Right-of-(no)way stigma

Infrastructure and industrial projects across India have perennially been plagued by opposition from local groups or land owners but yet the right approach towards resolving this sensitive issue has remained elusive. Sandeep Menezes tries to gauge the quantum of projects affected and its impact whilst looking at suitable options to the intriguing issue of land acquisition.

Right-of-Way (RoW) has been a major impediment to infrastructure development across India. This has adversely affected various infrastructure projects across sectors such as highways, power transmission, telecom, railways, irrigation, water supply and sewage etc.

Over the last few months that the land acquisition law was introduced, industry has witnessed a manifold increase cost of acquisition thereby making projects unviable. In fact costs of land acquisition have increased by nearly 3 – 3.5 times making industrial and infrastructural projects unviable and raising costs in the overall Indian economy. Also the process of land acquisition has become more time consuming than before.

Quantum of stalled projects:

While the quantum of stalled projects is hard to define since it straddles various sectors and may be partly or wholly stuck due to pending land acquisition. Although not all projects are stuck due to land acquisition – it remains the largest project impediment.

As per the data sourced from ProjectsToday, private sector projects worth a combined investment of Rs 5,34,500 crore were stalled, deferred or abandoned in the last two fiscal years —2012-13 and 2013-14.

As many as 189 highway projects with a cost of Rs. 1,80,000 crore are stuck due to problems such as land acquisition and other issues, stated Nitin Gadkari, Road Transport and Highways Minister while addressing a summit on highways recently.

According to a recent FICCI report if the installed power generation capacity is planned to be increased to 388 GW by 2022, transmission sector will need to do quite a lot of catching up. However, one of the major reasons for delays in new capacity addition is RoW issues. Though the Electricity Act, 2003 empowers the licensee with the RoW under the Telegraphic Act 1885, it is rarity for a transmission project to be executed without any delays in land acquisition or getting the RoW. Three years ago, PGCIL had challenges in spending its planned Rs.6000 crore in capital expenditure, for the construction of the inter-state transmission lines, primarily because of the hurdles in land acquisition and RoW problems.

The Impact:

Hurdles due to land acquisition not only delay the project implementation but also affect financial closure, economic viability and threaten its completion. In fact the situation in some sectors such as highways and power transmission is so acute that bankers and investor are unwilling to invest due to uncertainty pertaining to land acquisition. There have been cases wherein most of the land has already been acquired but a small pending portion has turned the entire project unviable.

Until uncertainty pertaining to land acquisition is not sorted out – the enthusiasm of various stakeholders will always be mired with caution that will affect infrastructure development nationwide.

Legal Tangle:

Currently it had become virtually impossible to acquire land for construction of roads, power transmission and creating other infrastructure under the existing Land Acquisition Act. In the past, India Inc has complained that the stringent provisions in the Land Acquisition Act will make projects unviable.

Under the existing Land Acquisition Act, it is mandatory to take consent of 80 per cent of people whose land is taken for private projects. In the case of Public-Private Partnership projects, the consent of 70 per cent of the people would be required. The newly elected government has already reiterated its commitment to boost industrial and infrastructure development through ensuring additional flexibility in the existing provision.

Safeguards Needed:

The issue of land acquisition has always been plagued by controversies. For many years, contentious issues like inadequate compensation and rehabilitation and resettlement (R&R) of the oustees have dominated the discourse on the subject. The purpose of acquiring land has never been as seriously debated in the Indian context as it should have been. This has been one of the reasons why land acquisition policies never had the desired effect.

Land acquisition policies have either tilted too much towards the socialist side making acquisition difficult or time consuming while offering huge compensations to land owners. Or in some states with the aim of attracting more investments, the land acquisition policies have tilted towards the capitalist side offering too little compensation to land owners while giving unreasonable power to the land acquiring administration.

Without any doubt, the current land acquisition law needs urgent amendments so that major infrastructure projects are not held hostage to the delays created by few individuals. Most of these individual unashamedly only seek to receive unreasonably outrageous compensation by holding the entire project hostage through outright agitations and opposition.

But there is also a need to ensure that the market value of the land along with a reasonable premium is paid out to the owners so that they don’t feel cheated of their rightful compensation. This is the best scenario since all stakeholders including land owners will then participate to execute the project quickly instead of indulging in lengthy litigations and agitations prolonging project implementation.

Future Options:

Recently Finance Minister Arun Jaitley stated that the new government is exploring the possibility of providing exemption in the Land Acquisition Act which meant that some flexibility would be introduced in the current land acquisition provisions.

There are some options being looked into for untangling of stalled road projects. In a significant shift of policy, Nitin Gadkari recently stated that public private partnership (PPP) model was not feasible at present for award of road projects due to a host of issues and that the scheme will be bid out on engineering, procurement and construction (EPC) mode.

Conclusion:

At a time when major projects are stalled and industrial production has been low in recent past, there are expectations of more facilitative policy quickly from the new government to bring back the competitiveness and also attract more investment. The government has been sending out signals of easing land acquisition hurdles but now its time for those thoughts to be put into action.

Quotes:

Right of View

Anil Agrawal, Managing Director – Kridhan Infra Limited:

Clearances have been a major issue in the past few years why projects were getting stuck. Most of the infrastructure companies started owing assets of roads having huge debts – but because it was stuck – their revenue was less. As you rightly said right-of-way and local issues are a reason. I think the government is working now to resolve these issues and we should see some good results.

Vikram Sharma – MD – Supreme Infrastructure India Limited:

Yes, there has been a very serious issue of land acquisition, alignment of all governmental departments for implementation of any project. Procedural backlog due to lack of basic coordination among various department has serious impact on implementation.

G Sathiamoorthy, Country Manager & Managing Director – Black & Veatch (India):

Land is a necessity for infrastructure projects. A lot of projects are either cancelled or delayed due to non-availability of land or difficulties in land acquisition. Another major hurdle post identification and selection of land is securing the required clearances.
RoW has been the bugbear stalling infrastructure projects across India over the last 3 years. It would be prudent for the government to exclude important infrastructure development projects from the ambit of RoW and move towards single-window mechanism for core projects.

Rikiin Bbarot, Joint Managing Director – Atlanta Ltd:

There has always been issues regarding Right of Way – currently there are still issues persisting but I think the new government will be working on it with some new out of the box policies to speed up the whole thing.

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