top of page

This Doesn’t Fit the Bill

By: Laxmi Joshi

Infrastructure development is largely dependent on acquisition of land. The cost of land acquisition forms a significant portion of the project cost and it often impacts the project timelines. According to the report of Ministry of Statistics and Programme Implementation as on December 01, 2012, about 270 central sector infrastructure projects are delayed and one of the reasons for such delay was the failure of the State to acquire land in time and hand over site for construction.

The Land Acquisition Act, 1894 (the “Act”) currently sets out the framework for the government to acquire land from private landholders for public purpose projects by paying them compensation for the same. A large number of land acquisitions under the Act have been challenged in the court for various reasons, ranging from wrongful acquisition under the guise of fabricated public purpose or urgent requirement to inadequate compensation and lack of transparency. Singur, Nandigram and Kalinganagar incidents are examples of large infrastructure projects that had to be abandoned and shifted to another State in the face of public opposition.

A new legislation, the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2012 (“LARR Bill”) has been tabled in the legislature and is being actively considered with a view to address the various issues faced in implementing land acquisition under the Act.  While the objective of the proposed Bill is to balance social justice and need for infrastructure development, it is more focused towards protecting the interest of the land owners which, in turn, is likely to pose more challenges for infrastructure projects in the future.


The proposed framework may cause a significant increase in the project cost. The cost of land acquisition constitutes atleast 20 – 25 percent of the total project cost. The framework under the LARR Bill may increase the cost of acquisition by as much as 150 per cent, which in turn would substantially increase the project cost. The LARR Bill requires the project owner/ contractor to provide rehabilitation and resettlement package for the project affected people (“PAP”) in addition to the compensation to be paid to the land owners for acquisition. The definition of PAP is broad and it includes landowners, tenants, lessees and persons working in the affected area for three years prior to the acquisition, where the acquisition would affect their primary source of livelihood.

The LARR Bill further provides that PAP will be entitled to a minimum compensation of four times the market value for land acquired in rural areas and two times the market value for land acquired in urban areas. The average of the sale price of similar land in the preceding three years or the land value fixed by the State government for payment of stamp duty in the relevant location will be considered as the market value of the land for the purpose of computing the compensation. There is no ceiling on the compensation.

In addition to the lumpsum compensation to be paid for the land acquired, PAP will also have to be paid annuity for 20 years. Further, for the next 10 years, 20 percent of the appreciated value of the land will have to be shared with the PAP every time the land is sold or transferred.


The proposed framework does not aid in reducing the time involved in completing acquisition of land required for a project. The LARR Bill requires the project owner/ contractor to undertake a social impact assessment study which would, in turn, need evaluation and approval by a multi disciplinary expert committee. This would be appointed by the appropriate government to ensure that the rehabilitation and resettlement package meets the actual requirement of PAP and mitigates the social imbalance caused by the acquisition and displacement of PAP. It does not set out any timelines within which such approvals will be given. It also does not set out any objective considerations that will be taken into account while making such decisions. It is further significant to note that no proposal for land acquisition will be approved unless 80 percent of the PAP consent to the rehabilitation and resettlement package.

Land acquisition is expected to become even more complex as the LARR Bill does not permit acquisition of multi-crop irrigated land, except as a demonstrably last resort measure. Even where it is demonstrated to be the last resort, no more than 5 percent of the multi-crop irrigated area in a district can be acquired under the proposed Bill. Approximately 40-50 percent of India’s agricultural land falls within this category. With such limitations, it would prove to be very challenging for the project development as it means non-availability of 55 million hectares of arable land of the country for the same. The northern States of India have most of the multi-cropped irrigated land. This restriction would further adversely impact the growth prospects of such States.

Acquisition of land is currently dealt under various existing legislation, including the Special Economic Zones Act, 2005, the Atomic Energy Act, 1962, the Railways Act, 1989, the National Highways Act, 1956, etc. These are proposed to be exempted from the provisions of LARR Bill. As a result, different processes and procedures may operate in parallel for acquisition of land, leading to inconsistent practices and administrative indecisions.

Thus the LARR Bill in the present form fails to provide for a time bound acquisition process to address the delays. The Bill, currently awaiting the approval of the upper house of the legislature, also does not consider the potential adverse impact on essential infrastructure projects adequately.

Mr. Amit Iyer also contributed contributed to this article.


bottom of page