Eye on UP, cabinet clears land bill; Industry cries foul

An embattled cabinet on Monday cleared the new Land Acquisition & Rehabilitation Bill in what may seem as an act of politically savvy clearly aimed at the forthcoming assembly polls in Uttar Pradesh.

But the move earned immediate opprobrium from corporate captains, who feel it drastically increases the cost of setting up greenfield projects in India, even making them unviable.

The bill will now be tabled in Parliament on Wednesday, information and broadcasting minister Ambika Soni said. It has been touted as a landmark legislation that would clear confusion regarding the setting up of power projects and manufacturing units (private sector ventures as well as public-private partnerships).

The Confederation of Indian Industry, India’s main industry body, was tentative in response. While welcoming the comprehensive inclusion of ‘relief and rehabilitation’ or R&R in the bill and the government’s assurance that beyond a reasonable threshold, land acquisition for ‘public purpose’ would be done by the government, the CII said it’s concerned about the cost of R&R that would be ‘loaded on industry’ and the solatium ratios that are spelt out. Solatium is a form of compensation for emotional — rather than physical or financial — harm.

“While the CII is in favour of appropriate and adequate compensation for people affected by land acquisition, we believe that the costs have to be reasonable for industry to remain viable,” it said.

The main thrust of the bill is to make R&R of the farmers as well as landless labourers a key element of the acquisition process.

“Many industries do not mind paying a higher price for a clear title. The negatives are the annuity proposition, which would put a lot of burden. Players generally don’t mind paying a lump sum, but committing an annuity becomes challenging,” said Pranay Vakil, chairman, Knight Frank India, a leading realty advisory firm.

There is also the political angle as far as the Congress is concerned. Party general secretary Rahul Gandhi has been trying to support the farmers’ cause against the Mayawati government in Uttar Pradesh and the proposed legislation has been tailored to meet what the party sees as the right thing to do.

West Bengal CM Mamata Banerjee had also put up a stiff resistance to the legislation but Ramesh had worked with her to get her nod as well.

But big businesses may make their representations before the parliamentary standing committee as costs for setting up projects could increase exponentially.

“One can expect a 25% to 40% scale-up in prices if such a scenario arises. It is not practical to bring private projects under this bill, especially in this part of western India. Acquiring land at multiples of the market prices is not viable,” said Lalit Kumar Jain, national president of real estate industry body Credai. Jain said the industry plans to make a recommendation before the standing committee on this.

The group director, finance, of a leading steel company in India said the bill is a ‘disaster for the industry’. He said if passed by Parliament, the bill will not only delay setting up of new large-scale industries in the country but will also make projects unviable. “Machinery cost comprise 30% of total project cost of any big project, while land cost is less. But once the bill is in place, land cost will exceed machinery cost and this will discourage every company to set up large projects,” he said.

The Congress is keen to push through the legislation as soon as it can because it wants to go into the UP poll with the new law in hand, as it might help the party win over the rural hinterland of the most populous state.

The government also sees it as a key legislation for pushing economic reforms because land has remained a thorny problem for implementation of new infrastructural and industry projects.