1. Policy help needed to put state land to work

Policy help needed to put state land to work

Lack of clear titles, database and shorter lease terms hit plans

By: | New Delhi | Updated: March 16, 2015 11:43 AM
RLDA sources say only about 100 hectares of land at the authority’s disposal has been found to have all legal entitlements and an encumbrance-free status.

RLDA sources say only about 100 hectares of land at the authority’s disposal has been found to have all legal entitlements and an encumbrance-free status.

With the growth in tax revenue hit, the Narendra Modi government wants to put the vast land resources with the public sector to work to create an additional robust revenue stream and catalyse urbanisation, but it needs to plug many policy loopholes and trigger harmonious steps by multiple decision-makers to make a headway.

Consider this: The Indian Railways says out of its 4.6 lakh hectares of land, 47,336 is “vacant”, — informal estimates are even higher — but the Rail Land Development Authority (RLDA), set up in 2007, has so far been given just 900 hecrates of land, scattered over 100 cities and towns.

Last week, the authority received a letter from the Railway Board, taking back large tracts of even these land parcels from it. This was after the RLDA found that the land titles were unclear/missing, despite the sites being in the railways’ physical possession.

RLDA sources say only about 100 hectares of land at the authority’s disposal has been found to have all legal entitlements and an encumbrance-free status. With such legal issues and the RLDA’s inability to get many state governments agree to the required “change in land use”, for commercial purposes, the authority has so far generated a measly R1,370 crore as lease rentals. This is even as it believes that
mobilising R8,000-10,000 crore annually is quite feasible if it gets sufficient land from the railways and the states are made to comply with the authority, which is created by an Act of Parliament.


Major Ports, another public-sector landlord, holds 2.58 lakh acres of land, a fifth of which is believed to be surplus, which includes prime urban land in Mumbai, Kolkata, Chennai and elsewhere. Transport minister Nitin Gadkari has recently announced a five-year plan to set up one smarty city each alongside the 12 major government-sector ports at a total cost of Rs 50,000 crore, “without selling land to developers and builders.”

A bolder plan allowing outright transfer of the prime land with low-traffic Mumbai and Chennai ports in a transparent manner would help decongest these cities and dramatically increase land supplies for housing and other urban amenities. In case of other major ports, a bar on the Port Trusts leasing out land for more than 30 years, is a hurdle that needs to be removed by amending the Major Port Trusts Act.

The shipping ministry’s land management policy for major ports, last modified in January 2014, spells out the tender-cum-auction methodology for leasing out land outside Custom bond areas to the private sector, including for port-related public-private partnership (PPP) ventures, and how the revenues (lease rentals) would be appropriated, but still requires the Trusts to get permission form an “empowered committee,” which reports to the government. Analysts say the absence of a guaranteed lease period of 99 years, a standard term for such leases in other sectors, has been a dampener and kept private developers/investors at bay.

PPP ventures for port-related infrastructure services are conducive for major ports handling heavy traffic. The high revenue share (30-35%) that Port Trusts demand among other things has adversely impacted the bidding for PPP projects in the port sector. In case of Mumbai, Kolkata and Chennai ports, the land can be sold/leased out for 99 years for  non-port-related (city-development) activities and given the prime urban land with these  ports, the proceeds would be huge for the government.

Between the railways and Port Trusts alone, the surplus land that can be transferred to the private sector either on short- or long-term lease or via outright sale or jointly developed for PPP projects is estimated at a whopping 1.7 lakh acres; while similar estimates of disposable land haven’t been made public by the defence and PSUs, their land possessions are even bigger (see chart) and excess land parcels of lakhs of acres can indeed be identified for development.

Some 1,000 acres of the Mumbai Port Trust’s 1,800 acres, valued at Rs 1.25 lakh crore, is surplus and can be made available for commercial purposes, including real estate projects. These include prime land parcels where the sale of an acre of land can fetch up to Rs 500 crore.
In the Kolkata Port Trust’s (4,576 acre) area, there are tracts where the market price for an acre of land is around Rs 50 crore. The Cochin Port Trust, which has around 2,352 acres, including surplus stretches that can attract premium prices, has secured an approval from the government to lease out land for an initial period of 60 years. Gujarat’s Kandla Port holds bulk of the land area with major ports, but  the development of these lands needs projects designed to suit the geography of the Kutch region.

The policy issues relating to land monetisation are primarily on how the transfer is to be executed and how the the sale proceeds/rentals are used. While competitive bidding (preferably e-auction) is the best way for leasing out/sale, the proceeds can either go to the Consolidated Fund of India (read the Union Budget) or can be earmarked for the respective public-sector entity. The railways, for example, would need the money realised from commercial exploitation of its land to be used for modernisation of stations and attendant urban facilities through PPP ventures.

So would some of the PSUs, which, according to the department of public enterprises,  have over 8 lakh acres set aside for development using external resources. While the revival of some sick PSUs could hinge on land monetisation, the better-off ones could use the route to bolster their business. In a large number of cases of the ailing PSUs, the land utilisation could be a way to recoup the investments made by the government  as the companies are wound up.

The defence forces are in possession of around 17.54 lakh acres of land, 80% of which with the Army. Despite the Modi government’s focus on indigenous defence production that requires a more flexible land use policy, the defence ministry hasn’t yet made any estimate of excess land with it; in fact, it hasn’t said if there is any excess. Of the land with the defence, the 62 notified cantonments (which are integral parts of the respective cities and towns thanks to their horizontal growth over the years), occupy a land area of 1.57 lakh acres and the rest of the land is with the forces, and a sizeable section of even this is  now prime real estate. There are precedents of the defence forces giving land to states in return for compensation and the latter developing them, but this process needs to be streamlined with a clear-cut policy prescriptions.

(Arnab Dutta, Huma Siddiqui and Shubhra Tandon contributed to this story)

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