India's New Land Acquisition Policy to Cause Cost-time Overruns in Infra Projects

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Researched by Industrial Info Resources India (Delhi, India)--The recent change in land acquisition policy in India is likely to impact the economy of the country's major infrastructure projects as the developers are now required to pay much higher compensations for acquiring land from farmers and landowners.

The new law mandates payment of four times the market value for any land acquired in rural areas and double the market value in urban areas. Further, the law comes with a key clause on consent requirements from landowners before acquisition of land. For private sector projects, consent from 80% of the concerned landowners is needed, while for public-private projects, the developer must have go-ahead from at least 70% of the landowners.

On this note, some of the leading industrialists feel that this law will further lengthen the already time-consuming process of land acquisition besides causing a rise in the prices of land, which would in turn impact the overall cost of the project.

The new law envisages ensuring fair compensation, rehabilitation and resettlement to farmers whose land is acquired for setting up industrial and infrastructure projects. The new law replaces and revamps a more-than-a-century old law wherein most powers were vested with the government in decision-making and farmers and landowners hardly had any say. According to the Indian government, the hitherto "undemocratic law" is now replaced with a "fine-tuned" and "more genuine" and "fair law" focusing on benefiting the farmers and landowners.

A retrospective compensation clause is also a key feature of the law. The law would be applicable in retrospective effect for cases where the award of land is under progress or possession has not taken place within the scope of compensatory and acquisition norms.

The Indian Parliament last year passed the relevant bill, the "Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill, 2013."

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