In August last year, the government authorised individual ministries to clear projects of up to Rs 1,000 crore following a request from the Union Minister for Road, Transport Highways Nitin Gadkari.
At Rs 1,189 crore, the land acquisition cost for upgrading a 33-km highway stretch between Patna and Buxar — the first phase of a 125-km road upgradation project — is over 200 per cent of the estimated construction cost of Rs 556 crore for the section.
In fact, the cost to acquire land for the 33-km section, post implementation of new compensation norms, is even higher than the original cost of the entire project, pegged at Rs 1,129 crore, and initially awarded to a contractor in 2012.
The escalation in land cost of the Patna-Buxar stretch is symptomatic of the widening gap between construction and land costs in highway upgradation projects across the country. This is in stark contrast to the trend a little under a decade ago, when land cost used to be just around 10 per cent of the total project cost.
This has prompted the Ministry of Road, Transport & Highways (MoRTH) to write to the Ministry of Finance seeking exemption of land cost from the total project cost of Rs 1,000 crore that the latter is currently permitted to approve.
“We have written to the Finance Secretary to exclude land cost from the total project cost of Rs 1,000 crore that the ministry is permitted to approve. It will help avoid multiple layers of approvals and expedite the pace at which projects in the highways sector are awarded,” a senior ministry official said.
In August last year, the government authorised individual ministries to clear projects of up to Rs 1,000 crore following a request from the Union Minister for Road, Transport & Highways Nitin Gadkari. Prior to this, all projects that cost more than Rs 300 crore had to be send to the Cabinet Committee on Economic Affairs (CCEA) for approval.
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 land owners.
“Land cost used to be 10 per cent of the total project cost eight-nine years ago. Since the new compensation norms were implemented, land acquisition expenses in many cases are more than 100 per cent of the civil cost. There are projects where land cost is Rs 1,300 crore while the civil cost is Rs 600 crore. This is happening especially in projects close to urban areas”, added another ministry official.
Though the phenomenon is being seen across the country, sources in the NHAI said the sharpest rise in land prices has been seen in Maharashtra, Punjab and Haryana.
The NHAI had signed an agreement for four-laning the highway between Patna and Buxar on BOT (toll) basis with Gammon India in February 2012. The contractor was to complete work on the section in 30 months. However, with Gammon failing to even commence work on the stretch, the NHAI terminated the agreement and decided to undertake construction of the highway under engineering procurement construction (EPC) mode late last year.