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The hurdles in land acquisition that stall many a project could be overcome through imaginative strategies
Posted On Thursday, February 11, 2010 at 01:49:08 AM
The need for heavy investment in infrastructure projects like power and roads is universally recognised. Innovative instruments for raising financial resources for mega projects have been devised.
Thanks to financial engineering, mobilisation of funds from the private sector and through PPP ( Public Private Partnership) have become the standard.
The concept of SEZ (Special Economic Zone) inspired by China’s success through this instrument has attracted a lot of interest not only from India Incorporated but also from major multinational companies from abroad.
Nevertheless, there is still a major stumbling block. Even the most modern project management techniques are powerless if the physical possession of the land is not obtained. This in spite of the fact that compared to the total cost of the project, the cost for land may be a very small fraction.
Singur demonstrated the harsh reality of how even an imaginative initiative by a reputed house like Tatas could be stopped in its tracks by a determined opposition by the farmers who owned the land.
It is now recognised that merely paying the price of the land is not enough. The rehabilitation of the project-affected people is equally important. This will include providing alternative accommodation, jobs etc.
The most critical aspect of the whole process of acquisition of land is the pricing of the land. It is necessary to ensure that the land-losers are also able to enjoy a share of the economic benefits resulting from the project.
The astronomical increase in real estate prices as well as troubles posed by vested interests fishing in troubled waters are posing nightmares to many project-promoters. Singur is just one example.
In fact, this is one area where a lot of innovative thinking is called for. One approach is to compensate the project-affected persons by way of jobs for families losing land.
But with the astronomical rise in the prices of land — once the project is implemented or even when the prospects of the project become public knowledge — mere jobs do not satisfy many land-losers. There is, therefore, the need for a more imaginative,inclusive strategy for land acquisition.
Prof P V Indiresan, former Director of IIT Madras, came up with a radical idea. Instead of acquiring the land with all the hassles, why not take the land on a long-term lease? The lease period may be equal to the productive life of the project.The original land owners can continue to derive the benefit from the increase in price of their real estate.
After all, the 100- year-lease of Hong Kong by Britain in the 19th century is an excellent example of this concept, even though it was more an accident of history than a conscious exercise in project design.
Yet another innovative idea to lick the problem of land acquisition is to make the land-losers shareholders in the prosperity resulting from the project.
A special purpose vehicle (SPV) can be set up in the form of a separate company in which the land-losers own shares proportional to the area of the project land owned by them.
A part of the commercially profitable buildings coming up in the project area or a part of the developed land in the project area may be earmarked for the SPV.
The SPV may undertake commercially profitable operations in this area. This will ensure that the landowners can continue to derive income and profits from the implementation of the project . The benefits will flow to the shareholders in proportion to their share.
This way, the perennial issue of the correct pricing of the land, taking into account the future escalation of prices, can be resolved in an equitable, fair and transparent manner. In short, an exercise in inclusive land acquisition.
The nature of the SPV and the terms can be tailor-made for each project. If the land-losers have the managerial ability, it can be left to them, otherwise the project-promoters themselves may manage the SPV. This idea is definitely worth a try by the government.
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