Slow land reforms posing downside risk for infra projects: Fitch Solutions

The slow pace of land reforms will continue to result in project delays and rising costs, posing a downside risk for the road and rail sectors, Fitch Solutions said Wednesday.

"The government's land reform agenda has evolved in to a highly contentious issue in the country, as reform attempts were countered with fierce resistance from land owners and political opponents. Hence, with the 2019 elections in the horizon, we expect land reform to take a back seat as the BJP moves to address other pertinent issues such as raising agricultural wages...," Fitch Solutions, an affiliate of Fitch Ratings, said.

India's poor track record in delivering projects on time, it said, can be seen from official government data, with almost 50 per cent of road and rail projects in the five most populous states in the country being delayed by more than four years.

"A majority of the delayed projects are running above the budgeted costs -- without land reforms at the federal level that would standardise land acquisition procedures across the country and expedite the acquisition process, the status quo is likely to persist," it said.

In particular, large-scale, inter-state projects will face heightened challenges in land acquisition due to the diversity of land acquisition laws across states as well as the large amount of land required for project implementation, it said.

On Mumbai-Ahmedabad high speed rail project, it said that the "USD 7.1 billion railway project connecting the states of Maharashtra and Gujarat in the west coast of the country is likely to be delayed due to ongoing land acquisition issues".

"The first bullet trains are planned to be launched in August 2022, in time for India's 75th Independence Day. However, we expect more delays due to complications arising from the disparate land acquisition laws in different states and increasing resistance from land owners. Nearly all of the 1,400 hectares of land have yet to been acquired as of November 2018," it said.

On the Mumbai-Nagpur Highway Project, it said, the 700-km expressway spanning across Maharashtra has been hit by delays in land acquisition which has resulted in an increase in project cost.

"Land owners are unwilling to give up their land despite the government offering compensation that is several times above the circle rate. As of June 2018, only 77 per cent of the 7,298 hectares of land has been acquired for the project.