New land law a setback to infra projects: industry

New land law a setback to infra projects: industry
Highlights

Criticising the new land law, experts and analysts have said it is body blow to the ambitious $ 1 trillion investment target for the infra sector during the 12th Plan as the new rules envisage high compensation and near-total consent from affected parties to acquire land. The Land Acquisition Bill was passed by the Lok Sabha with overwhelming majority last week. It will come up for discussion in Rajya Sabha this week.

Experts says rise in land prices will make most of infra projects unviable

Mumbai (PTI): Criticising the new land law, experts and analysts have said it is body blow to the ambitious $ 1 trillion investment target for the infra sector during the 12th Plan as the new rules envisage high compensation and near-total consent from affected parties to acquire land. The Land Acquisition Bill was passed by the Lok Sabha with overwhelming majority last week. It will come up for discussion in Rajya Sabha this week.

"Infrastructure projects will receive the sharpest blow due to the new land bill as the rise in input costs is likely to make them unviable. Infrastructure projects are already under pressure, so the private sector is not interested in them.Economic growth is largely dependent on infrastructure development which the government cannot take up single handedly and the private sector cooperation is necessary," Cushman & Wakefield Executive Managing Director for South Asia Sanjay Dutt said.

The Land Acquisition Bill, which will replace decades-old Land Acquisition Act of 1894, has set out clearly the compensation to be paid for land acquisition. Developers are required to get the consent of up to 80 per cent of people whose land is to be acquired for private projects, and 70 per cent of affected people for public-private partnership (PPP) projects. "The consent clause will delay the start of the project further making the required returns from the project difficult to achieve," Dutt said.

According to HCC group Chief Operating Officer Rajgopal Nogja, the Bill would lead to further holding up of the infrastructure development where many projects are already languishing due to the failure of authorities to acquire the necessary land for development. "The linear and multiple process norms will make land acquisition difficult and may result into even dropping of development idea itself in some cases. The bill will add to all-round escalation in the cost of projects and would have cascading effect on the future of development in the country," he said.

Terming these as unfavourable conditions, experts said the $ 1 trillion investment target during 12th Plan may not be achieved. "Given the financial stress under which infrastructure developers and banks are, their appetite to take up new projects is not there, more so, for projects involving market risk, " PwC India Executive Director Manish Agarwal said

With a target of 50 per cent investment from the private sector, the government had planned to develop projects on PPP basis, where the risk will be shared by the developers. However, given the current scenario, things will have to go back to the drawing board again, public-private-partnership model may need to be thought through and redone, he said.

More trouble in store for mining sector

Mumbai (PTI): Experts have warned that the mining and quarrying segment is likely to suffer further after a contraction by 2.8 per cent in the first quarter of the fiscal, if the issues plaguing the sector are not resolved immediately. While iron ore mining approvals issue can be expedited, coal production could be ramped up to boost not only the mining sector but also to help the investment cycle, they said.

"We are assuming a negative growth figure in the mining sector in the current fiscal. However, we are also watching statements coming out from government regarding restarting mining in some regions, which may turn things towards a positive growth territory," Crisil Chief Economist D K Joshi said. He also said that the mining sector is a binding constraint to the growth of the economy for now, degrowth of which is also posing a risk to the current account deficit numbers.

"Unless approvals are expedited to open iron ore mines in Karnataka along with steps to restart operations in Goa, the sector will contract further," Federation of Indian Mineral Industries (Fimi) vice-president Basant Poddar said.

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