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  1. Steep climb: Land cost of road projects rises to whopping 55 pct from 9 pct in 2009

Steep climb: Land cost of road projects rises to whopping 55 pct from 9 pct in 2009

Land acquisition has unquestionably been the biggest hurdle in road development. But what’s become another cause for concern is the rising cost of land acquisition.

By: | New Delhi | Published: December 28, 2017 5:43 AM
road sector, icra, Land acquisition cost, maharashtra, Maharashtra State Road Development Corporation For the 400-km Vadodara-Mumbai expressway, the cost of land is estimated at 37% of the total project cost. (Representative image: PTI)

Land acquisition has unquestionably been the biggest hurdle in road development. But what’s become another cause for concern is the rising cost of land acquisition. Land acquisition cost, which was at about 9% of the total project cost in 2009, rose to 16% in 2012 and has further escalated to 37-55% in some recent expressway projects. This sharp escalation in acquisition price has been caused by the need to comply with the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR). The act increased the compensation to four times the market value in rural areas and twice the market value in urban areas, from purchase prices linked to the circle rates in the area that were often considered outdated (based on a law enacted in 1894).

This led to a steep increase in acquisition cost to upwards of Rs 2.5 crore per hectare currently (from Rs 0.90 crore per hectare in FY2014). In fact, in Maharashtra, to acquire land for the Nagpur-Mumbai Super Communication Expressway, the nodal authority for the project, Maharashtra State Road Development Corporation (MSRDC), has paid far more. Kiran Kurundkar, joint managing director, MSRDC, told FE: “Through negotiated purchase under state policy, we issued a GR (general resolution) in 2015, providing for five times of the market price in purely rural areas, which is far better than the entitlement under LARR. We are giving first preference to direct purchase through negotiations with land owners.”

In another instance, for the 261-km proposed Delhi-Jaipur expressway, the cost of land as a percentage of the total project cost is as much as 55% of the total project cost of Rs 32,800 crore, with each hectare of land costing Rs 6.43 crore. Also, for the 400-km Vadodara-Mumbai expressway, the cost of land is estimated at 37% of the total project cost.

On account of the increased costs, ratings and research agency Icra estimates the National Highways Authority of India (NHAI) would need at least Rs 1.8-1.9 lakh crore over a period of four years just for land acquisition for the first phase of 25,000 km under the newly launched Bharatmala programme. The total land requirement for Phase-I of Bharatmala is estimated to be in the range of 70,000-75,000 hectares.

Icra vice-president Shubham Jain told FE that the target of 83,000 km looks extremely ambitious. He said, “The National Highway Development Programme, the largest highways project ever undertaken in the country till date, had achieved a progress of 26,255 km in 17 years. The cumulative awards and execution for the last eight years, by the ministry of road transport and highways stood at 61,977 km and 43,307 km, respectively. Given the past track record, completing 83,000 km by FY22 looks extremely ambitious.” Jain added that for the first phase of the programme, the market borrowings are estimated at Rs 2.09 lakh crore over a four-year period (average of Rs 52,319 crore per annum). Jain said, “The ability of NHAI to raise over Rs 50,000 crore per annum for four consecutive years remains to be seen.”

In addition to the increased costs, fragmented land holdings, lack of clear land titles, dependence on local authorities, inadequate land acquisition plans at the time of preparing detailed project reports and the lack of a methodology for compensation are the major difficulties during land acquisition. Icra said that in about 80% of the delayed road projects awarded by NHAI, the reason for delay is attributable to unavailability of “right of way”, which is the responsibility of the awarding authority. Securing huge land parcels by complying with the RFCTLARR Act in its current form is going to be a challenge, Icra added. The government had made an attempt to amend the Land Bill in 2015 by easing land acquisition norms for infrastructure projects (including public-private partnerships), but this was not successful. Therefore, the success of the Bharatmala programme critically hinges on the pace of land acquisition along with other requisite approvals, Icra said.

The Bharatmala Pariyojana Phase-I was approved along with other programmes in October 2017. It involves around 83,000 km (including Bharatmala Pariyojana Phase-I of 24,800 km) of national highway development by FY22.

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