New Land Acquisition Act Comes Into Force From January 1, 2014

The Indian economy has been growing at the slowest pace in a decade, and one of the reasons for this is the slowdown in the investment cycle. What could accentuate this slacked pace in the new year is the Land Acquisition Act, which comes into force from January 1, 2014. The bill was passed in the Monsoon session of Parliament in 2013 and on September 27, it received assent of the President of India, Pranab Mukherjee.

This new legislation replaces the 120-year old one and was framed with the intention of providing compensation to farmers in a fair and just manner. The salient feature of this Act is that it requires atleast 70% of the people whose land is being acquired to give consent for Public-Private Partnerships. This becomes 80% when the land is being acquired by any private player. Also notable is the fact that the compensation has been upped up to four times the market values in rural areas and twice the market value in urban areas.

Another key feature of the Act is that has been introduced with retrospective effect to provide justice in historical cases where no reward for land acquisition has been made. Moreover, if the land is being sold to a third party and the profits are more than 40%, these profits should be shared with the land owner.  A maximum of 5% irrigated, multi-cropped land may be acquired in a single district.

Although these clauses ensure fair and just compensation for farmers, the flipside is that land acquisition will become dearer for the companies. This means that project costs will remain on the higher side and many projects may become financially unviable. The power and realty sectors will be mainly affected.