Disposal of Railways’ surplus land- Legal implications



Shri Ashwini Vaishnaw

Union Railway Minister


Dear Shri Vaishnaw,

I have come across a news report recently that the Cabinet Committee on Economic Affairs (CCEA) has approved a steep reduction in the annual rental for land leased to third parties by the Railways from the existing 6% to 1.5% of the market value of the land, annual step-up in the rental from 7% to 6% and an extension of the validity period for the lease from the existing 30 years to 35 years, apparently with a view to encourage public-private partnerships (PPPs) in setting up cargo terminals etc. (https://timesofindia.indiatimes.com/business/india-business/railways-aims-for-rs-30000-crore-more-from-land-lease/articleshowprint/94086531.cms)

In many States,annual rentals for land leased to private agencies are fixed at 10% of the market value of the land. To that extent, the existing rate of 6% adopted by the Railways is, in itself, a highly concessional rate. Even otherwise, in principle, giving subsidies to private agencies in the name of promoting “ease of business” is not a prudent measure. Instead, the Railways should provide a corruption-free, harassment-free interface to private agencies and enforce the public-private partnership agreement strictly with deterrent penalties to ensure that such a partnership promotes the overall public interest.

There are more fundamental legal issues that arise in the case of surplus lands available with the Railways. They are as follows.

  1. The lands under occupation of the Railways, mostly along the railway tracks, were acquired forcibly in the past by the States, on behalf of the Railways, under the erstwhile Land Acquisition Act of 1894, both prior to and after Independence. Prior to Independence, they were acquired exclusively for government departments, whereas after Independence, the States invoked their eminent domain authority citing “public purpose” for such forcible land acquisition. The term “public purpose” was defined in Section 3(f)(iv) of the 1894 Act as “ the provision of land for a corporation owned or controlled by the State;” In other words, the legality of such acquisition can be sustained only as long as the land in question remains with an entity owned and controlled by the government. Any alteration in its ownership/ control would violate the letter and the spirit of the above statutory requirement, which would make the PPP agreement prima facie illegal, to the extent it covers the land in question. Strictly, in such a case, the land should revert to the concerned State. Since the State had originally handed over the land to the Railways at a nominal rate, restoration of the land back to the State should also be at a nominal rate.
  2. It is in view of this statutory position that the General Financial Rules (GFR) of the Union Finance Ministry stipulate that the Railways should keep the States in the picture while dealing with its surplus lands. In other words, the Centre cannot take unilateral decisions in this matter, without consulting the States.
  3. In the specific case of Railway lands in the Scheduled Areas (areas notified under the Fifth Schedule to the Constitution), there are special laws that prohibit alienation of lands to non-tribals including private agencies (apex court’s orders in the Samatha case). Moreover, under the Panchayats (Extension to the Scheduled Areas) Act of 1996 [PESA], the local tribal Gram Sabhas have the authority to take decisions on all projects, schemes etc., a requirement that was confirmed by the apex court in the Vedanta bauxite mining case in Odisha. Therefore, the Centre and the Railways cannot take unilateral decisions on alienating any surplus land in such Scheduled Areas to private parties, either through a lease or in any other manner. Prior discussion by the tribal Gram Sabhas and their consent is mandatory.
  4. There are equally important concerns that arise in lands adjacent to the railway tracks, especially in and around urban agglomerations, where millions of low-income families, mostly belonging to the SCS/STs/OBCs, unable to find alternate locations for living, have put up their make-shift shelters and lead sub-human lives. Under Article 21 of the Constitution, they have the right to live (apex court’s orders in Olga Tellis case) and the government cannot be a party to uprooting them. The residents of those settlements have chosen the lands adjacent to the railway tracks, as that is where they earn their livelihoods. Unless the government can provide them better livelihoods elsewhere, it cannot summarily displace them. This is an important issue that the Railways should consider in a sensitive manner, as any unilateral decision on displacing those families would involve human rights violations. Both the Centre and the States, in consultation with those families, should first get a comprehensive survey carried out of all such settlements, work out a rehabilitation strategy that enables the residents to lead their lives in dignity and with improved livelihoods, before proceeding further. In view of the legal implications cited above, it would be prima facie illegal for the Railways to monetise those lands by involving private agencies.
  5. The Railways themselves would require vast stretches of land adjacent to the tracks for strengthening and expanding its capacity to be able to meet the future challenges in terms of increasing volumes of passenger and freight traffic. The Central Ministries and the Railways should facilitate a progressive shift from road to rail movement of freight traffic in the country to reduce specific energy consumption per tonne-km. Alienation of Railway lands to private agencies on a long-term basis would run counter to such a strategy.

I am afraid that the manner in which the Central Ministries including the Railways are trying to fast-track privatisation of the CPSE facilities and monetisation of their assets raises serious questions of propriety and prudence. I would caution the Railways to proceed in a way that conforms to the legal requirements fully.

I hope that you will get these issues examined by the Railway Board in consultation with the Ministry of Law before taking precipitate decisions.


Yours sincerely,

E A S Sarma

Former Secretary to Government of India



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