Indian Government Amends Land Acquisition Bill

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Dec 30, 2014: On Monday, for the third time in recent weeks, India’s cabinet used an unusual maneuver  – issuing an “executive order” — to push forward with its economic overhaul agenda.

The executive order, or ordinance, tries make it easier for industrial projects to acquire land. The ordinance chips away at a major obstacle to industrial investment. Several proposed economic overhauls from India’s new government had been delayed by opposition protests in Parliament, which ended its session recently.

Ordinances are generally used to implement laws only in case of emergencies when Parliament isn’t in session. For an ordinance to remain law, it must eventually be approved by Parliament. However, under Parliamentary rules, there are special procedures that could make it easier for the government to ultimately win Parliament’s approval for these ordinances.

Finance Minister Arun Jaitley said in announcing the ordinances that the changes focus on speeding up development in five areas: development of industrial corridors, social infrastructure such as education, rural infrastructure such as roads and power, housing for the poor, and the country’s defense capabilities.

The ordinance makes land acquisition easier in these areas by exempting them from several provisions of current law, Mr. Jaitley said. For instance, such projects now won’t need the consent of 80% of landowners during acquisition, as is the requirement in other sectors.

However, the ordinance also makes another significant change: It expands the current law to increase the likelihood that landowners will be compensated in projects, such as highways and rail, where the government is involved, according Mr. Jaitley.

In similar moves last week, the cabinet approved ordinances for increasing the cap on foreign ownership in local insurance ventures to 49% from 26%, and for facilitating auctioning of coal mining licenses.

The latest move could add to criticism from opposition parties, which have objected to the use of ordinances, arguing that they show the government’s intention to muscle through its agenda. The government has defended its actions, saying the ordinances were necessary because opposition parties weren’t allowing parliament to function.

“The ordinance demonstrates the firm determination of the government for reforms,” Mr. Jaitley said last week.

Speaking on Monday, Mr. Jaitley said that while the ordinance on land acquisition aims to facilitate industrial development, the government wasn’t diluting provisions that deal with compensation for land owners, mostly farmers. “In a nutshell, we have tried to achieve a balance, where higher compensation will continue. At the same time, procedural rigors will be loosened or eased.”

In recent years, foreign companies have faced troubles in acquiring land for projects, prompting some to cut back their investments. In 2013, ArcelorMittal, the world’s largest steelmaker, dropped its plan to build a plant in the eastern Indian state of Orissa, citing delays in acquiring land as a main reason.

The changes now being introduced are important for Prime Minister Narendra Modi’s “Make in India” campaign that intends to boost Indian manufacturing. Mr. Modi has often in his speeches addressed foreign investors, inviting them to manufacture goods in India.

Earlier on Monday, during a separate “Make In India” event, Mr. Jaitley acknowledged that major changes in policies were needed to achieve that objective. “Unless radical steps are taken, manufacturing continues to be a challenge,” he said.

Courtesy: The Wall Street Journal