Governing farmer rehabilitation and resettlement in India

An important aspect of land acquisition due to development projects is farmer resettlement which includes restoration of standard of living. In order to achieve this and minimize the negative effects on the farmers, institutional arrangements of rehabilitation under the Land Acquisition Act 1894 have been modified several times. These usually take shape as hybrid organizational forms. Land is acquired through a top-down approach using a monetary compensation principle and displaced farmers have to re-organize their income activities by a market approach. This thesis, from different dimensions, shows that institutional efficacy does matter in achieving the desired outcome. Taking the Institutions of Sustainability framework as a starting point, three different yet related approaches, namely transaction cost economics, access-based property rights, and institutional fit, are adopted to unpack the rehabilitation issues. Using both qualitative and quantitative tools, a comparative institutional analysis is done. Through analysis of organizing modes and institutional arrangements of rehabilitation, it is shown that farmers bear high transaction costs in the current mode and there are ex-post hazards. It is also argued that in addition to allocated property rights, benefits actually depend on ‘access’ to those rights. Further, it is shown that farmer’s preference for different compensation options, as an indicator of social fit, plays an important role in contextualizing the institutional arrangements of rehabilitation. With these results, the thesis concludes that the institutions do matter but need to be contextualized to local conditions and farmers’ expectations.