One of the most politically contentious issues in recent times has been the government’s right to acquire land for ‘public purpose’.  Increasingly, farmers are refusing to part with their land without adequate compensation, the most recent example being the agitation in Uttar Pradesh over the acquisition of land for the Yamuna Express Highway. Presently, land acquisition in India is governed by the Land Acquisition Act, an archaic law passed more than a century ago in 1894.  According to the Act, the government has the right to acquire private land without the consent of the land owners if the land is acquired for a “public purpose” project (such as development of towns and village sites, building of schools, hospitals and housing and state run corporations).  The land owners get only the current price value of the land as compensation.  The key provision that has triggered most of the discontent is the one that allows the government to acquire land for private companies if it is for a “public purpose” project.  This has led to conflict over issues of compensation, rehabilitation of displaced people and the type of land that is being acquired. The UPA government introduced the Land Acquisition (Amendment) Bill in conjunction with the Rehabilitation and Resettlement Bill on December 6, 2007 in the Lok Sabha and referred them to the Standing Committee on Rural Development for scrutiny.  The Committee submitted its report on October 21, 2008 but the Bills lapsed at the end of the 14th Lok Sabha.  The government is planning to introduce revised versions of the Bills.  The following paragraphs discuss the lapsed Bills to give some idea of the government’s perspective on the issue while analysing the lacunae in the Bills. The Land Acquisition (Amendment) Bill, 2007 redefined “public purpose” to allow land acquisition only for defence purposes, infrastructure projects, or any project useful to the general public where 70% of the land had already been purchased from willing sellers through the free market.  It prohibited land acquisition for companies unless they had already purchased 70% of the required land.  The Bill also made it mandatory for the government to conduct a social impact assessment if land acquisition resulted in displacement of 400 families in the plains or 200 families in the hills or tribal areas.  The compensation was to be extended to tribals and individuals with tenancy rights under state laws.  The compensation was based on many factors such as market rates, the intended use of the land, and the value of standing crop.  A Land Acquisition Compensation Disputes Settlement Authority was to be established to adjudicate disputes. The Rehabilitation and Resettlement Bill, 2007 sought to provide for benefits and compensation to people displaced by land acquisition or any other involuntary displacements.  The Bill created project-specific authorities to formulate, implement and monitor the rehabilitation process.  It also outlined minimum benefits for displaced families such as land, house, monetary compensation, skill training and preference for jobs.  A grievance redressal system was also provided for. Although the Bills were a step in the right direction, many issues still remained unresolved.  Since the Land Acquisition Bill barred the civil courts from entertaining any disputes related to land acquisition, it was unclear whether there was a mechanism by which a person could challenge the qualification of a project as “public purpose”.  Unlike the Special Economic Zone Act, 2005, the Bill did not specify the type of land that could be acquired (such as waste and barren lands).  The Bill made special provision for land taken in the case of ‘urgency’.  However, it did not define the term urgency, which could lead to confusion and misuse of the term. The biggest loop-hole in the Rehabilitation and Resettlement Bill was the use of non-binding language.  Take for example Clause 25, which stated that “The Government may, by notification, declare any area…as a resettlement area.” Furthermore, Clause 36(1) stated that land for land “shall be allotted…if Government land is available.”  The government could effectively get away with not providing many of the benefits listed in the Bill.  Also, most of the safeguards and benefits were limited to families affected by large-scale displacements (400 or more families in the plains and 200 or more families in the hills and tribal areas).  The benefits for affected families in case of smaller scale displacements were not clearly spelt out.  Lastly, the Bill stated that compensation to displaced families should be borne by the requiring body (body which needs the land for its projects).  Who would bear the expenditure of rehabilitation in case of natural disasters remained ambiguous. If India is to attain economic prosperity, the government needs to strike a balance between the need for development and protecting the rights of people whose land is being acquired. Kaushiki Sanyal The article was published in Sahara Time (Issue dated September 4, 2010, page 36)

The Minister of Railways, Dinesh Trivedi, presented the Railways Budget 2012 to Parliament on 14th March.  While commenting on the financial position of Railways, the Minister said that 'the Indian Railways are passing through a difficult phase'. The Operating Ratio for the closing year is now estimated to equal 95%. This is significantly higher than the 91.1% figure budgeted last year. Operating Ratio is a metric that compares operating expenses to revenues. A higher ratio indicates lower ability to generate surplus. Surplus is used for capital investments such as laying of new lines, deploying more coaches etc. Therefore, a smaller surplus affects the Railway’s capability to make such investments. Budget v/s Revised estimates 2011-12 Budget 2011-12 had estimated the performance of Railways for the financial year. Revised estimates have now been submitted. Taken together, these two figures help in comparing actual performance against targets. Some observations are enumerated below:

  • Total receipts decreased by Rs 2,746 crore.
  • Total expenditure increased by Rs 2,102 crore.
  • Operating Ratio increased from 91.1% to 95%. This implies a decrease in surplus.
  • Appropriations to the ‘Development Fund’ and the ‘Capital Fund’ decreased from Rs 5,258 crore to Rs 1,492 crore (a decrease of 72%). The ‘Development Fund’ finances expenditure such as passenger amenities; the ‘Capital Fund’ is used for capital augmentation such as laying of new lines.

Budget estimates 2012-13 In 2012-13, Railways plan to improve Operating Ratio to 84.9% and to increase surplus to Rs 15,557 crore. This is more than 10 times the surplus generated in 2011-12 (Revised Estimates). The effective increase in freight rates is estimated to average 23%. During this time, passenger fares are also estimated to increase by an effective average rate of 19%. [1] Infrastructure Performance during the 11th Plan Under the 11th Five Year Plan, the total plan expenditure for Railways had been approved at Rs 2,33,289 crore. The Outcome Budget shows that the actual expenditure is only likely to be Rs 1,92,291 crore. Thus, expenditure will fall short by Rs 40,998 crore. This gaps exists despite a significant increase in the Gross Budgetary Support approved by Parliament. Plan expenditure during 2007-12 (In Rs Crore)

 

Approved Expenditure

Actual Expenditure

Gross Budgetary Support

63,635

75,979

Internal Resources

90,000

67,763

Extra Budgetary Support

79,654

48,549

Total

2,33,289

1,92,291

The Standing Committee on Railways, in its 11th report presented in August 2011, had sought an explanation from the Ministry. According to the Ministry, lower mobilization of internal resources and lack of extra budgetary support are the main reasons for the shortfall.  Internal resource mobilization has been low because of (i) impact of the 6th Pay Commission; and (ii) slow growth in freight earnings due to the economic slowdown. Extra budgetary resources have been low due to non-materialization of funds through the Public-Private Partnership route. Proposals for the 12th Plan Two recent committees – Kakodkar Committee on Railway Safety and the Pitroda Committee on Railway Modernization – have called for large investments in the next five years. The Kakodkar Committee has recommended an investment of Rs 1,00,000 crore in the next five years to improve safety; the Pitroda Committee has recommended an expenditure of Rs 3,96,000 crore in the next five years on modernization. The Railway sub-group of the 12th Five Year Plan has also estimated a requirement of Rs 4,42,744 crore for various other investments proposed to be undertaken during the Plan period. [2] All three groups have called for significant investments in infrastructure augmentation in the next five years. Budget proposals 2012-13 According to the Minister’s speech, the Annual Plan outlay for the year 2012-13 has been set at Rs 60,100 crore. The plan would be financed through:

  • Gross Budgetary Support of Rs 24,000 crore
  • Railway Safety Fund of Rs 2,000 crore
  • Internal Resources of Rs 18,050 crore
  • Extra Budgetary Resources of Rs 16,050 crore. Of this, Rs 15,000 crore would be borrowed from the market through IRFC (Indian Railway Finance Corporation).

What happens now? The Budget is likely to be discussed in the two Houses within the next few days.  Post the discussion, the Ministry's proposals will be put to vote.  Once passed, the Ministry can put its proposals into action. For more details on the Railway Budget, including the projects proposed this year and the status of proposals made last year, please see our analysis here. To understand some of the challenges faced by the Indian Railways, see our blog post from last year. Notes: [1] The ‘effective average fare’ has been calculated by dividing the total income from the segment (freight/ passenger) by the total traffic (in NTKM/ PKM).  This would vary with changes in fares as well as the usage by different categories of users (including the proportion of tickets booked through Tatkal). [2] Source: Report of the Expert Group on Railway Modernization (Chairman: Sam Pitroda)