Indian States Land Conversion Breakthrough Index

This Issue:

The availability of land is crucial for India’s potential success as a global manufacturing hub. Having simple, transparent rules for converting land use can help states take advantage of possible new large-scale investments.

Karnataka and Odisha lead the land conversion breakthrough index, which compares states’ land use conversion application processes according to their complexity and facelessness. Both states have recently instituted reforms that land them at the top of the list. Goa, Madhya Pradesh, and Rajasthan are all runner ups. As more states move towards e-governance platforms, their performance on this index will likely improve. Some states are more restrictive in land rezoning for reasons ranging from significant tribal populations to environmental conservation. On the whole, there is tremendous variation in states’ land conversion policies.

Why it matters?

A recent World Bank study reveals that states can boost firm creation, employment, and aggregate demand by rezoning agricultural land to industrial land. Policies that simplify the rezoning process result in more efficient sectoral allocation of land and create economic opportunity for owners of unproductive agricultural land. Land conversion is stymied in some states by applications that require extra steps such as numerous no objection certificates (NOCs), externally attested documents, and reconciliation with other land bills. On the other hand, some states have simple, faceless processes that reduce friction and the scope for corruption.

How the Index works?

The index comprises of two variables - facelessness and application complexity- which are rated on 0-4 and 0-5 scales, respectively. The sum of these two variables is converted to a 10-point scale to generate each state’s final score.

Facelessness is a composite variable based on whether attachments require visits to government offices, the application process is online, and conversion fees are subjectively or objectively determined. The latter two variables are binary variables, while the former is rated on a 0-2 scale. The sum of the three variables gives the facelessness score on a 0-4 scale.

Since applications vary significantly across states, application complexity cannot be compared according to fixed parameters. The application complexity score is rated on a 0-5 scale and is based on factors such as application length, number of required attachments, and prior legal knowledge required.

Our Data:

The data has come from government memos and land conversion policies that outline the application process. States that do not publish their application forms and related information online receive a score of 0 in this index.

Best Practices:

• States that process applications electronically often provide tracking numbers to applicants
• Certain states such as Rajasthan and Assam include exemptions from conversion fees for specified sectors in their rezoning policies. This is a policy lever for states to encourage the development of certain sectors
• Applications that use multiple choice questions and yes/no questions are the simplest to fill out
• Tamil Nadu and Karnataka have dedicated webpages for land rezoning
• Bihar requires authorities to provide applicants with clear reasoning if an application is rejected. 

Highlights:

• Kerala and Manipur, states with significant paddylands and wetlands, explicitly state environmental concerns as their reasons for restricting conversion of agricultural land
• Goa’s application portal is integrated with its single window system. This allows investors to deal with land conversion in the same window as other registration matters
• Karnataka’s new online affidavit-based land conversion process requires applicants to upload their application and related attachments to the Bhoomi portal. Bhoomi fetches land records from its backend database and distributes application materials to the relevant authorities internally. This lands Karnataka at the top spot in terms of simplicity and facelessness
• Although Bihar secures high scores for simplicity, it does comparatively poorly in facelessness. Bihar has a clearly written policy, but the application is submitted offline and conversion fee is determined by the collector. As a result, Bihar scores poorly in facelessness. Bihar could improve its score by integrating its land conversion application into its single window system.