An Indian court has ruled that the government has acted legally in taking back agricultural land leased to a company to build a car factory in West Bengal state. The government has pledged to hand the land back to farmers. The case has become a symbol of the growing conflict over land between farmers and industry and the need to overhaul India's archaic land acquisition laws.
The Kolkata High Court upheld a new law under which the West Bengal government reclaimed a large plot of land given to Tata Motors for an automobile factory.
The court ruled that all equipment should be moved out of the factory in two months. It said the company could seek compensation.
Tata Motors had moved the project to build the world's cheapest car to another state three years ago following violent protests by villagers over the acquisition of their fertile farmland.
The protests were led by the Trinamool Congress, which went on to win power, take charge of the government, and pass a law to take back the land, which remained with the company. Leaders pledged to distribute the land back to the original owners.
The case has drawn widespread attention in a country where conflicts between industry and farmers have reached a flashpoint in several states.
Farmers complain that governments often take over their land for very low prices under a century-old law and hand it over to private companies for lucrative projects, whether it is to build factories, homes or exploit minerals. The displaced farmers say it is difficult for them to find alternate livelihoods.
However, industry complains that the biggest hurdle to expansion in a fast growing economy is finding land for factories. Worries are also growing over state governments or courts blocking or overturning agreements. Economist D.K. Joshi at Crisil in India says the problem needs attention.
"Land acquisition is one very critical factor which needs to be ironed out for promoting infrastructure activity which we really want to," said Joshi. "Land acquisition if you straighten it out, will help in raising India's supply potential, help in improving its competitiveness, and I think it will also help in improving the sagging business confidence and improve the business climate at home."
The federal government hopes to provide the solution through a new land acquisition bill which it introduced in parliament earlier this month.
The bill, if passed, will raise compensation for farmers to several times over the market value. The government will only be able to acquire land if 80 percent of the affected families agree to sell. Private companies buying more than 100 acres of land in rural areas or more than 50 acres in urban areas will also have to provide jobs to at least one member of an affected family or an annuity for 20 years.
The proposed law could push up the costs for industrial projects, but is seen as providing a fairer deal for farmers as India moves from being a primarily rural economy to a more modern one.