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Monday, 11 March 2013 00:38
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Clearing land acquisition bill vital to get projects going

 

With political parties not able to come to an agreement on the proposed Land Acquisition, Rehabilitation and Resettlement (LARR) Bill, hopes of it getting cleared soon look dim. Indeed, there is talk of sending it back to Parliament’s Standing Committee on Rural Development to resolve the differences following the government introducing various new amendments to the Bill last December. That would be unfortunate because, apart from the extra time this will entail, the last time the Bill went to the Standing Committee, a series of new recommendations made land acquisition pretty much impossible for industrial projects as (a) government was prohibited from helping even PPP projects acquire land and (b) the discretion given to government to define infrastructure was to be curtailed. On the positive side, while LARR provided for compulsory R&R for even private sector land acquisitions beyond a certain size, the Standing Committee was of the view that such thresholds should be decided by individual states. This is when the government stepped in and, after the Cabinet cleared this, several new amendments were proposed. So, for instance, the government agreed with the provision that individual states fix the R&R thresholds. The definition of infrastructure was widened to include industrial corridors and national investment and manufacturing zones as designated in the national manufacturing policy. A proviso was inserted to say that, if the R&R could be quantified into a monetary amount, this amount could be paid to a government-appointed administrator whose job would be R&R—this was especially important for large projects since project authorities have no experience in conducting R&R. In short, the government identified the pain points for infrastructural growth and tried to fix some of the issues. The Bill’s big lacunae, of course, were the refusal to help industry acquire land or even help acquire land for large urbanisation projects. If India is to move 250-300 mn more persons into urban spaces over the next two decades, McKinsey estimates India needs to build 700-900 mn square metres of commercial and residential space each year—that’s more than two Mumbais each year.

While these are issues that need sorting out—industry opposed the generous payment norms proposed by the Bill but land acquisition costs are typically a small fraction of overall costs—chances are taking the Bill back to the Standing Committee will once again bring us back to where we started. Further delays in acquisition of land is the last thing India needs given the slowing in new projects—private sector gross capital formation fell from 13.3% of GDP in FY11 to 10.4% in FY12. Indeed, while the land Bill is being sorted out, it would be a good idea if the government started using the large land parcels it owns—17 lakh acres with the defence ministry, 4-5 lakh acres with the Railways and 2-3 lakh acres with major ports—to get projects started.

 
 

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