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Singh Woos Voters Passing Farmer Friendly Land-for-Industry Law

India passed a key bill that assures fairer terms for farmers when companies acquire their land for factories and mines, seeking to curb deadly clashes as Prime Minister Manmohan Singh attempts to woo poor voters.

Changes to a century-old law will allow farmers to get at least double the value of their land as compensation, while helping revive stalled projects. Private businesses will also need to win the approval of at least 80 percent of landholders before seeking state intervention to evict the remaining residents. The law requires a social impact study and provides valuation rules.

Singh, whose administration has been marked by corruption allegations and policy gridlock, is seeking to burnish his pro-poor image by passing legislation in the final months of his second five-year term. He won a rare victory on Aug. 26, when lawmakers passed another landmark bill that expands the world’s biggest food program, as he struggles to rescue a tumbling rupee and revive economic growth from a decade low.

“This is like a 5,000-meter race, where in the last 500 meters you really speed up,” said Sandeep Shastri, a political analyst and pro-vice chancellor of Jain University in Bangalore. “But in the first 4,500 meters you lost so much time that no matter how fast you run in that 500 meters it won’t really help.”

Maoist Rebellion

The land bill has been fought over both within the ruling Congress party and in parliament since September 2011, delaying the ratification of a key plank of the government’s agenda to spread the benefits of growth. Protests over state-backed purchases of land at below-market rates for factories or highways have increased in frequency since 2007, triggering calls for greater compensation to farmers.

“It’s detrimental for companies,” said Giriraj Daga, an analyst at Nirmal Bang Equities Pvt. in Mumbai. “The viability of projects will be affected because getting the consent of land owners will be difficult and higher compensation will lead to an increase in costs.’

The new law, which was passed by the lower house and still needs to be approved by the upper house, comes at a time when the economy is on the verge of its biggest crisis in more than two decades. The currency has weakened about 17 percent versus the dollar this year. The tumble has brought back memories of India’s early 1990s crisis, when the government received an International Monetary Fund loan as foreign reserves dwindled.

Colonial Law

The passage of the law amends the 1894 colonial-era Land Acquisition Act, which allows the state to seize land at cheap rates if it believes there’s a larger public interest, such as the creation of jobs. Abuse of the rule has led to clashes between farmers and provincial administrations, and fueled Maoist rebellions in some mineral-rich states, including Chhattisgarh.

Plans by Posco (005490), the world’s third-largest steelmaker, to build a $12 billion steel project -- billed as the biggest investment in India by a foreign company -- have languished since 2005 because of opposition from farmers unwilling to vacate public land they’ve occupied for generations.

Singh’s minority government needed the backing of regional parties for the passage of the bill, which was championed by Congress President Sonia Gandhi and her son Rahul Gandhi, members of a political dynasty that has ruled India for most of the last seven decades.

Opinion Poll

Fatal clashes between farmers and companies trying to secure land for projects have hampered India’s plans to expand its network of highways, new power projects and mines hindering growth. Tussles have sparked rioting and stalled more than $100 billion of projects across India, the Associated Chambers of Commerce & Industry said in 2009.

The ruling coalition, made up of nine political parties, is likely to lose the next election, according to an opinion poll published by Times Now television channel and C-Voter polling agency last month. The number of seats won by Congress is likely to drop by about 42 percent to 119 seats while the main opposition Bharatiya Janata Party is likely to win 131 seats, the poll found. No margin of error was given.

‘‘This government has seen a drift that we have never seen in the past, a period of policy paralysis and a sudden awakening at the end which may not prove to be anything substantial at the polls,” Shastri said. “A few months is a long time in politics to demolish your image but a few months is too short a time to build up your image.”

To contact the reporters on this story: Andrew MacAskill in New Delhi at amacaskill@bloomberg.net; Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net

To contact the editor responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net

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