbanisation, industrialisation and infrastructure building in the country has collapsed. Capital expenditure is constantly coming down. Infrastructure in private sector has become quite a big casualty.

The situation has to change. A balance in the interests of landowners and purchasers has to be restored. Land has to become freely available for industrialisation and infrastructure building of the country. This is necessary to build a $10 trillion Indian economy.

2013 Law mixes up several things. It enmeshes the environmental and social considerations of an infrastructure or industrial project with land acquisition. It confuses the welfare and development of the people with the compensation for land procurement. It fails to recognise the forces at play which affect the market prices and artificially inflates the compensation payable. It forgets considerations of viability of the infrastructure project totally.

Two fundamental reforms are called for in the 2013 law.

First, the applicability of the law needs to be severely limited. It should be used only for the projects which require land for the government to produce public goods and services only. Defence, policing, health, regulation etc. should be the purposes for which land could be ‘acquired’. The 2013 Law extends the liability to provide for Relief and Rehabilitation package even for purely private purchase of land through private negotiations if the land involved is more than the limit prescribed by the Government. These provisions need to be simply dropped. For the private projects, the acquisition law should be used only for the situation where the private entrepreneur is able to buy more than 80% of the land by private negotiations but some minority landowners are unjustifiably holding up remaining land. In such situation, the land acquisition law should be used only for determining what is a reasonable price.

Second, all the confusions and contradictions of the 2013 Law should be sorted out. The environmental and social impact consideration should be made applicable to the project, not the land acquisition. Price paid for land should be related to market price of land plus a compensation. If the underlying market price is not reflective of true price, the same should be objectively determined by the acquisition officer. Other interests in the land property should be recognised and compensated in a fair manner. All the requirements of giving jobs, annuities etc. should be done away with.

Land for industrialisation, infrastructure, housing and other private non-agriculture purposes should become a private transaction. Land acquisition law should be used only for the limited purposes.

Land Reforms for Slums Development

Census 2011 informs that there were 44 lakh households in slums in 2011. At 5 persons a household, this meant over 2 crore people lived in slums in 2011. A Committee of the Government of India estimated that India’s slum population might increase to 10.4 crore by 2018. No good estimates of land area occupied by slums are available.

The Government has taken up numerous programmes to improve housing and basic facilities for slum dwellers. There have also been some programmes taken by state governments for ‘regularising’ possession of slum-dwellers, including providing some title to the land as well. Slums, however, continue to grow. Current migrants’ crisis unleased by economic lockdown imposed to contain Covid-19 exposed miserable conditions of slum dwellers and the fragility of their connection to the slums.

There are two basic facts about slums.

First, all slums are invariably on government and local authorities land. A survey estimated that 60% of slum land is government land and 40% that of local bodies.

Second, slums are almost always inhabited by migrants. Those migrants who come to cities in search of work and unable to find an affordable rental place to live and work from in cities end up finding shelter in slums.

As slums are ab-initio illegal in nature, the utilities have always been reluctant to provide basic facilities like water, electricity and roads in slums. In fact, there was a naïve belief that if these facilities are not provided, the slums will disappear. In last three decades, the policy makers accepted the hard reality that the slum-dwellers and the slums were not going anywhere.

A number of slum development programme have been launched by the central government and state governments to improve living conditions in slums. Some programme have also been launched to improve housing in the slums. Some programmes included granting tenements of small sizes to the occupants of slums.

These programmes have not made much difference. Slums continue to increase. Slum-dwellers continue to increase. Some estimates say that about 10% of India’s population would be living in slums in not so distant future.

It is the economic policies pursued by India which are responsible for creating slums. Elite urban planning did not envisage and allow building of affordable housing and renting places in cities at locations where such supply was needed reflected in the location of slums. Renting as a policy for housing was totally decimated by misconceived policy of rent control and almost impossible ejectment of tenant.

Private sector did not build affordable rentable apartments for migrants to live in cities. The Government planners did not allow any such housing to come up as well. Result was absolute shortage of affordable rentable houses which is at the root of mushrooming slums on government lands.

While the slum development programmes undertaken by central and state governments would somewhat improve the living conditions at least in some slums, the solution, for slums, slum dwellers and the cities, has to be found in the roots of the problem.

First, the government and local bodies must recognise that clearance of slums is neither feasible nor necessary.

Second, the entire government and local bodies land occupied under slums, minus what is required for creating minimum infrastructure of utilities, should be, as a policy, be used for creating affordable housing, mostly rental housing, for migrants.

Third, the slum lands, excluding the utilities infrastructure land, should be auctioned to cooperatives of slum dwellers and private developers for developing primarily rental housing for migrants. As the rental housing would be developed in higher rise buildings, which a liberal policy should allow, the existing inhabitants should be able to get rental housing for them. The proceeds of auction can be used for infrastructure creation and providing cash support for the slum-dwellers.

Slums cannot be wished away. These are the result of a particular set of policies followed. A different set of polices can convert slums into inhabitable and healthier places to live and work. Slum-dwellers provides significant services to the inhabitants of cities. They can serve the cities better if they have comfort of living in good conditions.

CONCLUSION

India’s Unfinished Land Reform Agenda

First, it is time to move over from our present land record system of Mughal era vintage. We should create a modern national system of land records, covering both rural and urban areas. We need to move beyond recording only ownership and other rights only from agricultural relationship. We should take up a National System of Land Records to complete all land records- agricultural, residential, businesses, housing, infrastructure- recording the type of activity the land is subject to, the ownership and other attributes. This National Land Record should be managed by a Depository Institution. The Land Register should be dynamic register with every change relating to ownership or rights in land being recorded in the Land Register, as part of the transaction itself. The Land Register should be publicly available for information.     

Second, enactment of the draft Model Agriculture Land Leasing Act circulated by the NITI Aayog is an absolute must for farmers’ welfare, growth of agriculture and Indian economy. It would be advisable to widen the leasing reforms proposed in the model law. The scope of the law should be extended to allow leasing for non-agricultural purposes as well. The enactment of this law should be accompanied by deletion of all restrictive provisions in respective tenancy and land revenue laws of the states. The agricultural land taken under leasing arrangements should not be subject to agriculture ceiling laws. Leasing period should be left entirely at the will of the parties to the contract.

Third, non-agriculture use of land in India in industrialisation, urbanisation and infrastructure is very small. Less than 1% of land is used in buildings, roads and railways- which produces entire 60% plus non-agriculture GDP. Apprehensions of large-scale transfer of agriculture land into non-agriculture land are entirely misplaced and misconceived. Paucity of non-agriculture land is also responsible for excessive urban land prices. If India were to convert only 1-2% of its land mass into non-agriculture use, the entire demand supply situation for urban land would change. Non-agriculture use land would not be as costly as it is today. Industry, infrastructure and housing would become affordable and promote businesses and growth of the country. It would help farmers get little more money. Land availability for agriculture would not be affected at all.

This calls for fundamental reform of land conversion regime. Conversion of agricultural land into non-agricultural use should be freely permitted. In fact, the distinction that land is agricultural or non-agricultural should disappear. The environmental, health, safety and other legitimate common consideration are regulated by the laws which govern emissions, pollution, safety etc. Linking conversion to such requirements needs to be done away with.

Fourth, the 2013 land acquisition law- The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 needs to be thoroughly recast and refocused.

The 2013 Law mixes up several things. It enmeshes the environmental and social considerations of an infrastructure or industrial project with land acquisition. It seeks to achieve welfare and development of people from the compensation for land procurement. It disregards the principle of market price and artificially inflates the compensation payable. It ignores considerations of viability of the infrastructure projects totally.

Two fundamental reforms are called for in the 2013 law. First, it should be limited to only two types of acquisitions- the government projects to produce public goods and services like defence, policing, health, regulation etc. and private projects where more than 80% of the land has been bought by private negotiations but minority landowners are unjustifiably holding up remaining land. In case of private purpose acquisitions, land acquisition authority should only determine the fair price to be paid. Second, all the confusions and contradictions of the 2013 Law should be sorted out. The environmental and social impact consideration should be made applicable to the project, not the land acquisition. Other interests in the land property should be recognised and compensated in a fair manner but all the stipulations of giving jobs, annuities etc. should be done away with.

Fifth, slums are the result of flawed policy of not creating regulatory system and incentives for building rental housing at appropriate locations in cities. All the lands over which slums have come up are government and local bodies land. The government and local bodies must recognise that clearance of slums is neither feasible nor necessary.

To make slums habitable places to live, entire government and local bodies land occupied under slums, minus what is required for creating minimum infrastructure of utilities, should be, as a policy, be used for creating affordable housing, mostly rental housing, for migrants. Further, the slum lands, excluding the utilities infrastructure land, be auctioned to cooperatives of slum dwellers and private developers for developing primarily rental housing for migrants. As the rental housing would be developed in higher rise buildings, which a liberal policy should allow, the existing inhabitants should be able to get rental housing for them. The proceeds of auction can be used for infrastructure creation and providing cash support for the slum-dwellers.

SUBHASH CHANDRA GARG

NEW DELHI 26/05/2020