Resettlement and rehabilitation:A change in the basic paradigm

This paper argues that there is a pressing need to abandon the existing model in favor of a more coherent and simple solution. This primarily rests on the repeal of the Land Acquisition Act, 1894, and the restoration of the individual’s right to his property unaffected by any compulsory power of acquisition by the state for itself or its nominees. The procedure then will be voluntary, participative, and result in fair and reasonable value for property acquired; incomes lost and lives disrupted. It will require project authorities to treat "affected persons" as stakeholders and allow the "affected persons" to make decisions of their free will and in keeping with their long-term self interest.

The question of resettlement and rehabilitation of people affected by projects has become a major issue in recent times. Some of the new emphasis has been generated by groups of environmentalists in U.S.A. and Europe whose agenda has been widened to include the problems of displaced people as well as displaced or endangered plant and animal life and other natural resources. These groups have been able to influence the U.S. Congress as well as The World Bank and other international funding agencies. To this extent the issue has been placed squarely on the agenda of developing countries as well.

In India, the matter has, till recently, been seen as a pure compensatory problem with an almost total reliance on the century old Land Acquisition Act, 1894. The solution is dependent on the capacity, efficiency and honesty of the revenue department of state governments in handling the process of evaluation and distribution of compensation and the execution of resettlement and rehabilitation schemes.

This paper argues that there is a pressing need to abandon this whole approach in favor of a more coherent and simple solution. The solution rests primarily on the repeal of the Land Acquisition Act and the abandonment of the coercive and compulsory power of acquiring property by the state – a power that has its vestiges in ancient feudal and colonial law and ethos. The procedure then will be voluntary, participative, and result in fair and reasonable value for property acquired, incomes lost and lives disrupted. It will encourage, nay even require project authorities to treat affected persons as stakeholders and allow them to make decisions out of their free will and long-term self-interest.

Historical perspective

The notion that the state is the ultimate possessor of all land (and, axiomatically, arbiter of the fate of all and any of the people) is a feudal one. The progress of social change in Europe, since the Magna Carta was signed in England, had allowed change in this and other such notions and has continued ever since. Unfortunately, this tendency did not occur in India, and our social development, such as it was, was further complicated by the introduction of colonial rule. The British resolved the asymmetry of strong individual property rights in England and none in India by various half-measures which included the Land Acquisition Act.

While in retrospect this may be seen as a half-measure, in the India of that time, it was a great step forward to acknowledging rights of private property. The acts of legislation left behind by the colonial power and new legislation framed by the new democratic state, led to a rash of expropriations and acquisitions, almost all compulsory in nature.

The first set of laws introduced was the Evacuee Property Act, which allowed each of the two new states, India and Pakistan, to seize the property of those who had migrated to the other for the alleged purpose of redistribution to refugees. The ultimate logic of this Act is that foreigners were not entitled to own property. Otherwise there was no particular need for this Act, as residence and property rights do not necessarily have to go together.

Then came, the rash of nationalization of industries and businesses in India with compensations of a minimal order. It was also thought necessary to amend the Constitution to replace even the fair and reasonable (note: not market) value of compensation with the word amount. This was not to be subject to judicial review. The Bank Nationalization case decided by the Supreme Court was another watershed in this process, which ultimately culminated in the Minerva Mills case.

The abolition of jagirs and other feudal entities through various Jagir Abolition Acts and their imposed compensation is another point of reference. On the other hand, the ruling princes, however, negotiated their own compensation and rights (privy purses) and received them as part of the establishment of the new Indian Dominion and these rights were enshrined in the Constitution of India. The asymmetry in the treatment of jagirs and princely states has to be noted. Even the privy purses were summarily abolished and the first breach of contract between the consolidated Indian State and its former components took place.

The Rent Control Acts, the Land Tenancy Acts, Agricultural Ceiling Acts, Urban Ceiling Acts, etc., constituted part of the whole range of coercive legislation whereby the state sought to regulate, alter and abolish traditional individual property rights established over the last 100 years of British rule.[1] It is no wonder then that the notion of property as permanent, heritable, and secure for future generations began to suffer and resulted in alteration in savings and investment behavior. It also generated considerable corruption, litigation and general disrespect and contempt for the law.

The growth of the economy, the rise of the property-owning middle class and the noveau riche beneficiaries of the new state and the need to conform (since 1991) with international norms of property and other civil rights, has changed the whole perspective. For the first time in this nation’s history, defense of property rights has become a major issue.

Projects and people

The idea that progress is unchallengable and that nothing should stand in its way was one propagated by those in power that felt the responsibility to ensure progress per se unmindful of the negative externalities of every big step forward. It is another matter that negative externalities may be outweighed by the project benefits or even by positive externalities. The issue could not be quantified to anyone’s satisfaction[2] - prices, values and time horizons being controversial - and the matter was settled by default; by the exercise of coercive state power. Most projects resulted in displacement and expropriation and the old British legislation, the Land Acquisition Act, was used to settle the matter as far as the project authorities were concerned.[3]

Now this issue has assumed importance partly because progress is not seen as unchangeable nor as entirely benign. The growth of general awareness of an individual’s rights, media coverage, strong local political bases, and the intrusion of international standards has been responsible for this sea change. Further, as foreign direct investment is welcomed and does in fact take place, the foreign company’s shareholders, other stakeholders and consumers of its products, as also various groups in the parent company’s country become interested and agitated where manifest unfairness is reported in the international media.

None of these companies are prepared, as in the past, to trade-off reputation for concerned corporate behavior for profits. The penalties for so doing are great and may result in adverse publicity resulting in loss of sales through consumer boycott, discounting of the share price by stock markets, avoidance by mutual and public pension funds of old and new stock issues, dismissals of senior officials and also of class-action suits of enormous size and cost.[4] This attitude affects the international funding agencies multilateral, national, public and private. All these factors require us to develop a new and acceptable way of dealing with re-settlement and rehabilitation.

Current Thinking[5]

There is concern and considerable effort to introduce new systems in handling displacement and rehabilitation and to legislate these new systems into being. The main issues are spelled out in the Draft Policy (Proceedings, 1999) are:

This is a laudable effort and speaks well of the authors of the Draft Policy and their intentions. However, it does not address two fundamental questions: This paper seeks to address these questions and suggest a radical solution to them.

The need for compulsion

There does not seem any justification for this need. The state is admittedly democratic, admittedly oriented towards capitalism based on free markets, and is responsive to internal and external pressure for preservation and strengthening of civil rights. In this context, a reliance on a century-old procedure (even if made more compensatory) cannot be justified in ideological terms. In terms of an open democratic system, it will be difficult to imagine a positive vote in a referendum.

What is the justification especially when the state is now seeking to preserve private rights, organize regulatory bodies for the protection of private capital, guaranteeing foreign capital and its receivables, etc.? The World Bank, surprisingly, offers the justification. Admittedly, there is an asymmetry in the global approach which encourages free markets in all sectors, water rights, entitlements, state intervention to reinforce market failures and maintenance of the integrity of free markets, both in the developed as well as the developing world.

Yet when it comes to this issue, even the World Bank is supportive of compulsory acquisition. The argument goes thus:

"The pre-requisites to a market-based approach are a developed land market, accurate pricing, clear title system, and the presence of non-judicial negotiation systems…. But in the case of developing countries, private sector land acquisition is very complex because of imperfect land markets, under pricing of land, no clear title, and customary land rights. And this is precisely why governmental intervention becomes necessary." (Proceedings, 1999, p.9) Let us consider the technical issues that prevent the ideological ones from being preferred: Thus the conclusion drawn that because of these failings - mostly imaginary as far as India is concerned - we should resort to governmental intervention is erroneous. Even if such a conclusion does follow from the weaknesses described, then its logic would have all developed countries following compulsory acquisition procedures. Oddly,[6]it is the some firms in the private sector that have resorted to purchase by negotiation and in trying new methods. This may be due to the ideological bias in favour of property rights and also the need to live in a good neighborly way with the people of that area.

In the case of Enron’s Dahbol unit, the private foreign investor has supplemented the payment according to the Land Acquisition Act with its own ex gratia payments to the owners of acquired land (Proceedings, 1999, p.81). In the case of TISCO’s Gopalpur, the area required has been drastically pruned to international standards. Site maps have been changed to exclude villages that were reluctant and every adjustment was made to make the process fair and reasonable. In the process, TISCO has paid 5 times more than the Land Acquisition Act would have allowed but ensured goodwill of the people, and a litigation-free project. For sure, it would have taxed TISCO’s negotiating skills but that is a matter that can be outsourced or built up internally (Proceedings, 1999, p.29-35).

The argument against compulsory acquisition can end with another quotation from the World Bank’s Vice-President, Dr. Ismail Serageldin who, in comparing China, India and Indonesia, is stated to have said:

"Best performance so far is by China, mainly on account of three factors. First, resettlement was taken up as a project in itself. Second, in pre-liberalization China there was no private property, hence no question of property-based resettlement. And third, the official policy of the Chinese government did not recognize unemployment, so employment was guaranteed to all those re-settled. Now after liberalization, the property approach seems to be coming back and with it associated problems."(Proceedings, 1999, p.89) The sum total of this is that in a dictatorial, non-democratic, private property-less system, the procedure followed as in China may yield results.[7]But the starting assumptions are questionable and their requirement not necessary to achieve the results required.

Participative approach

Both the World Bank and the Draft Policy are strong on the need for a participative approach. But a priori compulsory land acquisition legislation is neither necessary nor sufficient to ensure fair and equitable resettlement and rehabilitation. If the whip of compulsory acquisition is to be tempered by the balm of participation, this is a morally indefensible and operationally inefficient procedure. Participation assumes total equality. Otherwise, it becomes a sham and results only in a cosmetic justification for pre-determined policy and outcomes.

The real success of any participative procedure for resettlement and rehabilitation will be seen only if the persons affected have the choice of saying no. Such a choice must be available and feasible. The project’s first test of feasibility should be its capacity to fully compensate those affected by it and to secure their willing and whole-hearted cooperation. Development should be welcomed - first by the negatively affected and then by those positively affected. The threat of compulsory acquisition is the equivalent of an offer that can’t be refused and is more worthy of a mafia boss than of a democratic government.

The past 50 years has been a period where property and other civil rights have been eroded and threatened. Now when the tide seems to have turned, it is befitting that the opportunity should be grasped with both hands. In an age when every international forum resounds to the cry of empowerment of the people, legislation like the Land Acquisition Act are responsible for dis-empowerment of the affected persons. The abolition of the Land Acquisition Act and other coercive, expropriative legislation will be a first step to ensuring civil and other liberties of the people, ensuring their willing cooperation in solving problems created by developmental projects and joining the international comity of free nations.[8]


Gautam Pingle is a Senior Member of Faculty, Public Policy and Systems Area, Administrative Staff College of India, Hyderabad


  1. The lack of protection for individual property during the Mogul and post-Mogul rule has led some to argue that property rights are a colonial phenomenon and, therefore, not to be taken seriously.
  2. The impossibility of inter-personal comparisons of welfare had by then been firmly established and well known.
  3. As far as the project authorities were concerned their problem ended after the government decided to acquire the land. Thereafter, the problem was between the government and the affected people and the project authorities could go on without any responsibility except to pay the government for the land.
  4. Slogans such as " X Company kills babies" as a campaign against baby milk powder sold under misleading and dangerous pretences in developing countries can be very effective in frightening the company concerned.
  5. Summarized in Proceedings (1999). It also contains the Draft Policy paper and discussions of World Bank and Indian participants.
  6. The private sector in India has played what can be seen to be a dirty game. Large tracts of land, usually without justification, have been acquired using the LA Act at throwaway prices. Thereafter, the industry concerned had no further interest in the affected people in the area they intruded into. The same game has been played by public sector industries. The worst cases are by the State Housing Boards, which acquired land at rock bottom rates and sometimes soon after plotting sold the same land at huge profit. In many cases, however, buildings were constructed for low- and middle-income groups and sold to them even before land compensation was paid.
  7. The head of the Bank’s special Task Force created to study resettlement issues expresses another view of the World Bank. He says "Before the late 1970’s vast population displacements caused by massive dam building in China resulted in the disastrous impoverishment of many people and in significant socio-political instability. At that time, China lacked a legal or policy framework for resettlement: the results were tragic displacement operations, such as those from the Sanmenxia and Danjiangkou reservoirs in the 1960’s and 1970’s." (quoted in Cernea, 1996, p.1522, fnt.12).
  8. The World Bank’s General Counsel says "Resettlement legal issues (are treated) as a subset of property and expropriation law...New legislation often must be introduced, or existing laws must be modified, in order to plan and carry out involuntary resettlement adequately" (quoted in Cernea, 1996, 1519) (emphasis mine). No reference is made to the fact that laws established on the basis of the theory of "eminent domain", like the LA Act, are responsible for most of the problems created by the dis-empowerment of the affected persons. And the only solution is new laws or amendment of existing laws.


Center for Rural Studies (1999). Displacement and rehabilitation in India - Future perspectives:Proceedings of a national workshop. Mussoorie: Lal Bahadur Shastri National Academy of Administration. Referred to as Proceedings (1999).

Cernea, M.M. (1996, June 15). Public policy responses to development-induced population displacements. Economic and Political Weekly, 31 (24), 1515-1523.