After the initial euphoria, leaders of India Inc are realising that the proposed Land Acquisition, Rehabilitation and Resettlement Bill will not make their lives easier. Instead, it will negatively impact new projects, with land acquisition cost going up by as much as 150 per cent, making large projects like real estate townships and airports costlier.
Land costs are typically between 20 and 25 per cent of the total project cost, but for large infrastructure projects such as roads, realty and airports, land costs can add substantially to the total project cost. Arun Nanda, director of Mahindra & Mahindra, said the land acquisition cost will go up by 100 per cent to 150 per cent. “The project cost will depend on what is the land cost as a percentage of total cost of the project,” he said.
Getting 80 per cent of land owners to agree to sell their land to private sector projects will not be an easy task, as usually 10 per cent of land owners or their records are untraceable and another 20 per cent are fence-sitters. “In fact, it will be a non-starter,” said Nanda.
According to the proposed land acquisition Bill, consent of at least 80 per cent of the land owners is required for any private project. If the land is to be developed under public-private partnership (PPP), 70 per cent consent from landowners is required. However, government projects do not require land owners’ consent.
CEOs say that in most cases, it is not farmers who get the compensation but the middle-men and land aggregators, who take power of attorney from the land owners and grab land before any project starts.
Vinayak Chatterjee, chairman of Feedback Infrastructure, said, “It is old wine in old bottle, pulled out of the fridge and served to the public”.
He added CCI had much less “teeth” than when NIB was first conceived.
“Already, it takes years to get environment clearances and for land acquisition, especially for a public sector unit. We are hearing that the clause of 70 per cent consent from land owners will be applicable for ongoing projects also, which may affect the production plans. Moreover, the government should understand that mining is site-specific and it needs to be treated differently,” said the chairman of a government-controlled company, asking not to be named.
In an earlier interview, A M Naik, chairman of engineering and construction giant Larsen & Toubro (L&T), had warned that the project cost of Navi Mumbai airport would go up by Rs 4,500 crore if higher compensation was paid to the land owners. On Friday, Naik refused to comment on the issue.
The CEOs are also concerned about the implications if the provisions of the Bills are applied retrospectively, especially in cases where the compensation has not been made. They fear if a land owner has not yet received compensation for some reason, he can bargain for a higher price and thereby hold up the process and contribute to further land inflation.
The Bill also states that the entire process of land acquisition and award of compensation needs to be completed within five years of the date of proposal, else the transaction stands cancelled. “While it all seems positive on the surface, the fact is that there is also potential for even more uncertainty in the process of land acquisition. The idea of the Bill was to ensure that land owners get fair and timely compensation and also resettlement options.
However, it would need further tweaking to ensure that there is no potential for land owners to drive up land prices in the bargain - which, in turn, would mean that the cost of the finished products will rise,” said Mayank Saksena, head (land services), Jones Lang LaSalle India.
