If we look at Singur, it is a simple case of conflicting wants and divergent preferences among people. Tata wants land to build its wonder car, thousands of workers want the jobs that will be generated; but many farmers want their land which would be acquired.

Now, there are many ways of resolving such conflict. Tata could use violence, employ some gunmen and get rid of the opposition. Unfortunately the government holds the monopoly over violence and Tata cannot legally employ such violence. The second is using rent seeking methods to ensure that the government will favour Tata over others. This sounds like an alternative to violence, but what was witnessed in Singur is violence against this kind of decision-making mechanism. And the last alternative is to use the market to farmers better off than when they owned the land; to make people in the area better off than before by offering them jobs and making Tata better off than before by allowing it to make profits.

The most important thing about the market is that it is an alternative to violence. When people could pillage and plunder the market provides a way of resolving conflict.

The problem with Singur is that the market alternative is unavailable. The government has ensured through that people cannot directly interact with each other; that farmers cannot sell agricultural land for non-agricultural purposes and so on. This is the reason for the violence.

One can hardly blame the Tata for leaving. Anyone who operates peaceably in the market will find it impossible to operate in such an environment and the added costs of police and private protection are probably too high. The only way to bring Tata and others to West Bengal may be to allow sale of land without government acquisition and let the market resolve all conflict. 

This piece written by me got published in the Wall Street Journal Asia (subscription required) on May 21st 2007.

UPDATE: Mint (which is in partnership with The Wall Street Journal) is publishing the same piece today (May 24th 2007).

These are strange days in India, especially when it comes to special economic zones. The left-wing government of West Bengal has been teaming up with the same big foreign corporations it previously claimed to hate, even asking peasants to vacate their land to make room for the companies. Then the right-wing opposition started siding with the grass-roots left to oppose the business interests. What is going on here?

Nothing, it turns out, that hasn’t been going on already for 50 years. West Bengal, where the communist parties have perhaps their largest presence in India, is rather famous for its commitment to land reform. This is the state where the maximum amount of land has been redistributed to farmers and peasants since independence to demolish the oppressive Indian feudal system, partly perpetrated by the Colonial government. So while it’s somewhat surprising that the redistribution is now going to foreign developers, the basic behavior is true to form.

To be fair, only so much of the blame can be apportioned to the West Bengal government. It is only doing what the Indian government, both state and federal, does best—taking land from A and giving it to B. Most of the fault lies with India’s socialist founding fathers.

Ironically, Indians had greater protection from private land “takings” under the British. Section 299 of the Government of India Act, 1935, clearly stated that no person was to be deprived of his property save for public purposes and with compensation. But from that high Madisonian note, the socialist leanings of successive leaders slowly eroded those rights.

After declaring independence in 1947, the members of the Indian Constituent Assembly, influenced by the American Constitution, tried to imitate the U.S. Bill of Rights both in content and intent. The newly-minted Takings Clause, which set out the rules for eminent domain, required that any land seizure should be for a public use (meaning infrastructure) and should be justly compensated. The first draft of this provision, proposed by Kanhaiyalal Maneklal Munshi, read almost exactly like America’s Fifth Amendment.

Socialist members like Jawaharlal Nehru, Bhimrao Ramji Ambedkar, Sir Benegal Narsingh Rau and Govind Ballabh Pant worried that such a strict limit on governmental power would prevent “beneficial social legislation.” These leaders of the Indian National Congress Party had promised to reconstruct an egalitarian agrarian economy and abolish the zamindari (feudal) system and transfer land to the tiller. A strict anti-takings clause would have foiled these plans. Unfortunately, the socialists managed to out-shout the Madisonians. “Public use” became “public purpose” and “just compensation” just became “compensation.”

Even then, this wasn’t the happy ending the Congress Party had hoped for because they had to pay vast sums of compensation for acquisitions. This paralyzed their land reform agenda. So they set about amending the constitution to eclipse even this little protection. Within a year the clause was amended and land reform legislation was ousted from the jurisdiction of the courts through its inclusion on the so-called Ninth Schedule, a list of laws immune from any kind of judicial review. These amendments effectively removed takings disputes from the jurisdiction of the courts, giving the government carte blanche to acquire any property it wanted.

The final blow to private property came in 1978 with the 44th amendment to the Constitution. The fundamental right to private property was abolished and was relegated to the position of a legal right. Further, the eminent domain clause was deleted from the Constitution, allowing the government to acquire any land for any purpose without compensation.

As a result, in today’s India there is no real right to private property and no protection against government land acquisitions. The rich feudal lords whose land was stripped in the 1950s and the poor peasants in Nandigram today suffer the same fate—a complete demolition of their private property rights. Talk about egalitarianism.

India has, in many respects, been turning away from its socialist past, and the decision to create and expand SEZs is part of that trend. The bitter irony, however, is that SEZs, meant to be at the vanguard of a newly capitalist economy, are being erected by trampling on the most fundamental tenet of capitalism—the right to private property. It is even more ironic that the constitutional amendments passed to protect the farmers through land reforms are being used today to evict farmers through the same principle—government-directed land redistribution.

Luckily India is still a vibrant democracy that protests such infringements. The West Bengal government had no choice but to bring its acquisition efforts to a halt after violent protests in Nandigram, where thousands of villagers and farmers attacked the police trying to enter and occupy land earmarked for an SEZ. Recently the central government announced that “no state can compulsorily acquire land from farmers through the Land Acquisition Act,” and that private parties setting up SEZs shall negotiate the purchase of land.

So it is a victory of sorts, as “takings” of this nature have been restrained by the government due to voter pressure. But can Indians prematurely do the victory dance when no formal constitutional guarantees exist to restrain takings and protect private property?

Ms. Rajagopalan is a Delhi-based law student and writer.

Most of you are familiar with my obsession with property rights and my frustration with land acquisition. Not surprisingly, my op-ed which appeared in Mint today is on use of Eminent Domain in Singur. The op-ed is here (login required, registration is free).

My previous post on eminent domain is here.

Also check out Niranjan Rajadhyaksha’s column Cafe Economics in Mint today here. Succinct piece on complacency over reforms in India.

A more detailed critique in The Economist over the reform agenda in India here.

In the last few days I have got many emails asking for my non expert opinion on Eminent Domain, I thought its time I posted on it. This post is to track the shameful history of abrogation of the right to private property in India.

Eminent domain is quite simply the power of the state to take private property for public use upon compensation to the owner.

For most people (especially the left liberal morcha) the buzz word in the above sentence is compensation. However the main issues for eminent domain are:

1. Private property
2. Public use

   On the first issue of private property, the issue so much is not what private property means but what kind of rights it is backed by. Do we have a right to private property in India? If so what kind of right is it? Is it a fundamental right? A statutory right? Traditonal, customary right?

   The second is on the interpretation of public use, and public interest. Does it mean only public goods or any good for the benefits of the public? The latter is clearly a lot wider than the former.

   Though originally the Indian Constitution contained adequate provisions to protect private property, this right has virtually ceased to exist in India.

   1. The government undertook to reconstruct the agrarian economy and tried to redistribute land, fixed ceilings on holdings, abolition of zamindars etc
   2. In urban property government has regulated with rent control, clearance of slum and urban land ceiling legislation
   3. Government regulated private enterprise through its nationalisation policy.

   Originally Article 19(1)(f) guaranteed to all Indian citizens the right to acquire, hold, dispose of property, with Article 19(5) permitting state to impose reasonable restrictions in general interest of the public. The power of eminent domain is found in Entry 42, List III, which says “Acquisitioning or Requisition of property”.

   Article 31(1) lay down that no person could be deprived of property without due process of law. Article 31(2) in its original version said “No property……shall be taken possession of or acquired for public purposes under any law authorising the taking of such possession or such acquisition, unless the law provides for compensation…….”

   I think we were doomed on the question of property rights from the beginning because of the language of 19(5) was so much wider than the eminent domain clauses in other constitutions though the original article 31(2) tried to incorporate the takings clause as in the US constitution.

   The Takings Clause in the Fifth Amendment of the US Constitution also protects private property. No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation. (Emphasis Added)

   The reason for Kelo was because SCOTUS decided to interpret public use (which meant provisioning of public goods like roads, railways, bridges, damns etc) as inclusive of public interest and allowed the government to acquire land for a private developer as it would increase employment and growth in the City of New London. Sandra o Conners in her dissent hit the nail on the head when she said this interpretation was dangerous as, “Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.”

   So since the very beginning the Indian Constitution, though recognised the right to private property, allowed acquisition in “public interest”. The Singur situation and the POSCO deal in Orissa etc can be defended on utilitarian grounds of increasing employment and growth in the are through the SEZ’s. Article 31(2) and its requirement of public purpose may have saved rights of property holders is the courts stictly interpreted “public purpose” but with this fundamental right abolished there is no hope.

   Somewhere between the fabian socialist and his totalitarian daughter private property got the death knell.

   1. The first blow was in 1951 itself with the First Amendment. The fundamental right to property guaranteed by Atricle 31 was curtailed t implement agrarian reforms. The Amendment also added Article 31A and 31B and, worse, the Ninth Schedule to make put laws outside the purview of judicial review.

   2. In 1955 with the Fourth Amendment where Article 31(2) was modified and Article 31(2)(A) was added to clearly outline the power of the government to acquisition and requisition.

   3. With the Seventeenth Amendment in 1964, Article 31 was further curtailed by expanding the meaning of “estate” and also expanding the Ninth Schedule to include more land reform legislation.
   4. The Twenty Fifth Amendment in 1971 further changed Article 31 to substitute “compensation” with “amount”. This was a result of the judgement in the Bank Nationalisation Case.

   5. In 1972 in the Twenty Ninth Amendment, two more land reform legislations in Kerela were included in the Ninth Schedule receiving protection under Article 31B.

   6. In 1974 with the Thirty Fourth Amendment, twenty more state acts on land ceiling and reforms were included in Ninth Schedule giving them protection under 31B.

   7. The Forty Second Amendment did what no person in the Constituent Assembly would have imagined. According to this amendment primacy was to be given to al Directive Principles over Fundamental rights in Article 14,19 and 31 (there goes equality, free speech and right to private property). This meant no law giving effect to the Directive Principles could be held void due to inconsistency with fundamental rights!

   8. Final blow came with the shameful Forty Fourth Amendment in 1978. To save the Parliament the trouble of constantly amending the fundamental right to property, the fundamental right was removed altogether and made a legal right.

   More on the consequences of these amendments and the case law later.

I have never been impressed by the leftist bandwagon which is perennially fighting the giant corporations. I am also not a big fan of Morcha’s against these large corporations when they plan to come and set up shop in India.

India is finally creating SEZ’s which hope to repeat the magic of China’s SEZ’s. For a detailed analysis of this new economic policy read The Economist. I am largely happy with providing such incentives and inviting foreign investment to India especially for developing infrastructure.

However as far as the POSCO deal is concerned, well that is what I am, concerned. This Korean company has struck a deal with the Orissa government for the creation of a special economic zone for POSCO where it will set up a large steel plant as well as develop and operate a major port. More on the deal here.

The trouble is the state government has promised 4000 acres which it doesn’t own.

The land is going to be acquired by the state government from about 100 villages, mostly agricultural, and no rehabilitation package has been announced for the villagers whose land will be acquired.

The reason for this is that in India there is no fundamental right to private property, there is only a legal right to private property. This fundamental right was abolished by the 44th amendment in 1978. Hence it is far easier for the government to acquire land often without paying compensation.

Many feel it is often justified for the government to acquire such land for public projects such as dams (as is evident from the Sardar Sarovar project), highways etc. However the POSCO deal is nothing more or less than taking land away from the poor and giving it to the rich under the utilitarian pretext of creating more employment and growth for the whole area.

This is a typical example of the government taking away the rights liberty and property of the “little people”. It reminds me of Justice Sandra O Connors dissent in Kelo v City of New London where she said, “Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory”.

The POSCO deal is an excellent example of what we call abuse of government power of eminent domain. Finally what we see today is not a step towards growth and development but two steps away from the right to private property and economic freedom which is the foundation for any long term growth and development.