With a single stroke, the government has increased the cost of production in the country. The modified land acquisition bill called Land Acquisition, Rehabilitation and Resettlement (LARR) Bill cleared by the group of ministers (GoM) has left all participants fuming.
The corporate sector is naturally not pleased as the cost of projects like infrastructure will shoot up.
Larsen & Toubro has said that the cost of setting up the new airport alone will rise by Rs 4,500 crore.
According to the bill, the consent of two-thirds of landowners will be needed for acquiring land for public-private partnership and private projects, which has been revised down from 80% earlier. Also, the bill says that compensation to land owners will be twice the market value of land in urban areas and four times the value of land in rural areas.
The point of contention in the bill is the “value of land”. There is no transparent way in which the value of land can be determined. Land deals are never pegged to the circle rates set out by the government, and land owners have always asked for very high rates when it comes to their notice that it is being acquired for a commercial purpose. It is only the first patch of land that comes at the lowest cost, but once it is known that the land is bought for commercial purposes, land sharks jump in. A number of SEZs have been cancelled due to the inability of acquiring land at the desired price. Even industrial projects are getting delayed for want of land at reasonable prices.
Apart from Trinamool Congress, most of the other parties have welcomed the government’s bill. Thus, it is likely to face very few problems in being cleared by the Parliament. And once such a populist bill is cleared it will be difficult to reverse it.
There is little doubt then those industries will move to areas where land is available cheap.
Gujarat thus stands out as it has made land available to companies, especially in the auto sector at very reasonable prices. Though the bill says that government role will be limited in land acquisition, industries are going to find it difficult to find land at low prices. Gujarat’s model of giving away non-agricultural and arid land is thus a possible solution, but most of this land across the country is owned by the government.
The biggest impact of the bill will be on infrastructure projects as it is the prerogative of the government to set up these projects, but the private players will be required to acquire land for it. This conflict of interest has in the past led to a slowdown in building up of infrastructure and the bill has ensured that it will remain slow in the near future.