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The cost of land acquisition for highway projects in the country has gone up 70 per cent in the last three years, even as new compensation mechanism under the land acquisition law is not applicable. The new law became applicable from January 1 this year, and will have its effect on the land acquired for highways during the current financial year.
According to official data, from an average cost of Rs 78 lakh a hectare (ha) in 2012-13, it has gone up to Rs 1.35 crore a hectare in 2014-15, while it was Rs 90 lakh a hectare in 2014-15. Analysts said with new land acquisition in place, it will further bump up the cost of land acquired for highway projects.
Speaking to Business Standard, a senior official in the National Highways Authority of India (NHAI) said, "This is beyond doubt that the cost of land has grown dramatically in the last three years, mainly on account of increase in circle rates, sale deeds, increase in realty prices etc. In the last three years, the cost of compensation has gone up by 73 per cent. Further, with the new land acquisition law in place from this January, the cost of land will further go up. The effect of the new law in awarding compensation will be reflected in the land acquired in 2015-16."
Officials, however, said with higher compensation, landowners are more than willing to offer land for acquisition. The increased compensation has also burnt a hole in the government kitty. According to data, the government paid Rs 9,098 crore as compensation to the landowners to acquire 6,733 hectare in 2014-15. While in 2012-13 to acquire 6,925 hectare, the compensation paid was Rs 5,404 crore. Data clearly indicates that the government paid much more in 2014-15 towards acquiring land simply because of the increase in the average cost of the land.
This has also resulted in an increase in the cost of constructing highways. An NHAI official added, "In 2012-13, the land used to contribute 13-15 per cent of the total cost for constructing a four-lane highway, whereas in 2014-15, it touched 15-20 per cent of the total cost."
Currently, the overall cost of constructing a kilometre of a four-lane highway is around Rs 4-8 crore for a plain road without a bypass.
On being asked the trend in the current financial year, he added, "It is premature to find out the average cost of land the NHAI acquired in the current financial year as there are certain procedures involved."
With the government target for constructing at least 10,950 km in the current financial year, there would be more acquisitions. The government has acquired 1,551 hectare of land during the period April-June 2015 and intends to acquire 9,000-10,000 hectare in the current financial year.
India Ratings and Research (Ind-Ra), in a recent report, said initiatives in the recent past will be a springboard to the revival of the highways sector. Rescheduling of premium and refinancing schemes have provided some respite to special purpose vehicles (SPVs) with a forlorn hope of restoring their fiscal health. The introduction of the hybrid annuity model (HAM) and infrastructure debt funds further highlight the government's focus on addressing the rising need for devising an efficient and flexible financing path.
