On Just Compensation For Unjust Takings

New Delhi: May 26, 2008
There is an interesting comment from Jyoti Basu, the Communist patriarch, that the land taken from villagers for setting up a factory to make Tata Nano cars – using “eminent domain” for a private purpose – cannot be returned, but “the compensation package can be discussed.”

In all such discussions of “just compensation” when eminent domain is used, economists, lawyers as well as judges view this just compensation in terms of “market price.”

This is a grave mistake.

The market price would be a just compensation only if there was already a “For Sale” sign put up on the property.

Where no such signs have been put up, the owner is clearly unwilling to sell at the market price.

Thus, the just compensation for an owner who is unwilling to sell at the market price must be many times higher than the market price.

Only that can be deemed just compensation.

The landowners of Singur are clearly unwilling to sell at the market price.

And anyway this is an unjust use of the powers of eminent domain.

In my judgement, therefore, the compensation should be anywhere between 2 or 3 times the market price.

This will represent only a small rise in the project cost – of which land comprises less than 10 per cent.

And justice will prevail.

Indeed, if the courts issue such a judgement, the precedent set will ensure that eminent domain is used very sparingly, and that too for truly public purposes only – for which it is intended.