Land-Acquisition Bill : Eases Process, Raises Costs

Legislation would streamline a chaotic process to acquire land for industry or infrastructure costs but higher compensation for landowners would significantly raise costs involved…Critics said the Bill could make it harder for India to build the infrastructure projects it needs to boost economic growth. The higher prices for land also risks making the country less attractive for investors…


land-eases-process-raises-cIndia’s lower house of Parliament recently passed landmark legislation requiring greater compensation for landowners whose property is acquired for industry or infrastructure construction, streamlining what has been a chaotic process but potentially raising costs for businesses and the Government. Purchasing land for factories and other commercial development has long been a major stumbling block for investors looking to set up or expand operations in India, with scores of multimillion-dollar projects held up in recent years as farmers opposed land-purchase plans.
Under the law, developers would be required to pay up to four times the market price of rural land and up to twice the value of urban land in order to acquire it for public works or industrial use. The acquirers also must pay for the resettlement of dislocated people. “This is a historic Bill which moves India further along in its rights-based approach to development,” said Meenakshi Natarajan, a member of the Congress party, in Parliament. “It makes farmers and other weaker sections of society a part of the country’s growth.”To become law, the Bill must also be passed by the upper house, which is expected to approve it.
Critics said the Bill could make it harder for India to build the infrastructure projects it needs to boost economic growth. The higher prices for land also risks making the country less attractive for investors.
Proponents said it eliminates many ambiguities from the process of land acquisition by laying down clear rules for how land can be acquired and how much compensation must be paid, and by establishing deadlines for its procedures. Land acquisition is contentious in India, where small holdings by families with no source of income other than farming are common. Tata Motors was forced to abandon plans to build a car plant in West Bengal in 2008 after villagers protested, claiming they were forced off the land by the local Government and paid inadequate compensation. The plant was later built in Gujarat.
South Korean steelmaker Posco dropped out of a $5.3 Billion steel-mill project in Karnataka in July in part because of hurdles to acquiring land. “The Bill will add to all-round escalation in the cost of projects and would have a cascading effect on the future of development in the country,” said Rajgopal Nogja, chief operating officer of Hindustan Construction Co., which builds large infrastructure projects across India.
Mr. Nogja said the Bill would lead to further delays for infrastructure projects. The Bill says that when land is acquired for private companies, they must obtain the consent of 80 per cent of landowners in a given area. For public-private projects, 70 per cent must consent.
– WSJ

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