Niraj Kumar, Partner, DSK Legal niraj.kumar@dsklegal.com February 2014

NEW LAND ACQUISITION LAW

& FDI

Introduction

New Act** has come into effect from January 1, 2014;

Objectives:

To introduce informed, participative, transparent and efficient land acquisition process;

To create a multi-layered screening system in the land acquisition process;

To provide fair compensation to the people whose land is acquired;

To provide for rehabilitation and resettlement (‘R&R’) to project affected people.

**http://dolr.nic.in/dolr/downloads/pdfs/Act_Land_Acqusiition_2013.pdf

Draft rules notified on December 31, 2013 – presently in public domain for inviting objections/ suggestions.

Concerns under the Old Act

No transparency in the process;

Urgency clause too wide and used too liberally;

Public purpose vaguely defined;

No provision for R&R – States had their own policies;

Compensation too less and not linked to market value;

Several wide-scale protests from farmers and landowners.

How the new act addresses concerns

Multi-tiered consultative process which involves carrying out Social Impact Assessment studies and obtaining prior consent from families affected by the land acquisition;

Higher compensation calculated based on market value multiplied by specified factor – (1 for urban areas, 2 or 1 for rural areas);

Urgency clause restricted - to be used only in case acquisition is for national security/ defense, emergencies due to natural calamities, etc.;

Public purpose more clearly defined;

Provides for mandatory R&R for all acquisitions over a certain threshold;

Establishment of National & State Monitoring Committees to monitor the land acquisition process;

Establishment of a specialised body - LARR Authority(s), for speedy redressal of disputes relating to land acquisition and R&R;

Old Land Acquisition Process

Identification of land for

public purpose

(S.4)

Notification in official Gazette

(S.4)

Officer authorized to tender payment on entry

(S.5)

Objections to be filed within 30 days

(S.5-A)

Report to be filed by the collector based on which

declaration made

(S.6)

Notice to persons interested to an enquiry regarding key aspects

(S.9)

Award made as to true area shall be finalized

within 2 yrs. otherwise entire proceedings lapse

(S.11)

Government can then take possession of land which will vest with it without

any encumbrance

(S.16)

New Land Acquisition Process

Notification issued by Govt. for consultation

(S.4)

Social Impact Assessment of land for public purpose within 6 mths. (including

public hearing)

(S.4, 5)

SIA & Social Impact Management Plan published by appropriate Govt.

(S.6)

Expert Group Appraisal of SIA report within 2 mths.

(S.7)

Preliminary Notification in official Gazette, newspapers & website

(S.11)

R&R Scheme (drafting, public hearing, approval) (S.16, 17)

Collector hears objections of persons interested

(S.15)

Collector files report, issues and publishes Declaration , with summary of R&R

Scheme (S.19)

Land marked out and measured and plans made

(S.20)

Public notice and enquiry held by Collector

(S.21, 22, 23)

Collector passes Award (Compensation & R&R) (S.23)

Collector shall take possession of land only after ensuring that the R&R process is

completed (S.38)

Note to Private Purchasers

Applicability of New Act: i. If government is acquiring land for private companies or PPP projects –

all provisions of the Act;

ii. If companies purchase land through private negotiations with owners – only R&R provisions shall apply in cases where acquisition is above the threshold notified by the govt..

Prior Consent of affected families to be obtained – 80% for private companies and 70% for PPP projects.

Option to offer its shares as part compensation only upto 25% of market value.

Rehabilitation & Resettlement

An Administrator, a Commissioner and a Committee for R&R to be appointed by Government;

National and State Monitoring Committees to be appointed by Government for reviewing & monitoring R&R Schemes and plans;

After publication of preliminary notification, Administrator will conduct survey, undertake census, prepare and publish draft R&R Scheme;

Public hearing is conducted to hear claims and objections;

Administrator shall submit the Scheme with report to Collector;

Collector reviews the Scheme with the Committee and submits the same with his suggestions to Commissioner for Approval;

After approval of Scheme, the same is to be published;

Based on Scheme, Collector passes individual R&R Awards as per entitlements listed in 2nd & 3rd Schedules of the Act;

Some instances of FDI and their struggle with the Old Act

Maruti Suzuki’s case – Maruti Udyog Limited (MUL), the Indian subsidiary

of Suzuki was allotted about 600 acres of land in 2008 by Haryana State Industrial Development Corporation (HSIDC) for setting up its manufacturing plant in Manesar (Haryana). The land was acquired under the old act and the compensation paid to the land owners was challenged in the court. After a protracted litigation which went upto the Supreme Court of India, HSIDC was directed to pay enhanced compensation to the land owners. HSIDC in turn has made demands for additional payment from MUL which has been contested by MUL. The matter is sub judice.

Honda, Mitsubishi were other prominent FDI investors that also faced similar situation for their facilities located in Manesar (Haryana).

Some instances of FDI and their struggle with the Old Act

POSCO’s experience – South Korean steel giant announced to set up USD

12 billion integrated steel plant in the state of Orissa, India. Even after lapse of eight years since POSCO signed MOU with the state government, the land acquisition is not complete for the whole project. Apart from other reasons such as lack of environmental clearances etc., the disjoint effort at land acquisition and providing the R&R relief, has to a large extent been responsible for the delay.

FDI & Environmental Management The Environment (Protection) Act*, rules and notifications issued

thereunder provide for environmental clearances and compliances that is applicable on manufacturing units in India – the most important being the notification dated 14.09.2006** issued by Ministry of Environment and Forest, GOI;

Projects divided into categories A & B – category A projects require clearance from Union Government (MoEF), category B projects require clearance from State Government (SEIAA) ; the division in category A & B is based on the size of the project and/or the nature of the business;

Requirement to undertake measures for conserving environment (e.g., rain water and storm water harvesting systems, solar energy conservation, etc.);

Corporates are required to undertake and fulfill the same as directed; Appraisal by Expert Group during EIAS ensures that all environmental

aspects are dealt with in detail. *http://www.moef.nic.in/sites/default/files/eprotect_act_1986.pdf **http://envfor.nic.in/legis/eia/so1533.pdf

Thank You!

DSK Legal, Advocates & Solicitors

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