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Land acquisition law leads to higher highway costs, delays
The Economic Times, 17 March 2014, New Delhi: The United Progressive Alliance government finds itself between a rock and a hard place, with no road in between. The highways ministry is getting the jitters because the new land acquisition law could cause costs to soar and some projects are already facing a tough time in anticipation of this escalation.
On the one hand, the government claims the new land acquisition law as a signature achievement of its tenure. On the other, projects such as the Delhi-Jaipur Expressway being pushed by the Prime Minister’s Office face a surge in real estate costs because of the legislation based on the assessment of the National Highways Authority of India. It told the ministry last month that the project’s land cost would treble from the original estimate.
In addition, while the highways sector is exempt from the law until January 2015, some land owners are declining compensation offers as they look for better valuations past that date, officials said. The ministry is assessing the impact and is likely to pursue increased budgetary support besides revisiting the Bill with other departments to resolve certain discrepancies.
The new land acquisition Bill, known as The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, came into effect in January. As implied in the title, the legislation is aimed at ensuring that owners get fair compensation for land taken away from them for various projects and was inspired in part by agitations in West Bengal and elsewhere.
Under the Act, land owners should get up to four times the market value in rural areas and twice that in urban areas. But this raises questions on financing projects given limited resources, according to officials at NHAI and the highways ministry.
While the provisions of the Act don’t apply to 13 enactments related to land acquisition including the National Highways Act, 1956, these are supposed to be brought under it by the Centre within a year of the new law going into effect, or January next year. However, the Act states that it could also apply with such exceptions or modifications that do not reduce or dilute its provisions on compensation — a point that needs clarification, officials believe.
For land acquired under the NH Act, the costs payable are determined by the competent authority for land acquisition or CALA based on negotiations with the land owner and taking into consideration the market value at the time the intention of acquiring it was notified. The new land bill provides for a solatium, or compensation for the compulsory nature of the acquisition and allied interest, which officials said would prove quite costly and necessitate greater financial assistance from the Centre.
Under the new bill, the market value must be multiplied by a factor — one for urban areas and between one and two in rural areas depending on the distance from an urban area. The value of any fixed assets would be added and this figure would be doubled as solatium (100% of market value). While the previous land acquisition act also had solatium provisions (30% of market value), Article 3J of the NH Act says that “Nothing in the Land Acquisition Act, 1894, shall apply to an acquisition under this Act.”
Land acquisition and compensation have been fiercely debated with respect to those owning the land getting their fair and rightful dues as well as the impact on industry on account of higher costs. The 2013 Bill itself has faced criticism and praise on both grounds. For the highways sector, officials said, the impact is already being felt.
“The highways ministry has been apprised that in certain cases, land owners have refused to take the compensation from the CALA because higher rates would apply from next year,” said an official. “Some state governments have also raised questions over what guidelines to follow for land acquisition for projects planned for this year because while the new law does not yet apply, local resistance might make it difficult to proceed at the prevailing costs.”
The highways ministry is likely to hold a meeting later this month to measure the impact of the Act on its projects and discuss a way forward. The review started after NHAI last month apprised the ministry that the new law could increase the Delhi-Jaipur Expressway’s land costs three times to Rs 18,000 crore raising questions on how to finance this from its reserves.