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Competition among states to get investments will rise with new land law: India Inc

CEOs to prefer states with clear, easier land acquisition laws

BS Reporter  |  Mumbai 

India Inc leaders say the Centre’s move on Wednesday to lob the land acquisition ball in state governments’ courts will increase competition among the states to attract investments.

States with an easier land acquisition process will see an increase in investments, as it takes time to get approvals for land acquisition and projects get delayed due to poor land laws, say chief executive officers (CEOs).

Harsh Goenka, chairman of RPG Enterprises, said: “States that want the lion’s share of investments’ inflow should be in a position to roll out the red carpet to investors and pass their own laws that take into consideration state-level factors, under broad guidelines from the Centre, to ensure fairness and to safeguard the interests of landowners. The deadlock on the land acquisition Bill should be resolved fast, failing which it could prove to be the Achilles heel for economic growth and rural development. Therefore, this is a very welcome step. And I hope that seeing the prosperity of these 10 states, others will soon follow.”

On Wednesday, 10 BJP-ruled states had proposed to bring their own land acquisition laws to boost infrastructure projects, as a logjam over amendments to the contentious land acquisition Bill, 2013, had delayed projects across the country. With the central government agreeing to this proposal, states with better land laws would attract projects and create employment while others run the risk of falling behind. “This is good for companies as the states will now have to compete with each other for investment,” said Ajit Gulabchand, chairman of construction major HCC. “At present, it takes 58 months to only get government approvals and another period of similar duration to get a project off the ground. So by the time a project is ready, a decade is lost. Any initiative that makes land acquisition easier should be welcomed.”

Like several other large projects in India, HCC’s ambitious Lavasa hill station project near Pune has been grounded for three years due to lack of environment clearances and land acquisition issues. But work had picked up pace of late.

CEOs said pragmatic states would decide on a law as the issue was under their jurisdiction anyway. “Therefore, rather than using up Parliament’s time discussing an issue which could be residing in the states’ domain, it is best left to them to decide,” said D R Dogra, MD and CEO of CARE Ratings. “This, in turn, will affect the flow of fresh investments, depending on the flexibility shown. In a way, there will be an element of competition added across states as far as investors are concerned.”

Some large infrastructure projects have been stalled due to poor clarity over land acquisition laws. These include the Navi Mumbai airport project, Posco’s new steel facility and Adani’s Dhamra port in Odisha. The government started taking several steps to nudge such companies to start work on projects and had accelerated issuing of environmental clearances in six months, after two years of a slowdown in the clearances.

But for any confirmation of a recovery in the investment cycle, the pick-up has to be broad-based rather than selective, said analysts.

R V Kanoria, Chairman of FICCI Task Force on Land Reforms and Policy, said: “Passage of the Land Acquisition (Amendment) Bill with consensus of all the states is the optimal solution.... Nevertheless, in the absence of any consensus, the proposition of states to enact their own land laws aligned to their development requirements could be a useful alternative mechanism, as it would facilitate actualisation of investments....”

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First Published: Thu, July 16 2015. 23:48 IST