On ordinance spree, govt may next take up changes to the land Act
For PPP projects, clause on consent requirement could be abolished or brought down to 50% of land owners, against the current 70%
Dec 29, 2014
Source : Business Standard


New Delhi: To make the land acquisition Act of 2013 industry-friendly, the government is likely to take the ordinance route for amending the provisions on land owners' consent. The main irritant - the compensation clause - might, however, see only procedural changes.

The government has lately gone for ordinances to increase the foreign equity cap in private insurers and allow e-auction of coal blocks. Now, an ordinance to tweak the land acquisition Act is expected to be taken up by the Union Cabinet as early as Monday.

The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, enacted by the previous government, allows acquisition for public-private partnership (PPP) projects after 70 per cent of the land owners have given written consent; the requirement for non-PPP projects is consent from 80 per cent land owners.

The land ordinance, it is learnt, will dilute the consent clause for PPP projects - either abolish it or bring the requirement down to 50 per cent of land owners. For projects carried out by the government for public purposes - where the land is to remain in the hands of the government - no consent would be required.

PPP projects have faced difficulties due to issues related to land acquisition; these projects account for 60 per cent of the Rs 18-lakh-crore stalled projects. The amendments might be aimed at giving a fresh lease of life to such projects. However, the Mid-Year Economic Analysis by Chief Economic Advisor Arvind Subramanian and his team recently said there was going to be difficulty in attracting new private investments even if the past backlog was cleared, given the current corporate debt overhang.

Under the new law, compensation is likely to be calculated from the date of preliminary notification of the acquisition, unlike the current Act, which provides for compensation from the date of social-impact assessment study.

The amendments, though, are not likely to change the compensation amount. The Act currently provides for compensation of up to four times the market value in rural areas and twice the value in urban parts.

"If no change is being brought to the compensation clause, other amendments might not be of much help to private business. Their acquisition cost will not come down," said CARE Ratings Chief Economist Madan Sabnavis.

If other changes were being made, those would facilitate the government's acquisition for large infrastructure projects, he said, adding: "Unless the compensation clause is altered, private enterprises might not have much to cheer about."

Amendments could also be made to the definition of 'affected family'. At present, the term is seen as too elaborate and includes the people whose livelihood is affected for three years prior to the acquisition of land.

In their earlier discussion with the Centre, states had unanimously agreed that the definition could be misused in the absence of clear criteria for determination of affected families.

Another provision that could be diluted is the mandatory Social-Impact Assessment (SIA) for all acquisitions. Officials said this could be changed and confined to only large and PPP projects, so that this did not delay the purchase process. The Act currently mandates SIA for all acquisitions, irrespective of the size of a land parcel.

The retrospective clause, which says the land acquisition proceedings will lapse if the compensation is not paid or physical possession not taken within a given timeframe, is also likely to be tweaked. States had argued the clause hindered smooth purchase of land parcels.

The Act of 2013, which had replaced the Land Acquisition Act of 1894, has been criticised by industry for making acquiring land a more cumbersome process.

CRISIL Chief Economist D K Joshi said, "Though bringing about wholesale changes in the Act might take some time, some provisions could be tweaked in a medium term through an ordinance to bring about regulatory clarity and ensure normal economic activity was not hindered."

These amendments are based on suggestions from states' representatives to the Union government in June this year.

The urgency to bring the ordinance in this case is also due to a section in the present law that provides for amending 13 pieces of central legislation by January 1, 2015, to bring their rehabilitation, resettlement and compensation clauses in sync with the Act.

These Acts include the Coal Bearing Areas Acquisition and Development Act, 1957, the National Highways Act, 1956, the Land Acquisition (Mines) Act, 1885, the Railways Act and the Electricity Act.

Rural Development Minister Chaudhary Birender Singh and senior government officials had on Saturday met and discussed the changes that could be brought to the land Act through an ordinance route.


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