Infrastructure projects: Rise in land compensation cost a challenge for highways, airports

Land cost for highways is now 100% of civil cost against 10% of total project cost about a decade ago.

Written by Pranav Mukul , Anil Sasi | New Delhi | Published:November 9, 2017 12:28 am
Infrastructure projects, land compensation, land for Infrastructure projects, new highways, new airports, nitin gadkari, highway upgradation, airport expansion projects, Land Acquisition, indian express In 2 years, land acquisition costs for highway development has shot up from Rs 0.9 crore in FY14 to Rs 2.05 crore in FY16.

A surge in land compensation cost for highway upgradation and airport expansion projects since January 2015, when the First Schedule to the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (RFCTLARR) Act, 2013, kicked in, is proving to be a drag on the pace of infrastructure project execution.

In the airports sector, state governments are now increasingly reluctant to part with land and give it the Airports Authority of India (AAI) for expanding capacities of terminals and bays at airports, primarily in view of the high payout for acquiring land. “That is one major constraint, but we are trying to address that through dialogue,” AAI chairman Guruprasad Mohapatra told The Indian Express. Land cost in the highways sector, which used to be 10 per cent of the total project cost about a decade ago, is now more than 100 per cent of the civil cost in a number of sections. In two years, land acquisition costs for highway development, measured in terms of compensation paid for every hectare of land acquired, has shot up from Rs 0.9 crore in FY14 to Rs 2.05 crore in FY16, according to government data. The sharpest rise in land prices is visible in Maharashtra, Punjab and Haryana.

In the highways sector, apart from an increase in land prices, what has compounded matters is that a dozen states levy a percentage of compensation as administrative charges for acquisition of land for National Highways. Cumulatively, for 22 major states, the compensation paid for land acquisition for projects has shot up from Rs 9,027 crore in FY15 to over Rs 19,600 crore in FY17, according to latest government data.

Alongside the introduction of provisions of the RFCTLARR Act for the determination of compensation for land, in case of these 12 states that levy a percentage of compensation as administrative charges for acquiring land, the expenditure on compensation has also resulted into further increase in expenditure on administrative charges levied by state governments for acquiring land.

The NDA government had, in December 2014, amended the Right to Fair Compensation and Transparency in Rehabilitation & Resettlement Act, 2013 to provide higher compensation, resettlement and rehabilitation benefits to landowners. Land for the construction of National Highways (NHs) including flyovers thereon in the country is acquired under the provisions of the National Highways Act, 1956 in consonance with the applicable provisions contained in the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. However, under section 3G(5) of the NH Act, 1956, if the amount of compensation so determined, is not acceptable to the landowner, there is a provision for determination of the amount by the arbitrator to be appointed by the Central Government on an application by the party.

The trend of levying compensation charges is widespread, with all states levying administrative costs or charges for acquisition of land for the NHAI projects. Bihar, for instance, charges 20.5 per cent of the compensation amount as administrative costs, while Uttar Pradesh, Madhya Pradesh, Chhattisgarh, Gujarat and West Bengal levy 10 per cent of the compensation amount. Haryana levies Rs 1 lakh per acre as per clause 19 of Government of Haryana notification dated 09.11.2010. Maharashtra charges 6 per cent (3 per cent AC to be deposited with state government and 3 per cent to be deposited in the office of land authority.

Land acquisition expenses, on an average, have tripled as compared to pre-January, 2015 acquisition however, administrative charges being levied by the state government have not been rationalised. The matter has been taken up by the NHAI and the Ministry of Road Transport and Highways with these states requesting for rationalisation of these administrative charges.

In the civil aviation sector, which is witnessing high growth in passenger traffic every year, a severe capacity constraint for expansion of infrastructure at various airports is also being experienced. However, for the AAI, while plans have been chalked out for expanding capacities of terminals and bays at airports, data shows that many of the airports will reach saturation even after being expanded.

The Pune airport, for example, is expected to witness traffic of nearly 12.33 million passengers per annum by 2025-26, but current expansion of its terminal building underway will allow it to handle traffic of only 4.38 million passengers per annum. The proposed date of completion for the expansion of this airport is February 2021. Domestic airlines in India maintained the 37th consecutive month of double-digit traffic growth in September with demand rising 15.5 per cent during the month, according to the International Air Transport Association’s global report
released earlier this month, which also pointed out that the traffic growth continued to be stimulated by sizeable
increases in the number of domestic routes served.

“In the last five years, we have made several new terminal buildings, now we are finding capacity constraints. We have problems of land, we have these problems because we don’t have land and we have to depend on state governments for land. Because it is so expensive, state governments are finding it extremely difficult to give us land as freely as they used to give us before. That is one major constraint, but we are trying to address that through dialogues,” AAI’s Mohapatra said.

Another example of an airport under expansion that is witnessing constraint due to non-availability of land is the Goa airport, which is expected to see traffic of 15.66 million passengers per annum by 2025-26, but will only be able to handle 7.5 million passengers every year after its current expansion is completed in December 2020. Another senior AAI official, on condition of anonymity, pointed out that the planned capacity at such airport terminals was lesser than the required capacity, primarily on account of land constraints.

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