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DIVERSION OF L AND AND

DISPLACEMENT IN I NDIA :R EVIEW OF E VIDENCE ANDISSUES

Working Paper 40

Amita Shah and Animesh Kumar


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The CPRC-IIPA Working Paper Series disseminates the findings of work in progress to encourage exchange of ideas about poverty relatedissues. The findings are being placed in the public domain at theearliest with a view to generate wider debate.

This paper has been published as a chapter in S.M. Dev and K.S.Babu eds. (2008). Indias Development: Social and EconomicDisparities, Manohar/IDPAD, New Delhi, pp. 348-365.

The views expressed are those of the authors.

ISBN : 81-86641-52-1

For information about the working paper series, contact:

Professor Aasha Kapur Mehta

Professor of Economics

or

The Registrar/Deputy Registrar (Academic Support)Indian Institute of Public Administration

Indraprastha Estate, Ring RoadNew Delhi- 110002


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CPRC-IIPA Working Paper No. 40

Diversion of Land andDisplacement in India: Review

of Evidence and Issues

Indian Institute of Public Administration, New Delhi

Chronic Poverty Research Centre

2011

Amita Shah Animesh Kumar


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Amita Shah (Ph.D.) is an economist, has wide ranging experienceof conducting research on various aspects of development economics.

She is a Professor at Gujarat Institute of Development Research,Ahmedabad (India). Her research interests include sustainableagriculture and rural livelihood, participatory natural resourcesmanagement, gender and development, trade and environment,migration and agriculture-industry interface, and chronic poverty.

Animesh Kumar has a background in regional studies withresearch focussed on watershed management and institutionaleconomics. He also has a deep interest in land-use changes andagriculture-environment interface.


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ContentsPAGE

1. Introduction 1

2. Land use and allocation in a changing economy:Some evidence 4

2.1 State regulations and market failure 4

2.2 Land use and diversion in India: Estimates andissues 5

2.3 Displacement and issues in resettlement andrehabilitation: A brief review 7

3. Conversion of peri-urban agricultural land:Insights from existing literature 18

3.1 Growing urbanisation: Push and pull factors 19

3.2 Theoretical perspectives: Market imperfection 20

3.3 Impact of land conversion in the urban periphery:Select evidence 23

4. From market to state failure: Is there a way out? 294.1 Towards a holistic approach 29

4.2 Compensatory mechanisms: Problems and wayforward 31

5. Summing up 33

References 38Annex 1: Typology of land diversion and mediatingagency 42


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Abstract

One of the important and yet less attended down sides of Indias major stride towards economic development has beendisplacement of a large number of people from the socio-cultural milieu as well as natural resources, critical for their survival. While there is no systematic assessment of themagnitude and the complexities of displacement faced by

people in different situations, a rough estimate suggests that nearly 11 to 18 million persons may have been displaced dueto various projects of planned development since the 1950s.

While there can not be any denial of the fact that land is abasic and very critical factor of production for all kinds of economic activities, it is essential that allocation of land across

various sectors takes place on a sound theoretical foundationwith due consideration for multiple objectives of development (including rights to access factors of production and povertyreduction). The reality is quite different. The process of diversion of land from forest or agricultural sector in India ismainly an outcome of congruence of various vested interests-the state, the private sector (often multi-national corporation),

and the local elites. Globalization has fostered these processes further through liberalizing the land use policies.

The existing literature suffers from absence of a larger picture pertaining to the magnitude, impact and implicationsof land diversion owing to different types of development-induced displacement in different parts of the country. The

present paper is an attempt to bridge this gap by reviewing theevidence on diversion of land and displacement; policies and practice; and possible alternatives for addressing the issuesof alienation among those already deprived and marginalised

from the process of economic development.

Key words: Land, Displacement, Resettlement, Rehabilitation, India, Orissa, Mining


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Acknowledgements

The authors are grateful to CPRC for the opportunity towork on an important yet relatively less addressed issue

pertaining to drivers of chronic poverty in India. Thanks arealso due to Centre for Economic and Social Studies, Hyderabad and Institute of Social Studies, The Hague for providing anopportunity to present an early draft of the paper in the End-

Symposium of the Indo-Dutch Programme on Alternatives in Development on Indias Development: Even or Uneven? Reflections on Development Theory and Practice at Hyderabad, November 2-3, 2006.


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Diversion of Land andDisplacement in India: Review of

Evidence and Issues Amita Shah and Animesh Kumar

1. Introduction

One of the important and yet less attended downsides of Indiasmajor stride towards economic development has been diversion of land and displacement of a large number of people from the socio-cultural milieu as well as the natural resources critical for their survival.

There is no systematic assessment of the magnitude and thecomplexities of displacement faced by people in different situations,but a rough estimate suggests that nearly 20 million persons mayhave been displaced owing to various planned development projectssince the 1950s (Fernandes, 1994). Apart from this sheer magnitude,the phenomenon has highlighted glaring discrepancies in the waydevelopment has been perceived and rescue (compensatory)

mechanisms have actually worked. As a result, there has been a shiftof resources from poorer to richer sections of society. It is thereforeimperative to evolve a framework, which not only seeks to recognisethe stakes of the displaced but also provides a mechanism that enablesthem to benefit fairly from the processes of development.

The legal structure that governs land alienation and compensation

in India is complex. While policies pertaining to diversion of landfrom forest and agriculture to other uses seemed conservative (andalso conservationist), in practice they remained liberal and lackedtransparency. There is a lack of information sharing on the rationalefor the diversion of land and the basis and extent of compensation.The process of diversion of land from the forest or agriculture sectoris the outcome of a congruence of various vested interests those of

the state, the private sector (often multinational corporations) andthe local elites. Globalisation has fostered these processes furtherthrough liberalisation of the land use policies.


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2 DIVERSION OF LAND AND DISPLACEMENT IN INDIA

Land is in limited supply and is the critical factor of productionfor almost all kinds of economic activities as well as for humansettlement (Shah et al, 2005). It is therefore essential that its allocationacross different economic activities and uses is based on soundtheoretical premises, combined with the ground realities of multipleobjectives some of which often go beyond the narrowly definedgoals of economic growth per se. In a predominantly agrarian economysuch as India, the entitlement to livelihood and access to factors of production, especially land, are important objectives that need todetermine allocation of land across different uses and users. The

allocation mechanism must not only address the needs of economicactivities or sectors (including housing) but also look into the specificneeds of various ecosystems, regions and communities.

One of the most important problems facing land use policy inIndia is the asymmetry between the sectoral composition of GrossDomestic Product (GDP) and peoples dependence on land-basedactivities to derive a basic livelihood. Whereas the primary sectoraccounts for about 24 percent of GDP, it provides employment(though partial) to nearly 60 percent of the people and utilises nearly64 percent of the total geographical area (including forest). On theother hand, the secondary and tertiary sectors account for 76 percentof GDP and use only 8 percent of the geographical area of the country.

Given the heavy dependence on the primary sector for employment

and livelihoods, policies were, until recently, fairly conservative withrespect to diversion of land from agriculture or forests to other uses,such as development of infrastructure (including irrigation), industryand mining and urbanisation. While this is valid, given the agrariannature of the Indian economy, this approach is facing severe pressure,owing to increasing demand from the rapidly growing sectors (suchas industry, mining and infrastructure). Additionally, the substantiallylarge increase in population has led to increased urbanisation.

The conservationist, hence conservative, policies pursued so farare prohibitive rather than proactive in terms of evolving a rationalefor allocating land for the rapidly growing sectors other than theprimary sector, which contribute more than three-fourths of IndiasGDP. But this does not mean absence of diversion to other uses. In

fact, these policies have given rise to processes and mechanismsthat have proved counterproductive to the very cause of conservation.


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AMITA SHAH AND ANIMESH KUMAR 3

For, in the absence of a well laid-out policy for land allocation,decisions are often taken under duress because of lobbying and politicalpressure. This creates a fertile ground for adhocism and corruption.At the same time, those who get displaced in the process gain littleby way of compensation, as the procedure does not allow adequatespace for building counter pressure, public debate and properlynegotiated outcomes. The result is a lose-lose situation, wherebyneither the least damaging solutions in allocating land for alternativeuses are obtained nor is appropriate compensation for the displacedensured.

The issue of land allocation has been one of the most contestedpolicy issues. It has triggered many controversies, especially whendevelopmental projects for irrigation, mining and other infrastructure(like ports, etc.) have involved large-scale acquisition of land and/ordisplacement of the people. The latest is the controversy about specialeconomic zones (SEZs). In fact, urbanisation is the most importantuse to which land is being diverted (Sharma, 2003). The controversyabout diversion of land for urban industrial uses is a pointer to thefact that the issue is not so much about diverting the requisite amountof land for a sector or economic activity, which is important not onlyfor economic growth but also for reducing population pressure inthe primary sector. Rather, the objections are raised mainly on accountof the vested interests that develop over diverting agriculturally morefertile land, invariably without appropriate mechanisms of compensation to the farmers and also on the rationale of providingfiscal concessions, etc.

The existing literature therefore suffers from the absence of alarger picture pertaining to the magnitude, impact and implications of land diversion owing to different types of development- induceddisplacement in different parts of the country. The present paper isan attempt to bridge this gap by reviewing the existing understandingon the various issues related to land use, diversion from the primarysector and displacement in India. The main objectives of the paperare to examine: 1) the extent and magnitude of diversion of land fromforest/agriculture through acquisition as well as conversion inducedby the land market in the urban fringe; 2) recent reforms in landpolicies; and 3) implications for evolving a framework for allocationand use of land with clearly stated mechanisms for sharing of benefitsfrom development projects with the displaced and the poor.


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Section 2 presents a brief account of land diversion anddisplacement owing to different types of developmental projects andmajor issues pertaining to each of them. Section 3 discusses therapidly growing land market and examines the impact on householdsin the periphery. Section 4 offers a tentative outline for a framework for land policy that simultaneously addresses issues of use anddevelopment (or regeneration and management) as well as allocationof land across different sectors. Section 5 provides a summary of the major observations.

2. Land use and allocation in a changing economy: Someevidence

2.1 State regulations and market failure

Land use and land markets have been subject to large number of regulations across countries developed and developing. The basicrationale underlying state regulations is the non-renewable nature of land, which is the basic factor of production. Land, besides beingcritical for ensuring sustained economic growth, under differentcategories of capability and uses, performs specific ecologicalfunctions. Each of the various uses, especially in primary sectoractivities (such as crop cultivation, pasture development, plantations,livestock rearing, inland fisheries and mangroves in the coastal areas)makes a specific contribution towards sustaining diversity and thereby

ecological balance. Moreover, land and its use or management isimportant for facilitating drainage, hence governing groundwaterregimes or catchments (Government of India, 2006). This, in turn,has special significance for managing natural resources on a watershedbasis. Minerals beneath the surface land also have special implicationsinsofar as they are both exhaustible and non-renewable.

Finally, land, as noted earlier, plays a significant role in shaping thesocio-cultural milieu in predominantly agrarian economies. Althoughrooted in economic value as an ultimate source of economic security,land becomes a symbol of social status and a means of derivingpolitical power.

It is in this context, that various economies have tried to evolve astrategy for land use and its allocation over different sectors. The

most important thread underlying the policy approaches across variouseconomies is recognition of market failure in allocating land across


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different economic activities, especially the shift away from theprimary sector, where intrinsic value of land as a natural resource isstill retained. Obviously, marginal productivity measured in terms of monetary value is not the appropriate indicator for determining thediversion of land from the primary to other sectors in the economy.The demand-supply dynamics, at a given point in time or even in thecontext of forward trading and speculative transactions, may notcompletely capture the future as well as existent value of land, andthe forest, water and minerals embodied therein. This mainly leavesland markets within urban and peri-urban areas, where land is already

diverted from primary sector activities and is subject to growth,which at least in theory, is possible to stipulate. Economic theory,especially in the neoclassical tradition is thus most applicable to landmarkets in urban and per-urban areas. For the rest, perspectivesemanating from various disciplines or analytical frameworks, suchas environmental and ecological economics, political economy anddevelopment with equity and a human face, may have to be combined.

Unfortunately, a holistic perspective like this is yet to emerge forsimultaneously addressing the critical issue of land use, allocationand management.

The issue of land use and allocation policy consists of a numberof divergent scenarios such as:

Diversion of land across different uses within primary

sectors i.e. from pastures, forests and permanent fallow(or wasteland) to crop land and sometimes vice versa, andfrom any other earlier uses to water bodies and vice versa;

Diversion from primary sector i.e. from cropland, pastures,forest to industry, mining and infrastructure, includingirrigation;

Diversion from the primary sector to urban development:this is a special variant of the category above, but needs tobe treated as separate because its location as well as pace isdeemed to be limited and subject to fairly approximatestipulation as compared with the other two categories.

2.2 Land use and diversion in India: Estimates and issues

Increasing demand from some of the rapidly growing sectors (likeindustry, services and infrastructure), along with mounting


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demographic pressure in the country, has led to conversion of landfrom the primary sector (i.e. agriculture, pastures, forest) to alternateuses. The proportion of area under non-agricultural uses more thandoubled between 1950 and 2001, from 3.29 to 7.86 percent (seeTable 1). Besides this, more than 6 percent of the area is still in thecategory of barren and uncultivable land. Over time, the area underthe two categories of land use has declined from 16.7 percent to14.1 percent.

Table 1: Changes in land use patterns in India (%)

1950-1951 1975-1976 2001-2002Forests 14.24 21.92 22.58Area under non-agricultural uses 3.29 6.13 7.86Barren and uncultivable land 13.42 7.09 6.27Permanent pastures andgrazing land 2.35 4.14 3.48Land under miscellaneous trees

and groves 6.97 1.19 1.11Cultivable wasteland 8.07 5.83 4.37Fallow land 9.89 7.16 8.15Net area sown 41.77 46.55 46.19

Note : Figures as percentage share of total reported area.Source : Directorate of Economics & Statistics, Ministry of Agriculture.

An important feature of the changing land use pattern in India isthat only a part of the increase in land under non-agricultural usesseems to have come from the category of barren and uncultivableland. The evidence suggests that a large part of the land diverted forirrigation, mining, infrastructure and urban industrial use in peri-urbanareas has come from forests, pastures and cultivable land. Initially,diversion from primary sector uses was compensated for by a net

increase in land under cultivation, a large part of which may havecome from cultivable wasteland, besides settlement of forest landfor agriculture. Unfortunately, this kind of expansion does not seemto be possible any more. The result therefore is a net decline incultivated land, as observed recently (Reddy, 2006).

Unfortunately, there is no systematic estimate of the extent of land diversion for different uses. The land use data also fail to capturethe real picture owing to limitations in the system of land records andillegal ( benami ) transactions, especially in peri-urban areas.


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Nevertheless, a recent attempt to gauge the magnitude of land beingdiverted in the urban periphery of Hyderabad came up with a numberof 90,000 ha (Reddy, 2006). Extrapolating this for, say, 10 to 12

cities with an average size of Hyderabad give a figure of nearly 1million ha. This is less than 1 percent of the total geographical area of the country.

The problem, as noted earlier, is not merely about the magnitudeof land being diverted; the issue is which land, at what cost and withwhat kind of compensation package? In the case of peri-urban areas,the land is most likely to be under cultivation at the time of diversion.In what follows, we present a brief account of the extent of displacement under major types of developmental project and theissues related to each of them. This will help provide the context forthe recent controversy on diversion of land for urban industrial usesthat is discussed in the next section.

2.3 Displacement and issues in resettlement and rehabilitation: A brief review

It has been estimated that, over a five-decade period between 1951and 1990, more than 20 million people were displaced by variousprojects (Table 2). Of these, as much as 77 percent of the displacementwas caused by irrigation/multipurpose dams, followed by miningactivities (12 percent) and industry (5.9 percent). The type of land

and the process of obtaining it vary across different categories of project, as depicted in Annex 1.

Table 2: Estimate of displaced persons (DPs) by type of project from1951 to 1990

Total DPs % of total Resettled Share of tribals(lakh) DPs DPs (%) in DPs (%)

Dams 164 77.0 25.0 38.5Mines 25.5 12.0 24.7 52.2Industries 12.5 5.9 30.0 25.0Wildlife 6.0 2.8 20.8 75.0Others 5.0 2.3 30.0 25.0Total 213 100 25.0 40.9

Source : Fernandes (1994).

Another important observation from Table 2 is that only 25percent of the displaced have been resettled, owing to a complex


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mix of factors: weak policy, inadequate funds and administrativesetup and, above all, low political commitment in the wake of almost total lack of agency to take up the issue on behalf of thedisplaced.

Irrigation

Big dams have a peculiar feature of representing one of the mostsuccessful experiences in Indias economic development and at thesame time being a major culprit of displacement and unevendevelopment in the country. The big irrigation projects have

contributed significantly towards enhancing Indias capacity toproduce food grains and thereby provide employment as well as foodsecurity (beside flood moderation and drought mitigation), hydropowergeneration and groundwater recharge (Baijal and Singh, 2000). Butthe flipside of this development is fairly large, especially when onelooks at complex ecological issues based on their long-termenvironmental impact (Bandyopadhyay et al. , 2002).

Displacement caused by large irrigation projects is considered tobe the most contentious, simply because of the fact that theseencompass extensive tracts of land. Most of the displaced populationsare the inhabitants of the upper reaches. Owing to poor quality of land there, they generally live in poverty. The construction of damsnecessitates their displacement, which only adds to their miserable

condition. As the quality of land is generally not good, it does notfetch high prices and, if land is provided, it is also uncultivable. Thenet result of the entire process is that the poor are made to sufferwhile the farmers in the lower reaches reap all the benefits. Thus, theequity issue remains unattended.

An important aspect of the draft Resettlement and Rehabilitation(R&R) Policy in irrigation is provision of land in the command area.In fact, this should be the acid test for assessing the benefit to costratio of an irrigation project. The experience over a long period of time, however, suggests that this is not feasible politically as wellas administratively. Alternatively, the norm of land for land has beenaccepted as part of the R&R Policy. The Sardar Sarovar Project(SSP) on the Narmada river in Gujarat presents exemplary evidenceon how the norm could be followed in actual practice (Iyengar, 1997;Palit, 2004).


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But experience elsewhere has been quite disappointing, as indicatedby whatever limited efforts have gone in managing an R&R packagefor oustees in the Narmada project in Madhya Pradesh. Apparently,the main issue is not about finding adequate land for resettlement of a large number of oustees, not to talk about the quality of land andinadequacy of the requisite support for cultivating the land efficientlyin a new environment. The evidence suggests that, despite beingprovided with land, its poor quality has resulted in negativeconsequences for the livelihoods of oustees (Whitehead, 1999; Sah,2003). Since the R&R policy process is still ongoing, it may be

premature to make any final comment on the outcome.While the process is extremely complex, it is critical to recognise

that even moderately successful R&R is contingent on the processof negotiation and handholding by civil society organisations (CSOs).The (limited) success in the case of the SSP is attributable largely tothe strong support of a non-governmental organisation (NGO) (ArchVahini) in Gujarat, overseeing the entire process as an officiallyappointed agency. There is a great deal to learn from this experience,but the larger issue of effective negotiation remains unattended.Negotiations should imply effective dialogue between those with landin submergence (losers) vs. command (gainers) areas. The state andCSOs should facilitate negotiations according to the overall frame of R&R. Such processes, however, seem quite farfetched in a youngdemocracy such as Indias; the engineering- as well as water-centricapproach to irrigation projects makes it more difficult.

At this juncture, the story of big dams in India seems to be rapidlydecelerating, a consequence mainly of widespread protest (Khagram,2005). Nevertheless, the challenge of completing the unfinished R&Ragenda in the case of completed irrigation projects is looming large.This needs to be attended to on a priority basis, rather than acceptingit as a fait accompli. The process, as is evident from the experienceof the SSP, has to be long term rather than a one-shot resettlement,and should be based on possible processes of negotiation, as notedabove.

Moreover, the costs human as well as ecological borne bysociety need to be seen in the light of alternative approaches for

managing irrigation and power. Attempts have been made to reconcilethe large vs. small dam debate through a compromise, in the form of


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reducing the height of the SSP dam but maintaining the quantum of supply of water to Gujarat (Paranjape and Joy, 2006). It is proposedthat this be done by harnessing local water resources and not byrelying solely on the behind-the-dam storage. Such an arrangementleads to a remarkable reduction in the submergence area, andhenceforth displacement, although it entails a slight reduction in powergeneration. Essentially, the need is to evolve alternative models thatcould provide better outcomes in terms of displacement andenvironmental damage.

Mining

Mining activities represent a situation of somewhat limited optionsas compared with other developmental projects, such as irrigation,industry and infrastructure, given that minerals or mineral-basedindustries (coal, cement and basic metals) constitute some of thecore sectors, having a significantly large multiplier effect throughoutthe economy. At the same time, locations for exploring minerals are

determined by availability, given the state of the technology. In mostcases, mineral deposits converge with rich forest/vegetative cover.The challenge, unlike that in the case of irrigation or industry andinfrastructure projects, is that of reducing the demand and at thesame time undertaking the requisite reclamation measures.

Mining has a severe negative impact on land quality and contributesdirectly to environmental degradation and pollution, ultimately affectingthe tribal population adversely. The situation becomes furthercomplicated when mining of radioactive minerals is involved. Decadesof indiscriminate mining have left many villages highly polluted,rendering the lives of the inhabitants miserable owing to widespreadpollution levels and ill effects on health and agriculture (Panda, 2006).

The long-term effects of mining are more severe than the immediate

ones. For instance, a few decades of indiscriminate mining destroysall available agricultural lands. Mining as a major economic activity in aparticular area also hinders the growth of other industries. Waterresources become exhausted or contaminated with time. Therefore,once the mines are completely exhausted, the local population is leftwith no livelihood options and their lives also deteriorate (Mahadevia,1999).

Until the Coal Bearing Areas (Acquisition & Development) Act of 1957, all lands for mining were acquired by the government on the


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basis of the Land Acquisition Act of 1894 (Adhikary and Ghosh,2005). However, this does not even require that landowners beinformed properly before acquisition. Information is given only inthe gazetteer, thus reaches villagers too late for them to raise objectionswithin the specified time limit; sometimes they receive the informationafter the legal period is over (George, 2004).

The policy for resettlement followed by Coal India Limited (CIL)has been quite popular among affected populations, for the simplereason that the company offered jobs to the displaced population(Adhikary and Ghosh, 2005). Thus, the affected population receiveda share in the benefits of the project and CIL, in turn, could use thehope of a job as a bargaining chip to acquire land for mining (WorldBank, 1996). However, with increasing downsizing, this is no longerbeing offered as an option (Herbert and Dutt, 2004).

The challenge therefore is to work progressively on demandmanagement. While technological advancement is an important feature

for reducing the requirement of various minerals, it is essential thatthese resources are not exploited for exports, since the multipliereffects do not take place within the domestic economy. The bottomline is to minimise the scale of this activity to the level essential tosupport the economy, with a desirable sectoral composition. Wherevernecessary, mineral-based activities may take place by ensuring leastcost to the environment and adequate R&R measures. Ensuring

appropriate reclamation of the mined area is equally important. Again,a multi stakeholder agency assumes a critical role in this context.

Industrialisation

While industrial growth is more or less synonymous with economicgrowth, the pattern of industrialisation adopted in Indian planninghas been resource intensive and spatially extensive, with the capacityto absorb additional workers. The pattern poses two importantchallenges. First, it extracts substantial amount of resources, includingminerals for energy and land and water for setting up industrial unitsand the associated urban centres. On the other hand, the sector, withlimited job opportunities, leaves a large army of underemployedworkers to fend for themselves in various activities in the primaryand tertiary sectors. Development of some of the basic industriesduring the early phase of planning led to large-scale conversion of land, including forestland, for setting up mega units, mainly in the


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public sector. But the projects, such as in steel, cement, oil and naturalgas, remained more or less as islands of modern growth withoutgenerating significant impact, especially in terms of employment, inthe peripheral economy.

Another issue pertaining to job creation is that either the jobsavailable are of a semi-manual type, hence are not acceptable tomembers of erstwhile landowning households, or the job is offeredto only one member of the household, without provision fortransferring this to the next generation. This raises the question of long-term partnership in the profit of the industrial unit built on land,which could have been a perennial source of income for the household.

The asymmetry between growth in GDP and employment continuedover time. By 2001, the industrial sector contributed 27 percent of GDP (Joshi, 2004); its contribution to employment was less than 17percent (Datt, 2002). While there is no denial of the fact thatindustrialisation holds the key to sectoral transformation, essential

for reducing pressure on natural resources, the limited job creationhas jeopardised the expected outcomes. Given this scenario, diversionof land (and forest, minerals and water) may raise special concern(Reddy, 1994).

The twin issues are: 1) How to make industrial growth moreemployment generating so as to absorb communities in the peripheral

areas whose livelihood base is eroded owing to islands of industrialgrowth in the hinterlands? And 2) how to minimise the negative impactof industrial growth on natural resources land, air and water?

The recent debate on the creation of SEZs has special relevancefor the issues raised above. Given the fact that the country has alreadyset up a number of free trade zones (FTZs), it is not clear whetherSEZs would serve any special purpose in terms of attracting newunits and boosting exports (Chandrahekhar, 2006).

Pending this enquiry, the real issue that has sparked off thecontroversy is that of the leeway given to the industrial units in SEZswith respect to allocation of land, labour regulations and environmentalimpact assessments. What is worse is that the states are competingamong themselves to attract investments by providing fiscal and other

concessions, leading to a situation of race to the bottom within thedomestic economy.


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The Board of Approvals (BoA) 1 has already (as of October 2006)granted formal and in principle approvals to 237 and 166 SEZs,respectively. As many as 225 proposals are waiting with the BoA,many of which have already received or are in the process of receivingapproval (Times News Network, 2006). The magnitude of land beingdiverted does not seem to be very large (Table 3). However, the issueis that this has led to the state supporting conversion of agriculturalland by private operators, who may eventually use it for real estatedevelopment rather than to promote industrial growth and exports.

There are some noticeable differences between the formallyapproved and in principle approved SEZs. For instance, the averagesize of SEZs for which approvals have already been granted is lessthan 150 ha, whereas for the in principle approved set it is more than800 ha. More remarkably, only eight SEZs in the first set have anarea exceeding 1000 ha, half of these being in Gujarat. The numberfor such SEZs in the latter exceeds the former by 50. Out of these,14 are in Maharashtra. Incidentally, the small state of Haryana has asmany as 11 such SEZs in the offing, out of which six have an area of more than 3000 ha, with the one being planned (by Reliance) at 10,000ha.

Besides weak justification for providing tax concessions, an issuethat has received attention from various quarters is that of the freehand given to the land operators and the nexus with centres of political/

bureaucratic power. This has come up sharply in light of theInternational Monetary Fund (IMF) questioning the validity of settingup a large number of relatively smaller SEZs in contrast with China,where the strategy is to promote a few large SEZs (Aiyar, 2006).This reinforces the observation about the race to the bottom, wherethe states, in connivance with land operators, seem to have gone ona spree to acquire land in a fast-track mode.

It has been alleged that SEZs have a free hand to abuse labour aswell as environmental laws, and that they have provided many withland-grabbing opportunities (Das, 2006). The early signals suggest

1 The BoA has been constituted by the Department of Commerce, Ministry of Commerce and Industry, under the chairmanship of the Additional Secretary,Department of Commerce, empowered to consider proposals under the Export-oriented Undertakings (EOU)/SEZ scheme that fall outside the automatic ap-proval procedure.


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Table 3: Total formal and in principle approvals granted by the BoAafter the coming into force of the SEZ rules (as of October 2006)

Formal In principle Total

approvals approvalsNo. Total ha No. Total ha No. Total ha

Andhra Pradesh 45 9460.8 9 3768.4 54 13,229.2Chattisgarh - - 2 2029 2 2029Chandigarh 2 87.5 - - 2 87.5Dadra and Nagar - - 1 80 1 80New Delhi 1 6 1 11 2 17

Goa 4 291 - - 4 291Gujarat 18 10,398.3 12 8193 30 18,591.3Haryana 19 818.4 27 43,002 46 43,820.4Himachal Pradesh - - 3 5030 3 5030Jharkhand 1 36 - - 1 36Karnataka 29 1672.3 17 4721 46 6393.3Kerala 10 569.7 2 414 12 983.7

Madhya Pradesh 4 71.3 6 9309.3 10 9380.6Maharashtra * 48 8377.3 27 22,378.1 75 30,755.4Orissa 5 745.6 7 4060.3 12 4805.9Puducherry 1 346 - - 1 346Punjab 4 252 7 1571 11 1823Rajasthan 3 89.2 8 12,251.3 11 12,340.5Tamil Nadu 25 1300.6 12 5078 37 6378.6

Uttarakhand 3 468.2 1 14 4 482.2Uttar Pradesh 8 133.8 10 5954.3 18 6088.1West Bengal 7 170.3 14 11,827.2 21 11,997.5Total 237 35,294.3 166 139,691.9 403 174,986.2

Note : * Areas of two formally approved SEZs not known.Source : Department of Commerce, Ministry of Commerce and Industry

clearly that the entire process of land acquisition, development andtransfer to individual industrialists involves huge profits. Strangely,the state also becomes an appropriator of profit, whereas the primaryowner is left completely out of this nexus between the state and theprivate operators! According to Chandrasekhar (2006), this istantamount to primary forms of accumulation by the state, havinga monopoly on allocation of land. This, in turn, has received seriousprotest by farmers, especially when large tracts of agriculturally richland are being diverted for SEZs under the pretext of the publicinterest (Ghosh, 2006).


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It is becoming increasingly clear that the issue is not so muchabout the total magnitude of land (say, less than 0.2 mha until now)being allocated to an important sector like industry. Rather, the issueis that of indiscriminate use of monopoly power by the state, which,in turn, becomes a party to accumulation of profit by patronisingland operators. The loss of environmental goods, labour welfare and,above all, a source of livelihood for the rural communities is by andlarge unjustified. This is particularly so when the farmers, havinglost the land, are not adequately compensated nor made partners inthe chain of value addition on a long-term basis.

Coming back to the issue of land conversion, whereas mostindustrial development lands were acquired on the basis of LandAcquisition Act, the National Thermal Power Corporation (NTPC)follows its own R&R Policy, adopted because projects were oftendelayed in the absence of rehabilitation, resulting in a negativereputation and refusal of loans (Adhikary and Ghosh, 2005). Theunique point of the policy is that it covers all project-affected persons(PAPs), including landowners and landless. They may opt for landfor land (subject to availability) or receive a house. It also providesfor self-employment in terms of dairy, poultry, handicrafts, openingof own shops, awarding small contracts, etc. (NTPC, 1993). A similarpattern is observed in the case of a number of corporate housessetting up rural development wings. While these initiatives are a stepin a positive direction, the efforts for rural development have by andlarge remained an add-on to the spatial planning for industrial zones.

Apparently, these are some of the positive initiatives, if supportedby adequate safeguards against environmental damage on the onehand, and compensatory regeneration accompanied by peoplespartnership in the process of wasteland development on the other. Atpresent, both seem to be missing.

In this context, the experience from the project linkage approach(PLA) initiated in Gujarat as part of backward area development duringthe early 1980s may provide some useful insights. The approachwas adopted at the time of setting up a large industrial estate inAnkleshwar (Bharuch district in Gujarat), as part of the policy toshift industries to backward areas. According to the PLA, development

of important linkages with backward villages in the hinterland wasintegral to the setting up of the industrial area. Four types of linkages


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were envisaged: transport, training for skill formation, promotion of entrepreneurship and provision of rural amenities. These linkageswould help local youth access employment opportunities and alsoimprove the quality of life among rural communities that had lostland and faced problems of pollution, etc. Although the initiative metwith only partial success, it may still offer useful lessons (Shah,2001). The approach is unique in the sense that it is part of developmental policy rather than a voluntary gesture by an individualcorporate house, as noted above.

Forest: Environmental loss

Development-induced displacement has resulted in two majorfallouts: environmental damage and loss of livelihood among the people.This is despite the detailed provisions for compensation under theLand Acquisition Act 1894 and the Resettlement and Rehabilitation(R&R) Policy of 2003 2.

What differentiates forestry land conversion is the fact thatstakeholders have a wide-ranging geographical entity any loserowing to a change in access to the forest is a stakeholder and theperson may have a local, regional, national or even global presence(Institute of Economic Growth, 2006). For a long time, this crucialecological factor has remained largely ignored. Most of thedevelopmental activities in the forested lands directly affect the tribal

population (the indigenous inhabitants). The tribals formed more thantwo-thirds of the total population displaced owing to activities inforests (Table 2).

The displacement of tribals from forested areas has always metwith stiff resistance (Asher and Kothari, 2005; Sarangi, 1999). Thisis consequent on the fact that forests are the primary means of livelihood for these tribals and restrictions imposed on their use leavesthem deprived. At the same time, the fact remains that creation of protected areas and sanctuaries is necessary for the conservation of biodiversity. This has necessitated a search for new paradigms of conservation that is inclusive of peoples livelihood requirements.

2 National Policy on Resettlement and Rehabilitation for Project Affected Fami-lies, 2003, Department of Land Resources, Ministry of Rural Development, (Pub-lished in the Gazette of India, Extraordinary Part-I, Section-I, No. 46, dated 17 th

February, 2004


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Recently, the Indian Board of Wildlife accepted in principle that therewould be no forced displacement from protected areas (Rangarajan,2001). The Eco-development Project also accepts the principle of voluntary resettlement as part of protected area management. Theproblem, however, is that people trapped in protected areas are notcovered by regular developmental activities, nor do they receiveadequate compensation for lost opportunities when cooperating inconservation measures.

In order to resolve the issue of compensation, an Expert Committeeon Net Present Value (NPV) was constituted as mandated by theSupreme Court of India (IEG, 2006). The report submitted by theExpert Committee held forests as non-tradable. Hence, itrecommended that NPV calculation should be based not onassumptions regarding alternative uses of the same lands, like urbanhousing, mining, putting up a dam, road, etc. Instead, it should bebased on estimated loss owing to such activities, to be reckoned asan opportunity cost of forest tracts.

The estimates of NPV vary over space and depend largely on thequality and density of the forest land. For instance, in the states of Madhya Pradesh and Chattisgarh, NPV is being recovered at the rateof Rs. 5.8 lakh per ha to Rs. 9.2 lakh per ha. Similarly, in HimachalPradesh, the value varies from Rs. 1.57 lakh per ha for timber plantationsto Rs. 8.57 lakh per ha for dense natural forests (IEG, 2006).

The committee recommends a detailed procedure of NPVcalculation with significant emphasis on biodiversity, forest coverand density. Importantly, the committee recommends that NPV canbe fully exempted only in case the diversion also provides the samekinds of services as forests provide at the same location, (e g. carbonsequestration, retention of soil moisture, protection of biodiversity,

etc.). For all other cases, private or public, no exemption from NPVcan be made. Thus, instead of a blanket claim on exemptions fromNPV, the same has been made highly conditional. Thus, while activitieslike construction of highways, any type of industry (including SEZs),mining and quarrying, etc. have not been recommended anyexemption, relocation of villages, drinking water pipelines, etc. havebeen given full exemption. Similarly, major irrigation and hydel projects

have been recommended 30 percent exemption, whereas minorirrigation schemes have been given full exemption.


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Another issue deserving mention is in the context of states thathave a perception that this is the most opportune time for cashing inon the special resource base they have. Missing this would imply abig opportunity lost. Hence, they have become highly proactive ingetting investors from outside to put in the extremely scarce financialresources. The problem could be resolved in light of the existing systemof federal finance, by asking for funds by way of compensation forconservation of natural resources like minerals and forests. There havebeen some moves in this direction, whereby some of the forest-richstates have pleaded for additional resources from the central government

as a disability fund. This kind of option could relieve the state from adistress move to sell out its natural resources. It is possible to rationaliseexcessive exploitation of mineral resources to serve the interest of outside economies if the federal finance system incorporates amechanism to add value to conservation and pay compensation tofinancially poor states. Exploring an approach such as this may call fora more holistic framework, drawing on various developmental

perspectives, as noted in Section 1.Given this backdrop, we can now discuss the issue of land

conversion in the urban periphery, which has certain importantdifferences vis--vis the issue of land acquisition and displacementdiscussed in this section.

3. Conversion of peri-urban agricultural land: Insights from

existing literature

Four important features distinguish conversion of land in the urbanfringe from the issues of land acquisition and displacement notedabove. These are:

1) Development of the urban fringe is the single most importantfactor causing diversion of land.

2) The land is generally sold out by the owners rather thanacquired; hence, there is presence of a land market (thoughimperfect) in the urban fringe. This would imply that thephenomenon is more of voluntary rather than forceddisplacement.

3) The land in the urban fringe is generally more fertile ascompared with wasteland available in areas further awayfrom urban centres.


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4) There is a fairly well-developed theoretical literature on landmarkets and perspectives on peri-urban development.

3.1 Growing urbanisation: Push and pull factors

India has experienced significant growth in its urban populationsince independence. By 1941, the urban population was more or lessstable, at around 10 percent. Substantial growth was experiencedpost-1980s, when the proportion of urban population increased from23.34 percent to the present level of 27.80 percent (see Table 4).Urbanisation is expected to cross 35 percent by the end of 2025

(Dyson and Visaria, 2004).Table 4: Urban population by class of town

No. of towns (%) Urban populationdistribution (%)

Class 1981 1991 2001 1981 1991 2001I (100,000 226 (5.7) 300 (8.1) 394 (9.0) 52.6 64.9 68.6

and above)II (50,000- 325 (8.2) 345 (9.3) 404 (9.2) 14.0 11.0 9.7299,999)III (20,000- 883 (22.4) 947 (25.6) 1163 (26.6) 17.1 13.3 12.349,999)IV (10,000- 1247 (31.6) 1167 (31.6) 1346 (30.7) 11.2 7.9 6.819,999)

V (5000- 920 (23.3) 740 (20.0) 879 (20.1) 4.4 2.6 2.39999)VI (Less 348 (8.8) 197 (5.3) 192 (4.4) 0.7 0.3 0.2than 5000)Total 3949 (100) 3696 (100) 4378 (100) 100.0 100.0 100.0Share of urban population in total population 23.34 25.71 27.80

Source : Census of India, 1981, 1991 and 2001.

Another important feature pertaining to the pattern of urbanisationis class composition. It is observed that as much as 68.6 percent of the urban population lives in Class I cities (i.e. with a populationexceeding 0.1 million). This has special implications for the expansionof urban sprawl in the periphery of nearby urban centres in thecountry.

Urbanisation in India, as widely recognised, is a result of bothpush and pull factors. The latter is often found to be the reality given


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the pace and composition of employment growth in the primary sector.There are also problems on the demand side, since growth in theindustrial sector has come more or less to a halt. This is what isbeing termed urbanization moving ahead of industrialization (Hoselitz,1957: 44) in many developing countries, including India.

But urban centres are bound to experience significant growth first because of the sheer increase in population and second becauseof a continued push from the rural economy. The recent evidencefrom the 59th round of the National Sample Survey Organisation(NSSO), that a substantially large proportion (40 percent) of farminghouseholds do not perceive agriculture as a desired option, is a pointerto this phenomenon. An important implication has been a moreactivated land market, where many more farmers may like to sell off at least a part of their land in order to make an entry into the urbaneconomy to explore alternative occupations for subsequentgenerations.

As noted earlier, there is no systematic estimate of the total landcovered by the peri-urban area. A rough estimation puts the numberat 1 million ha. This once again is not too big a number comparedwith the proportion of the population inhabiting it and the contributionto GDP it makes. The problem is that of imperfections in the landmarket, hence the need for regulation, as discussed below.

3.2 Theoretical perspectives: Market imperfectionThere is a fairly rich and growing literature on the theme of

conversion of agricultural land in urban and peri-urban areas. It isneither the objective nor within the scope of this paper to review theentire literature. The limited objective here is to understand the mainfeatures of theoretical applications and empirical findings from studiesthat have gone into examining the cost and benefit of land conversion.

The vast literature on urban economics provides a basic rationalefor urbanisation and examines factors that determine the pace andpattern of urban growth in the midst of vast and, at times, stagnantrural economies, especially in developing countries like India.Productivity differentials and growing populations as well asunderemployment in rural economies are the two basic forces

pulling and pushing populations out of rural areas. Agglomerationeconomies, locational economies and economies of scale and scope


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are other major factors operating on the pull side. Growing disparitiesin public investment in agriculture and allied activities (vis--visother sectors) on the one hand, and basic amenities (in rural vis--vis urban areas) on the other, lead to further impetus for the pushfactors.

The literature, while reinstating the inevitability of urban growthand the shift of the labour force away from the primary sector, haspaid little attention to the implications of these spatial as well as sectoralshifts for the determinants of the processes of land allocation betweenrural and urban areas, or, equivalently between agriculture and non-agriculture (Bhadra and Brando, 1993: 2). The urban economicsliterature usually treats the role of the rural sector as residual, andmost of the analyses employ the partial equilibrium model in isolationof the agricultural economy.

The above construct is fairly inadequate and unrealistic wheregrowth of the non-agriculture sector and demand for urban land are

both situated in a complex mix of push and pull factors, whereequilibrium may be arrived at by simultaneously changing (orcorrecting) the operating environment in both the agriculture and thenon-agriculture sectors or rural and urban economies. This is essentialbecause the two are intrinsically interlinked, especially in a largeagrarian economy such as India. Besides this, there are imperfectionsoperating in the land markets, as noted earlier. The major imperfections

that operate on demand (pull) and supply (push) sides for urban landare presented in Table 5.

India, like most developing economies, is also characterised bythe phenomenon of over-urbanisation, owing mainly to the pushfactors driving large number of in-migrants to the urban centres.This raises a question as to whether the low level of industrialisation

(and employment growth therein) will ever reach a scale to lift alarge proportion of the population to income levels high enough toinitiate the process of de-concentration of urban centres (Vining et al. , 1986). This implies that urbanisation, given the populationdynamics and sectoral imbalance in terms of output and employmentgrowth, is a reality to reckon with.

An important alternative for land conversion is intensification of land use, a method followed by some land-scarce countries like Japanand Singapore (United Nations, 1973). However, in a country like


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India, with a highly skewed land to man ratio, conversion of agricultural lands in the vicinity of urban uses is resorted to. 3

Recognising the close interface between the agriculture and non-agriculture sectors and between rural and urban economies, some of

the relatively recent strands in urban economics have laid increasingemphasis on peri-urban environment or rurban development (Allen,2003). Prima facie , the new perspective is built on the ruralurbancontinuum and seeks to retain, to the extent possible, rurality , whileplanning for urban development and natural resource use and/orstrengthening the co-existence of ruralurban features within and inthe periphery of urban areas. Environmental planning and management

Table 5: Imperfections in demand for and supply of agricultural land

3 Two notable models of urban land development found in India have been fol-lowed in some of the most urbanised states. For instance, New Delhi follows theprinciple of public land ownership and leasing, whereas Gujarat and Maharashtrafollow land pooling and redistribution. Both the measures essentially entail com-pulsory acquisition of land and its development before re-leasing. However, whilethe Delhi model is easier, as it involves cash compensation and then re-lease (andthus earning huge profits), the latter model involves minimal cash compensationand displacement, as it simply redistributes the land proportionately back to theowners (UN, 1973).

Demand side Supply sideLand has scarcity value, hence is subjectto speculation

The present low level of viability offarming owes to sub-optimal levels of

technology and natural resourcedevelopment; this may not reflect theactual potential of the land/sector

Land is an important source of socio-political power, hence becomes a toolfor political corruption/favours

Does not take into account environmentalexternalities and future/existent value ofland

There is asymmetry in lobbying by theindustry and agriculture sectors; in fact,the agricultural lobby representing

rich/large farmers may implicitly pushfor a more liberal policy for conversionof land(Lack of a level playing field)

Imbalance between public investment forenhancing productivity of land in vasttracts of dryland regions, leading to

distress selling of land

Monopsonistic market structure Absence of institutional arrangements toovercome low viability of smalllandholdings

Lack of adequate planning andcumbersome policies regulating landuse, leading to non-transparency andcorruption

Distress selling of land in the vicinitywhere land has been acquired for non-agricultural uses


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of peri-urban areas should therefore draw on three distinct fields:rural, regional and urban planning. This is so because ecological,economic and social functions performed by the peri-urban area affectboth urban as well as rural areas. In this situation, the debate overcompact vs. expanded cities assumes special significance(Richardson et al. , 2000). Whereas the former seeks to minimisediversion of agricultural land, the latter may open up new avenuesfor agriculture and related services to cater to the urban demand, byretaining basic elements of natural resource management and ruraleconomies. The second approach may require broad-based

development of infrastructure as well as provision of basic amenities.Both have strengths and weaknesses. What is therefore needed is acomprehensive analysis of cost benefit under alternative scenariosof growth in rural economies and patterns of urbanisation. Suchanalyses have until recently been more or less missing.

In the absence of comprehensive cost benefit analyses underdifferent scenarios, it would be useful to review some of the empiricalstudies on impacts of land conversion on peripheral urban economies.

3.3 Impact of land conversion in the urban periphery: Selectevidence

Land conversion surrounding urban centres presents a typicalscenario, different from that in most other conversions, say forest

or remote rural areas. What makes land conversion in the ruralurban fringe 4 different is the fact that most urban centres evolvedoriginally because of the natural endowments of the area (Barrow,1991). 5 Thus, the fringe lands are generally more fertile and havebeen put to agricultural use. With increasing population pressure,such lands are bound to feel the strain (Burton and Matson, 1996).The situation is further complicated by an aggregation of uses by a

4 The term ruralurban fringe was first used by Wehrwein (1942) and has beendefined as an area of mixed rural and urban populations and land uses, whichbegins at the point where agricultural land uses appear near the city and extends upto the point where villages have distinct urban land uses or where some persons,at least, from the village community commute to the city daily for work or otherpurposes (Ramachandran, 1989: 297).5 Empirical studies have shown that land sold for housing purposes in the fringeareas fetches maximum prices for the farmers and a number of good quality landsare also sold off (Mani and Pandey, 2000).


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variety of stakeholders. Even the farmers living in the area might findnon-agricultural income sources to be more profitable and may gofor land speculations (Renaud, 1979).

A number of studies have highlighted the problem of the loss of agricultural land for accommodating the growing needs of variousdevelopmental projects as well as urbanisation. While most of thestudies, especially for industrial and other developmental projects,have gone into assessing cost benefit of the proposed projects in alarger economy-wide or societal context, efforts are seldom made tounderstand how people who have lost their land have eventually beenco-opted into the new economic order and how many have remainedvictims of the development (Sharma, 2003). This owes mainly tothe fact that 1) adjustment or co-option to the new economic orderis long drawn out process very few studies have gone intoexamining the process over a period of, say, 15 to 20 years; and 2)although urbanisation-induced loss of agricultural land is relativelylarger, it remains unnoticed, as much of the land is sold outvoluntarily by the farmers, under the rights to choose use of theland by the owners.

Evidence from Calcutta

There is a small but growing literature examining the impact of urbanisation, especially diversion of agricultural land, on the rural

economy and communities. Using a dual economy model in thecontext of Calcutta Metropolitan District in India, Bhadra (1991)observed that conversion of rural land into urban uses may lead toimprovement of aggregate welfare for the regional economy.

However, this observation is subject to the limitation that the welfareimpact is shaped by the characteristics of urban economies. Thestatistical results, as in the case of many developing countries, appearto support the hypotheses of over-urbanisation (Tolley and Thomas,1987). This, in turn, may reinstate the case of broad basing the farmeconomy, which may give a further boost to non-farm activities, inboth rural areas and small/medium towns (Mellor, 2006).

Unruly development in New Delhi

The pressure of increasing urban space has been felt most severelyin New Delhi, particularly in the past two decades. The rapid expansionof urban boundaries to the bordering villages has caused widespread


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changes in the land use and livelihood patterns in these villages. In adetailed analysis of a rural-turned-urban block in northern Delhi(Bentinck, 2000), the impact of urbanisation on the intertwined aspectsof land use and occupation has been found to be largely positive.

Urbanisation of these villages has brought them physically andsocially closer to the metropolitan city and much of the benefitsaccrued can be explained by the increase in opportunities to commuteto the city regularly. This has encouraged the village dwellers to optfor formal and informal work in the service sector in the city. But thereal boom in the economy in the fringe areas has been brought aboutby a surge in the rent and tenancy business. Most of the factoriesand enterprises set up in these areas belong to the city dwellers,hence the owners the erstwhile large farmers realise good amountson the rented land. Very few villagers have gone for the industrialactivity themselves, probably for the lack of experience and training,and have instead preferred joining government service or enteringthe transport business.

This does not mean that only the large farmers have benefited.The marginal farmers and landless and migrant labourers have allentered the service sector, joining white or blue collar jobs, dependingon their educational level. Of these, few of the economically bettervillagers have opened small commercial units; the migrant class haspreferred to work in the newly created small manufacturing units in

the village itself.

Another notable aspect of urbanisation in the fringe areas in NewDelhi has been that concerning agricultural activity. Many of thefarmers have continued with agricultural practices, of course withincreasingly intensive cultivation and changes in cropping patterns.Thus, floriculture and horticulture, fuelled by a huge market in the

city, have replaced staple crops. Many of the villagers have evengone for high-value perishable crops, with some opting for marketingthe produce themselves with a view to reaping higher benefits.Similarly, dairy farming has also signified gains to the farmers.Urbanisation also has had some adjunct benefits for agriculturalactivities, for instance easier access to fields through better roads,flood prevention and so on. Thus, the net effect of urbanisation on

agriculture in the fringe villages is also found to be positive.All this has been compounded by an obvious increase in urban


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infrastructure facilities and amenities in these villages. The electricityand water supply and, more importantly, health services have greatlyimproved, bringing increased awareness about health and hygiene.

Thus, it can be largely inferred that urbanisation of the fringevillages has had a positive impact on the socio-cultural and economiclives of the original dwellers, across all classes. The obverse side of the story stands mainly on ecological concerns. Increased industrialactivities resulted in a sharp increase in various types of pollution.This, in turn, has had a very bad effect on the health of poor labourers,who generally live in slums close to the factories. Several incidencesof asthma and tuberculosis have been found since the establishmentof industrial units.

Second, rapid population increase in these villages has resulted inincreased congestion. The richer erstwhile landowners have movedout from the villages and settled in the city or elsewhere. The poorersmall landowners, who rented out a portion of their living space,

faced extreme congestion problems. The slum dwellers have theirown set of obvious problems.

Most infrastructure-related problems are consequent on a veryrapid urbanisation. Provision of facilities by the civic bodies has notbeen able to keep pace, resulting in narrow lanes and sewerageproblems. In several places, the existing infrastructure has been found

to be extremely incapable of sustaining the burgeoning population.The reconciliation of economic progress with protection in

environmentally sensitive situations seems to be an arduous task.What makes the situation in New Delhi typical is the fact that effortsto make the progress ecologically sensitive have had negativeexternalities on the economic front. With the Supreme Court orderingrelocation of all industrial units from residential localities, workers inthese factories have to face the brunt. The small manufacturing unitswere largely dependent on the cheap labour available in the nearbyslums and congested corners of the urbanised villages. With therelocation, these labourers have no other option but to commute largedistances regularly, which makes a dent in their already difficulteconomic condition.

However, overall it can be safely inferred from the study that thenet benefits of urbanisation in the New Delhi fringe have been positive.


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What is missing in this account of the positive impact of urbanisationin peri-urban areas is the process by which co-option or integrationtook place, the terms on which benefits of the land market wereshared and, last but not least, who got left out of the benefits andwhy?

There are no clear answers to these questions. What is alsoimportant is the generalisability of these results when it comes torelatively smaller cities than New Delhi and Calcutta. The followingobservations from Ahmedabad and Baroda in Gujarat may help ingauging these issues.

Ahmedabad and Baroda: Limited benefits

According to a study by the Centre for Environmental Planningand Technology (CEPT, 1997) for Ahmedabad city, land transactionsuntil the early 1990s were limited in terms of magnitude and spread.The urban sprawl of Ahmedabad city was within 20 km. 6 However,some of the villages lost up to 60 percent of their land for non-agriculture uses. Examining the impact of land conversion in theurban periphery of Ahmedabad and Baroda city, Shah (2000) observedthat as much as 40 percent of the land sold by the farmers for industrialuses, was irrigated. Only 14 percent of the sample households (havingsold the land) reported having purchased more land. Whereas reasonsfor selling of land varied, from low viability of farming to lack of

interest among the future generation in farming as a profession, inmost cases land was sold to intermediaries, who would eventuallysell the land to actual users including land developers. As a result, asubstantial part of the land remained unutilised for a fairly long time.Besides this, industrial growth created negative externalities in termsof air and water pollution.

Against this, the employment benefit was quite limited. The studyreveals that one-third of the sample households used a major part of

6 The estimates represent significant under reporting because: 1) farmers sell theland to another farmer (also benami transactions), who uses his/her right to chooseits use, including for non-agricultural purposes non-agriculture permission be-comes merely a matter of formality in such cases; and 2) non-agriculture permis-sion, if not accorded within three months of the application, is deemed to havebeen granted. Both these lead to actual conversion without necessarily beingrecorded as non-agricultural use land on the official records.


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the sale proceeds in productive investment and another 10 percentindicated putting the money in fixed deposit. The remaining 50 percentused the money for social functions or improving housing conditions.Given the fact that members of the farming households were reluctantto accept blue or grey collar jobs in the unorganised industrial sector,many of them started questioning the pace of land conversion in thearea.

There has been no concerted effort to answer the issue, nor isthere any holistic land development agency, except a few metropolitanurban development authorities. The task of urban land developmentis left to different government departments on an ad hoc basis (UN,1973). The task of municipal corporations is limited to provision of urban facilities, whereas the district level self-governing bodies (like

zilla parishads ) are too ill equipped for the task. Consequently, thereis no formal master plan for development of the peri-urban areas.Hence, zoning of land use is also absent, which results in scatteredand haphazard development in the fringe area. An important problemin this context is that, once the adjacent land is converted, it is difficultto manage farming operations in the vicinity. In fact, this is one of the important mechanisms used by the industry/land developers toobtain agricultural land, as observed in a number of cases.

The reality as seen from the above evidence is thus mixed. Thereare certainly some gainers among the landowning community, and

also among the landless, who may obtain alternative occupations inthe expanding urban economy, as shown by Bhadra (1991). But it isquite likely that a substantially large proportion of the erstwhile ruralhouseholds lose vis--vis their earlier situation.

The problem in this analysis is that of absence of a counternarrative. It is difficult to visualise, especially over a longer period of

adjustment, the scenario that would have obtained in the absence of the development. This is particularly relevant in light of the fact thatagriculture, in large tracts of the country, is already facing a crisis,owing to inadequate policy support. Also, environmental damagesare yet to be assessed.

Although this may reinstate the rationale for following a moreconservative and restrictive approach, as has been the case untilrecently, policies need to respond to the growing compulsions and/ or aspirations for urbanisation. Failing this would lead to widespread


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corruption, thereby making the cure worse than the disease itself.Obviously, lifting all regulations is not the answer. Rather, what isneeded is to explore various alternatives for both rural and urbandevelopment, with environmental costs built in. The trick lies inworking out options and making informed choices, rather thansuccumbing to pressure from various quarters urban planners,agricultural stagnation and the powerful.

What is therefore essential is to explore alternative scenarios wherethe agriculture sector and the people engaged in it get a better deal interms of policy support. In this case, what appears to be the farmerschoice, i.e., to get rid of the land and farming as an occupation, mayalso undergo changes. Urbanisation may then have to face a situationwhereby large numbers of farmers make informed choices ratherthan operate under the distress of limited choices. This, in turn, mayforce the planners to very systematically and judiciously manage theurban sprawl and peri-urban environment (Dhar, 1998).

4. From market to state failure: Is there a way out?This brief account of land diversion and displacement suggests

that the state monopoly derived by using the rationale of marketfailure for determining allocation of land has, in fact, resulted instate failure. This is reflected in terms of ad hoc and excessiveacquisition of land for various industrial projects, including SEZs,

mining and infrastructure, extremely weak compensation mechanismsand follow-up thereof and haphazard urban sprawl. In most cases,the state is seen to facilitate appropriation of profit by privatedevelopers. How to retreat from this growing syndrome of the dualburden of the failure of the market as well as the state? Obviously,neither stricter restrictions nor ad hoc liberalisation can pave the waytowards rational allocation of land across sectors. In the former, as

noted earlier, illegal conversion or uncalled for alienation creeps in,whereas the latter leads to a loss of natural capital, at both societaland individual level.

4.1 Towards a holistic approach

The need therefore is to reflect on the past experiences of policyformulation as well as implementation, and move forward towards a

more rational and yet pragmatic approach, drawing on four majorstands of developmental perspectives: sectoral growth, inclusive of


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food growth, self-sufficiency and employment security; land useand environmental sustainability; management of peri-urban areas;and compensatory mechanisms.

Ideally, allocation of land should be determined by the pace andcomposition of growth in the production sectors and the associatedurbanisation, subject to the land capability classification. This wouldimply an acknowledgement by the Land Acquisition Act that land incapability classifications V VII may be preferred while divertingland for developmental projects and other requirements. At aggregatelevel, India has more than 19 million ha of non-cultivable wasteland,which constitutes 5 percent of the total reporting area. This landshould be diverted for various developmental projects.

The problem is that location of developmental projects is oftengoverned by exogenous factors, different from land capabilityclassifications. For instance, projects related to mining, irrigationand infrastructure have limited flexibility in terms of location choice.

Industrial projects may have somewhat more flexibility, but the locationis influenced significantly by agglomeration economies surroundingan already industrialised urban centre or corridor. Together, theseleave little scope for shifting locations of a number of developmentalprojects (including urban sprawl).

Therefore, the possible options are:

Scaling down the proposed size of the project (in the case of irrigation projects);

Exploring technological avenues to find substitute materials (inthe case of mining activities);

Identification of areas for industrial/clustering or corridors andthereby having spatially concentrated growth with planneddevelopment of hinterlands (in the case of industrial estates andlinkage approach for rural development);

Improvement of social infrastructure, communications and basicamenities in rural areas;

Enhancing productivity of land and water and thereby incomes

from agriculture to mitigate distress out-migration from rapidlyimproving living conditions in rural areas;


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Development of wasteland and degraded land by means of compensatory investment and establishing claims of the displacedon these regenerated lands (as in the case of compensatoryafforestation);

Systematic planning and management of peri-urban areas, withrural households having a specific share in the appreciated valueof land converted from agriculture; this could be based on estimatedfuture price of land (say eight times the present price) plus aproportionate share in the difference between the present price of agriculture and urban land to be paid in terms of land, etc.

Of course, there can be no generalisable solutions across situationswherein huge differences are found in terms of natural resourceendowment, type of land diversion, level and composition of economicgrowth and implications for poverty and rural livelihoods. A commonpursuit underlying most such cases, particularly of late, is that theyhave become fairly proactive with respect to attracting investment

for infrastructure and industrial growth.However, many of these states are already at a higher level of

industrial development, and the challenge before them is to sustainthe momentum, whereas for the economically backward but naturalresource-rich states, the dilemma is to go for large-scaleindustrialisation at the same time as conserving precious natural

resources. Obviously, this raises conflicts and complex policy choices. 4.2 Compensatory mechanisms: Problems and way forward

Although there are clearly laid down norms and procedures forcompensation under the Land Acquisition Act, the actual practice isfar below the provisions made in the policy. 7 We do not intend to getinto the details of the critical gaps in the process of acquiring land

7 At present, the procedures laid down in the Land Acquisition Act stipulateestimation of market value of the land, compensation for standing crops, damagessustained on account of severing with other land, damages to movable or immov-able property and expenditures on change of residence or business owing toacquisition. Apart from this, an interest at the rate of 12 percent is paid on accountof diminution of the profits of the land between the time of the publication of thedeclaration and the time of the collectors taking possession of the land. In addi-tion, a sum of 30 percent on such market value is awarded, considering the com-pulsory nature of the acquisition.


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and mechanisms for ensuring compensation, as these aspects havebeen discussed in great detail in the recent debate (Asif, 1999).Nevertheless, we would like to highlight some of the importantfeatures of the new policy initiative for paying compensation forconversion of forest land, and the draft R&R Policy being preparedby the government of India.

The compensatory mechanisms, as noted earlier, are marked by asignificant gap between the norms laid down in policy and the actualpractice. This needs to be bridged by evolving alternative institutionalmechanisms that are transparent and consultative. Actualimplementation needs to ensure that the following components arenon-negotiable.

Table 6: Necessary non-negotiable components in compensatorymechanisms

1 Conversion/acquisition of Drawing strict boundaries for urban land for urban growth sprawl. Ensuring a fair deal in terms

of present price and futureappreciation

2 Industrial clusters/estates Employment in industrial units,promotion of enterprisedevelopment and rural developmentthrough linkage approach in additionto a fair deal in terms of price

3 Irrigation projects Land for land (preferably incommand area) along with adequatesupport for land and water resourcedevelopment at 50 percent of the costof developing irrigation per ha

4 Infrastructure projects Regeneration of coastal ecology inlike ports the same region along with

employment and fair land prices5 Mining projects Reclamation of mined land,

compensatory regeneration of wasteland, preferably in the same region,along with fair land prices

Setting appropriate norms of compensation is only a first step.

However, to ensure that the norms are actually put into practice isthe real challenge. Policy by itself is not adequate unless it is supportedby statutory enactment. While the Land Acquisition Act already has


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several of the above features, the critical question is who can ensureeffective implementation, especially under the scenario of statefailure. The following aspects assume special significance in thiscontext:

Multi-stakeholder agency to inform, negotiate and oversee theprocesses of land acquisition and compensation;

Assured financial provision for supporting resettlement andrehabilitation of the PAPs;

Transparency and scope for negotiations within a stipulatedsphere;

Monitoring over a longer period of time;

Ensuring avenues for productive investment of the one-time cashcompensation received by farmers selling land/PAPs receivingcompensation.

The draft R&R Policy proposes a special institutional mechanismto take care of these aspects but, essentially, an agency like thisought to be outside the states domain.

The bottom line is that if the project cannot pay for the cost of compensation and/or the state is unwilling to accept checks andbalance through the agency of the people, especially the PAPs, this

may lead to a primitive form of capital accumulation as noted byChandrasekhar (2006). In this case, society may have to be preparedto give up the expected benefits from developmental projects thatexclude people who lose their basic source of livelihood.

5. Summing up

The foregoing analysis presented an overview of diversion of landfrom the primary sector to various other uses, the issues emergingfrom this and the way forward for a holistic approach for land use,sectoral allocation and compensatory mechanisms. Based mainly onevidence from existing studies, the review tried to provide acomprehensive picture of land diversion and its implications. This, inour view, is essential for making the connection between the threeaspects noted above. The analysis is based on the premise that theprimary issue in the context of diversion of land is the need to evolvea framework within which more balanced decisions regarding land


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use, allocation and compensation are taken.

While policies, till recently, have been conservative in theory, therehas been widespread abuse of these policies owing to the monopoly

of the state. This has led to uncalled-for environmental damage onthe one hand, and displacement of the people without adequate safetymechanisms for resettlement and rehabilitation on the other. As aresult, only about 25 percent of displaced people have been resettledso far. The fact that there is no systematic data on land diversion anddisplacement in the public domain owes, perhaps, to the overallsyndrome of absence of a holistic framework, combined with stateapathy. The overview presented in this paper is relevant in the contextof the growing displacement and its justification based on economicliberalisation since the 1990s.

The review has highlighted the following important issues:

Land acquisition for irrigation, mining and industry: Irrigationhas been the most important reason for land acquisition anddisplacement in India. However, the story of big dams in India seemsto have come to an end, since there are not many possibilities left forsuch interventions. Nevertheless, this does not reduce the severityof the problem regarding completing the unfinished agenda of R&R.This needs priority attention, and must entail sustainable resettlementbased on a process of negotiations.

Mineral-based industries promote overall growth and, at times,human development. The challenge is to manage demand and minimisethe scale of this activity to the level that is essential for supportingeconomic growth.

With SEZs growing at faster rates, the issue of land conversionhas become highly debated. The early signals suggest clearly that the

entire process of land acquisition, development and transfer toindividual industrialists involves huge profits, without the primarylandowners gaining anything from the value chain. This is of specialconcern in light of the fact that SEZs have circumvented both labourand environmental laws.

It may be reiterated that that the issue is not so much about the

total magnitude of land diversion, but rather about indiscriminate useof monopoly power by the state, and its becoming a party toaccumulation of profit by patronising land operators. The loss of


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environmental goods, labour welfare and, above all, source of livelihood for rural communities is by and large unjustified. This isparticularly so when farmers losing the land are inadequatelycompensated and are not partners in the chain of value addition on along-term basis.

A long pending issue is the development of a framework forallocating forest land and compensating for the loss of land, especiallywhen large tracts of forest land are already converted for use inagriculture as part of the settlement process. Of late, the SupremeCourt has taken up the issue of payment of compensation by assessingNPV. It is, of course, accepted that NPV calculation should not bebased on assumptions regarding alternative uses of the same land,like urban housing, mining, putting up a dam, road, etc. Instead, thevalue should be based on the estimated loss as a result of such activities,to be estimated on the basis of opportunity costs of forest tracts.

The critical issue, however, is to ensure that the compensation

received for loss of forests is channelled into the regeneration of theforest and the relocation of the people who have been displaced. It isessential to reinstate the primary stakes of forests and forest dwellersin the process of compensation. Who could ensure this? This is acritical issue that needs further deliberation.

Land conversion on the urban fringe: While there is no

systematic estimate of the extent of conversion of land on the urbanfringe, the total quantum of land may constitute less than 1 percentof the geographical area of the country. The problem is that the landunder conversion in the urban periphery is often of better quality,and the market for this is imperfect. A large part of the land on theurban periphery remains unutilised owing to speculative transactions.

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