Prepare grounds for offer

One of the final chunks of the government’s accountability in the growth of infrastructure could be in jeopardy if a parliamentary panel headed by Bharatiya Janata Party’s (BJP’s) Sumitra Mahajan gets its way.

“Public purpose” projects are defined fairly loosely and encompass all infrastructure projects, and the government is committed to acquiring land for these projects. But the parliamentary panel denies acquisition of land by the government even for mining, power, defence, Special Economic Zones (SEZs) and other infrastructure projects. This is in contradiction to the Land Acquisition, Rehabilitation and Resettlement (LARR) Bill 2011. According to the Bill, introduced in the Parliament last September, the government will acquire land under various infrastructure- and defence-related Acts, including the National Highways Act, the Land Acquisition (Mines) Act and the SEZ Act. Arguably, the government’s biggest role currently in public-private partnership (PPP) projects in the acquisition of land, in spite of the fact that land is only a relatively small fraction of the cost. This is because the sweat, the skill and the recourses involved in land acquisition are worth more than merely the financial cost of the land. Compensation is the diciest of the factors, since market prices are dynamic and the most volatile when acquisition is underway for a project. These prices are often irrational, and this is exacerbated by the fact that property prices are registered at prices far lower than the actual value. Once the pricing can be dynamic and arrived upon through various mechanisms including incentivisation, much of the problems will be resolved. If, however, a multi-member land pricing commission is indeed constituted, it should involve local leaders for smooth transactions later.

Land acquisition delays in as many as 16 national highways worth Rs 15,000 crore in West Bengal, Kerala, Goa and Tamil Nadu are resulting in major cost overruns. Indeed, land acquisition issues in India are among the top three reasons international investors are wary. So it may be natural to assume that an alternative must be found, and that the panel may be justified. A negotiated price of land for infrastructure has been often recommended in industry circles as the best possible resolution to land acquisition blues. Some private players support this, and say negotiations have worked for them to resolve issues speedily, saving on costs.

But those recommendations have a short memory because land acquisition by private players has had a dreadful history. In the highways sector itself, the Bangalore-Mysore Expressway was given up to Ashok Kheny-led Nandi Infrastructure Corridor Enterprises Ltd (NICE). The issue got politicised and land acquisition opposed to such an extent that the project is in jeopardy and doing the rounds in courts.

Landowners largely accede to the government because of the overarching authority it commands. It would be a retrograde step to clear itself on the role—the recommendation reeks of a unilateral change in the whole economic dynamics of infrastructure projects, where the concept behind private participation is less to do with efficient management of a project to shifting the blame for delays.

On the contrary, land acquisition corporations should be formed which can prepare incubated projects for offer to investors which are bereft of the land acquisition risk and have obtained all necessary clearances. This will accelerate the rate of FDI in PPP projects on offer.