This land is whose land? A new law may do little to break India’s land-acquisition logjam

This land is whose land? A new law may do little to break India’s land-acquisition logjam

Sep 7th 2013 |From the print edition

UNDER a bodhi tree, their brightly coloured saris draped over their heads, some 500 women brave the midday heat just outside the pretty and rather prosperous village of Dhinkia. Just a few hundred metres of rolling sand dunes from the sea, Dhinkia, in the eastern Indian state of Odisha (formerly Orissa) is a hub of protest. The women, one from every village family, are staging the village’s daily dharna, a sit-in. Sisir Mohapatra, a former sarpanch or village head, makes a rousing speech. He seems respected, though his police record would suggest he is a mafia don: he says he faces 35 criminal charges, and of his 60-strong extended family in Dhinkia, 40 are also wanted by the law. They claim that the charges are all trumped up. Their real crime is to oppose the biggest single foreign-investment project India has ever attracted.Estimated to cost $12 billion, the project, promoted by POSCO, a South Korean firm, is eventually to produce 12m tonnes of steel a year for export. It will have its own power plant, port and, 200 kilometres (125 miles) inland, its own iron-ore mine. Since an agreement on the project was signed in 2005, it has been mired in controversy—a case study in why investing in India is so hard.

Environmentalists worry about air pollution, coastal erosion, the endangered olive ridley turtle and much else. Many, including the Communist Party of India (CPI), which holds the local parliamentary seat, complain that the ore will be sold too cheaply, at a royalty to the government of just 27 rupees (currently about 40 cents) a tonne. Meanwhile, residents of Dhinkia and nearby villages fear for their livelihoods.

So the project has been delayed, probed by countless committees and subjected to repeated litigation. Just this week it faced hearings in Delhi at the National Green Tribunal, an environmental court. But as so often in India, one of the biggest delays has been acquiring the land. In theory, this should be easier for POSCO than for many other investors, since most of the 1,600 hectares (4,000 acres) it needs are designated as forest (even the scrubby sand dunes) and thus government land.

The residents of Dhinkia, however, claim legal rights as people whose families have been making their living from the forest for at least 75 years (which the government disputes). Some, indeed, make a very good living. Devendra Swain, like many villages, maintains betel vines, from which he earns 50,000 rupees a month selling the leaves. Mr Swain also grows rice, mangoes, cashew nuts, bananas and papaya. He claims not to be against industrialisation—except in his fecund backyard.

The villagers’ resistance to the project has seen ugly violence. In 2010 police fired rubber bullets to clear one dharna. In February there was another clash as police entered a neighbouring village, Govindpur, and started dismantling betel vines. In March three people died in a bomb explosion—victims of pro-project goons, say the villagers. The police allege the victims were blown up while making bombs themselves. Involvement in this incident is one of 61 charges facing the CPI’s Abhay Sahoo, the protesters’ leader, who is now in jail for the third time and trying to secure his release on bail. Fearing arrest or an attack by thugs, the 1,400 others in Dhinkia facing criminal charges dare not leave the village.

Of India’s million mutinies, many involve the emotive issue of land. That is one impulse behind a new law covering land acquisition and the resettlement and rehabilitation of those affected. This week it passed through Parliament’s upper house. Few disagree that some new legislation is needed to replace a much-abused British-era law from 1894.

The new bill, however, has drawn fierce criticism. Business is predictably aghast at what it sees as a populist law timed ahead of looming elections. It fears the law will push up costs by setting a high price for land (four times the market value in the countryside, twice in towns), and that it will cause delays—for example, by setting a high threshold (70-80%) for the percentage of landowners whose consent must be obtained. Research by Standard Chartered Bank estimates that the process will typically take four or five years, compared with 18 months to two years under the current law. Some businessmen think it is simply “unworkable”.

Even some who support the principles behind the bill think their implementation has been botched. N.C. Saxena, a former senior civil servant who sits on a National Advisory Council that tends to act as the social (or perhaps socialist) conscience of the ruling Congress party, says it is “anti-farmer and anti-industry and pro-civil society and pro-bureaucracy”. One of Mr Saxena’s criticisms is that it does not even cover government land. In other words, it would have no relevance for projects such as POSCO’s. Even if it did, legislation would not solve the fundamental difficulty, a total distrust of government. “After 66 years of independence,” says Mr Mohapatra, the former sarpanch, “no one has ever been compensated properly. Whoever gave his land and his home later became a beggar.”

Won’t get fooled again

He points to what he says is the unhappy lot of those displaced by two other projects in Odisha. One is the Hirakud dam across the Mahanadi river. It is India’s longest dam, for which Jawaharlal Nehru poured the first concrete in 1948. As many as 180,000 people had to move. Another is just down the road from Dhinkia, where a big oil refinery has been under construction since 2000. An empty field outside Dhinkia has drains and electricity, put in when plots were offered as compensation to those forced to shift. People found it so unappealing that the field is still empty. Moreover, 52 families who supported the POSCO project, many forced out of Govindpur in 2008, are still in reportedly miserable conditions in a transit camp. Add in heavy-handed police, and those agitating against the project have plenty of ammunition. Even the best-drafted law would find the going tough.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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