In 2011-12, eight of the 20 proposed large projects in sectors such as power, steel and highways had to be shelved because of problems in land acquisition. This led to a loss of investment worth Rs 66,000 crore, according to Crisil.
Recently, rural development minister Nitin Gadkari said road projects worth Rs 60,000 crore were stuck at different stages because of delays in acquiring land.
A 2009 McKinsey report cited a Planning Commission study as saying 70 per cent of road projects were delayed because of land acquisition.
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Since the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, repealed the 120-year-old Land Acquisition Act, 1894, on January 1 this year, industry's pet peeve has been the pendulum has swung too much in favour of landowners, in terms of the cost of land acquisition and rehabilitation of the displaced. Perhaps alarmed by the impact of a looming drought on investor sentiment, the new government has suggested it is open to reviewing some provisions of the Act. Business Standard takes a look at some of the contentious issues plaguing the new law:
Industry concerns
Most industry players say if the new law is applied in its present form, it will lead to significant escalation in project costs. A report by rating agency Crisil has estimated the law will raise overall project costs by three-five per cent. "Expectations of landowners will rise. That will push the price of land higher," Binaifer Jehani, director of Crisil Research, told Business Standard.
The new law stipulates landowners have to be paid at least twice the market price for land acquired in urban areas, and four times in rural areas. The cost of land acquired will also depend on the number of families displaced. According to the Confederation of Indian Industry's estimates, industry's land acquisition costs will rise three to three-and-a-half times. What worsens matters is the additional burden from a nearly-three-fold increase in mandatory relief and rehabilitation (R&R) entitlements.
According to the new Act, if the government acquires land for private companies, it has to secure the consent of 80 per cent of the landowners. For public-private partnership projects, the consent of 70 per cent landowners is required. Industry wants this percentage to be 60 per cent, as it reckons given the state of land records in the country, finding actual owners will be an uphill task in many cases.
For industry, delay is another worry. A notification to acquire land has to be followed up with a social impact assessment (SIA) study that will look into, among other things, whether the acquisition serves public purpose, its impact on affected families and whether the quantum of land acquired is justified or not. This study has to be vetted by a team of experts. Following this, the state government will take a call on the report and, if satisfied, start the R&R process. It is estimated the entire process will take about five years.
State governments call the shots
Industry executives say the new legislation has left a lot on state governments' plate, in terms of implementation. For instance, states have the power to veto the findings of SIA studies. Also, they can decide the type of land to be acquired, as well as the R&R requirements for private acquisitions. "More clarity is required on the role of governments in land acquisition for private projects. Thus, policy formulation at the state level will be critical," says Sheetal Sharad, senior analyst at Icra.
Retrospective impact
The new law will not only impact new projects, it might also affect some ongoing ones. The Act is applicable, with retrospective effect, on cases in which no award has been made for the land sought to be acquired, or cases in which most of the affected persons have not received compensation.
Cut the delay
"Industry's main concern pertains to the duration of the entire process," says B Muthuraman, vice-chairman of Tata Steel and past president of Confederation of Indian Industry. Industry players say they can deal with cost escalations, but the five-year process for land acquisition has to be reduced to two years.
Other concerns include a blanket R&R package in place of customised entitlements based on losses of specific families, limitations on acquisition of multi-cropped land, and return of unutilised land after a stipulated period.
The way out
As a possible way out of the imbroglio, experts suggest simultaneous initiation of all the processes such as consent-seeking, preparing the SIA report, securing environmental clearance and grievance redressal. What could help cut red-tape in the process is doing away with some committees and the need for too many approvals. For the government, it will be a tough balancing act to ensure landowners get their due and mitigate the impact on India's fragile investment climate.
INDUSTRY WISH LIST
| Dilution of consent requirement from 80% to 60%
| Doing away with retrospective clause
| Cutting delay in the process
| Revisiting indicated market multiplier
