Land Bill gives highway firms the blues

For highway developers, land acquisition has become a bigger concern than even financing or execution capabilities even when they are not involved in the acquisition process.

Like for other infrastructure sector companies, land acquisition issues delay the project hurting the prospects of the developers.
To allay industry worries and mollify primarily the rural populace that has to part with its land for India’s infrastructure development, the Cabinet recently passed the draft Land Acquisition, Relief and Rehabilitation Bill 2011 to replace the archaic Land Acquisition Act 1894.

While national highways do not come under the purview of the Bill, some provisions might be applicable to their state counterparts.
“It’s still not very clear what all will apply to state highways,” said Joy Saxena, chief financial officer of Era Infra Engineering.
National Highways Authority of India (NHAI) is responsible for acquisition of land for the projects it awards.

Paresh Mehta, vice-president, finance, Ashoka Buildcon, said there is no adverse fallout of the Bill on national highways. “But with the government paying more for land than earlier, people might be more willing to part with their land,” he said.

The Bill has recommended paying landowners four times the market price for their land, which will tighten NHAI’s finances, he said.

Hemant Kanoria, chairman & managing director, Srei Infrastructure Finance, is not so optimistic. “It’s difficult to say what’s more, what’s less. The buyer might feel the price is more than adequate, but the seller might not.”

Srei, which is developing 13 roads, has seen delays in some of them owing to land acquisition bottlenecks. “Currently, there is no definite policy. There is total chaos,” he said.

Though the Bill has stated consent of the public is not required for highways, ports, railway lines and canals, Parvesh Minocha, MD, transportation, Feedback Ventures, said the process could be derailed by vested interests. “Also, if the government raises the price for a piece of land, the owner might withhold a part of it in the hope of selling it at a higher place later. It’s a vicious circle.”

The recent farmer protests in Greater Noida surrounding land purchase for the Yamuna Expressway made the government fast-track the draft Bill.

Companies and experts agree that the key to acquisition are the state government and local authorities. “If they want to do it, they can definitely do it. Though technically it’s the NHAI’s job to acquire land through the state government, we participate, too, in educating and motivating farmers and in taking care of small issues to speed up the process,” said YR Nagaraja, MD, Ramky Infrastructure.

Of India’s total road network of 34 lakh km, national highways account for 70,548 km and state highways 130,000 km. NHAI plans to award 7,300 km this fiscal.

When Kamal Nath took over as minister for road transport and highways in 2009, in addition to setting a target of building 20 km a day, he said projects would be awarded when 80% of the land is in place.

“But that could be different pieces of land in which case it makes no sense. Or, sometimes NHAI promises to acquire the 80% by the time the developer begins work but there is a delay and the developer is losing money because he has hired machinery, consultants, etc,” Minocha said.