Land acquisition a major hurdle for India's infra, energy sectors

According to data shared with the Lok Sabha, 19 road projects awarded after May 2014 were facing delays

In India, land continues to remain a major concern for the infrastructure and energy sector, where industry officials say acquisition delays might have reduced but the process continues to be tedious and expensive.

The petroleum ministry's ambitious West Coast refinery project in Maharashtra is stuck for land and consent from owners.

According to data shared with the Lok Sabha, 19 road projects awarded after May 2014 were facing delays.

Industry sources said some of these projects were delayed due to land-related issues.

Experts said both road projects and large solar energy projects might take longer to fructify because of the land woes.

"Compared to the previous government, the only change is that the approval process is a little faster.

"Land continues to remain an issue and the process is tedious. New land acquisition policies helped in terms of making the process clear.

"However, the process is still lengthy and, with the policy, acquisition is more expensive," said an official from an infrastructure construction company.

For National Highways Authority of India (NHAI), the compensation paid for acquisition per hectare was Rs 23.79 million in 2016-2017, compared to Rs 135.1 lakh per hectare in 2014-15.

In addition to the cost involved, the acquisition process might have pushed the ministry to lower its road-award target for the current financial year.

"The ministry of road transportation & highways has fixed a lower award target of around 20,000 km of highways for FY19, from 25,000 km in FY18," rating agency ICRA noted in its report.

Land issues are not limited to the infrastructure space.

While fresh investments in thermal power have come to a standstill, those investing in solar energy are also feeling the pinch.

"Land acquisition is a challenging process, except for the solar park (where government does the acquisition).

"In India, it is still an emotional asset. Land is not a problem, it is the lack of a right policy to utilise the land available. Land is an environment and a political issue," said Amarthaluru Subba Rao, executive-director, finance and strategy for CLP India.

"Land requirement is an issue if it is a big solar project. Lenders also prefer to financially close a project when at least 85 per cent of the land is available," said an infrastructure banker, on condition of anonymity.

He added, when the government helps with acquisition, the process is not tedious.

For the oil and gas industry, India's plans for its largest refinery have so far failed to take off, owing to land-related issues.

In December 2016, the petroleum ministry announced its three oil marketing companies - Bharat Petroleum (BPCL), Indian Oil (IOC) and Hindustan Petroleum (HPCL) would jointly set up the country's largest oil refinery in Maharashtra.

The project continues to face uncertainty, as the state struggles to acquire land amid local protests.

"Land and right of way continue to remain a tedious process, mostly due to local and political issues.

"It is a lengthy process to educate and convince landowners to allow for right of way for related infrastructure projects and land costs have been on a rise," said an official from the oil and gas industry, who did not wish to be identified.

Photograph: Aaron Harris/Reuters