Last week, in rain-washed Jaipur, government officials huddled together to give shape to an amended land acquisition law, which if passed by the assembly would make Rajasthan the first state to amend the central law passed by the United Progressive Alliance government in 2013.

The state government claims the amendments are needed to promote the state's industrial development, which is ostensibly being hobbled by difficulties and delays in land acquisition. But southeast of the city, the empty spaces in Sitapura muddied such claims.

Less than 16 km from the bustle of Jaipur, a network of good roads, uninterrupted power supply and easy access to trade and services make Sitapura one of the most coveted industrial areas in the state.

Parcelled out and allotted to entrepreneurs, it should presumably be a hive of industrial activity.

Instead, there are vast expanses of vacant land here with no sign of productive use.

Sitapura is not an exception.

Data shows less than one-third of the land acquired by the Rajasthan State Industrial Development Corporation has been put to use for industrial production.

The mystery of RIICO land
Set up in 1969 to promote industrialisation, RIICO makes land and infrastructure available to industry. For this, it acquires private farmland and clubs it with available government land to create industrial areas like Sitapura. In these areas, anyone who is setting up an industrial project is entitled to get a plot of land on a 99-year lease.

According to the latest data, until June 2014, RIICO has acquired 72,709 acres of land, of which only 34,108 acres has been allotted, in the form of 53,381 plots. On these plots, only 34,023 industrial units are currently under production.

This means that 19,358 plots are not being used by industry. Assuming that all plots are uniform in size, 12,368 acres of allotted land is not being used by industry. Altogether, 21,739 acres of the 72,709 acres of land acquired by RIICO  –  or less than 30%  – is being used for industrial production.

Why does the state want to speed up further acquisition of farmland for industry given that acquired land remains under-utilised?

Rajasthan's Commissioner for Industries, Vinod Ajmera, declined to comment. "This is a RIICO matter," he said. "How can I say anything about this?" made several attempts to speak with RIICO officials. But neither the chairman nor the managing director responded to calls and emails.

Conversations with industrialists and businessmen, however, offered insight into the real uses of RIICO land.

The use of RIICO land
"It is a very good investment," said a representative of an industry association who did not wish to be named. "There is a lot of money floating around, both of businessmen, and of politicians and bureaucrats. Nothing better than using it to buy land."

According to RIICO's rules, only those setting up industrial projects can apply for its land. Most of the RIICO land is given on first-come-first-served basis. Once the allotment is made, the project must become operational within three years, else RIICO can cancel the allotment and take back the land.

However, a chartered accountant familiar with the process said that the system is easily rigged. "You pay RIICO officials a commission and they will call you in advance whenever a new industrial area is set up," he said. All you need to do to get a plot of land is to come up with a project proposal. "It could be an agarbatti manufacturing project, which requires minimum investment. Once you get the land, you set up a small building to show that you are producing agarbattis. You can hold the land as long as you want, until you want to sell it further," he explained.

Said the industry representative, "Even if you do not start production, if you are influential enough you will not lose the land."

A closer look at RIICO's Disposal of Land Rules 1979 shows how the rules make this possible.

For a plot less than 10,000 square metres, an applicant does not need to submit a detailed project report. There are no detailed criteria to determine how much land is needed for different types of industrial units. There is one provision that allows applicants to get land in excess of project requirements: the built-up area on the allotted land need not exceed one-third of the plot size. "About 1/3rd area can be kept for future expansion and rest 1/3rd can be presumed to cater to present requirements. If applicant has mentioned 'X' square meter as proposed built up area and the same is found to be reasonable, he may be provided plot in the band approximately 3-3.5 'X'." In other words, if candidates need 100 square metres to run an agarbatti factory, they can get can get as much as 350 square metres.

All that candidates need to prove that a unit has started production is a sales tax receipt. There are no checks to see whether the quantum of production in their factory is commensurate with the levels they had claimed while applying for the land. A few packets of agarbattis is enough to keep the land secure.

And in case they are not able to start production within three years, the rules allow for extensions for upto five years –enough time for candidates to find a good buyer and sell the land at a sizeable profit. There is no bar on the resale of RIICO land.

Profiting from land
The scale of profits to be made in buying and selling land in Rajasthan's industrial areas can be gauged from the rise in land prices in recent years.

An industrialist who set up a plastic-based manufacturing unit in Ramchandpura, an extension of Sitapura, said he acquired 40,000 square metres of land for Rs 4,500 per square metre in 2010. "The cost came to Rs 18 crore," he said, "which accounted for the biggest chunk in my project cost of Rs 100 crore." Today, his unit is not doing very well, but the value of the land itself has multiplied. "The rate in the nearby area is 10,000 square metres," he said. "My land is worth more than Rs 35 crore."

I C Agarwal, the chairman of Genus Power Infrastructure Limited, a company that manufactures electronic metering solutions for the power sector, said the company acquired RIICO land in Sitapura at Rs 225 per square metre in 1993. Today, the price of the land in the resale market in Sitapura is anywhere upto Rs 20,000 per square metre. "But this does not mean anything to us," he said. "We are here to run an industry and not to profit from land."

Agarwal is very critical of the laxity in RIICO’s rules. "Those who have acquired land and have not put it to any productive use must be made to surrender the land," he said. "Such non-serious buyers are pushing the costs of land acquisition for the serious industry players." Furthermore, he pointed out that large chunks of land acquired by RIICO in the name of industry have been allocated for other purposes. In Sitapura, RIICO land has been given to private educational institutions. In Kukas, an industrial area on the Jaipur-Delhi Highway, RIICO land has been given to luxury hotels.

The amendments in the law
By amending the central law, Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, Rajasthan seeks to bypass the Social Impact Assessment provision enshrined in the act. According to this provision, before any land is acquired, an expert group must determine whether the project serves a public purpose and whether the benefits of the project outweigh its costs. The draft amendment also aims to dilute the provision that makes it mandatory for the government to seek the consent of local people before acquiring land. Some have argued these provisions would slow down the acquisition of land for industrial and infrastructure projects.

Speaking to the Economic Times, an official of the Rajasthan government claimed that the state is introducing amendments in the central law to avoid such delays, which could cause cost escalation of projects. The draft law also proposes to punish those "obstructing" land acquisition with upto six months' imprisonment and a fine of upto Rs three lakh.

But what remains unclear is why the government wishes to speedily acquire more land for industry when land already acquired is lying unused.