Land acquisition, a major impediment to large infrastructure projects in India, has in the past delayed private companies' development plans while they sort out litigation over land ownership and compensation.
Land costs that a decade ago comprised 10% of investment have increased to around 22%. National bank data released in March revealed infrastructure projects worth $145 billion were being held up.
To address issues related to land, Parliament has cleared the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Law, which now replaces the archaic 1894 law. Expected to come into effect by mid-2014, it has evoked a mixed response. There is little optimism in the private sector, and farmers—the very people the measure is designed to help—are opposing it.
The bill establishes a 70% approval benchmark by affected population for land being acquired by private public partnerships. For government acquisitions, by contrast, the government has the legal right to seize property.
However, the All India Kisan Mazdoor Sabha, a peasants’ rights organization, has called it a “pro-corporate, anti-farmer law. … This new law was drafted [despite] opposition by farmers to their agricultural and forest lands being acquired for development of big corporate houses,” says spokesman Ashish Mital.
“It provides fair compensation to those whose land is taken away, brings transparency to the process of acquisition of land to set up factories and buildings, infrastructural projects and assures rehabilitation of those affected,” says Rural Development Minister Jairam Ramesh, calling the legislation "historic."
Land acquisition delays mainly have happened as farmers were not paid adequately and on time, resulting in problems once construction is started, Sanjay Modi, CEO, Interarch Infrastructure told ENR. “While there are merits to the [bill], there are ambiguities, as there are no guarantees that previous owners won’t come back to demand more money. There needs to be clear-cut priorities in state laws on full and final payment,” he adds.
Concerns over the Land Acquisition Bill have been raised by numerous industry bodies. “The bill will raise the cost of land three to three and a half times, making projects unviable and raising costs … the mechanism should balance interests of affected families with industry affordability,” says S. Gopalakrishnan, President, Confederation of Indian Industry (CII).
"The retrospective effect of the Bill will severely affect ongoing projects as re-starting the entire land acquisition process will cause delays and cost escalation," CII said in a statement.
Already, major large infrastructure projects such as the Delhi Mumbai Industrial Corridor have been delayed
due to acquisition of land, the responsibility of the six states covered in the program. While many of the states do not have relevant laws to meet demands of similar complex projects, the western state of Gujarat is an exception. It has set up the first of many special investment regions (SIR) planned in India at Dholera in Gujarat.
Created around the DMIC, the SIR is expected to bring in an investment of around $90 billion to the state over the next ten years in manufacturing, banking, trading and logistics. Twelve more more SIRs are planned for the state.
"The good thing about Gujarat is that the state government holds many rounds of intensive consultations with landowners and has a final claim clause attached to the agreement, which is positive news to investors,” says Modi.