September 11, 2013 / 09:12 IST
The clearance of the Land Acquisition and Rehabilitation & Resettlement Bill, 2011 (LARR, 2011) is important because it replaces the archaic Land Acquisition Act, 1894 and merges the earlier two bills, namely the Land Acquisition Bill (2005) and the Rehabilitation and Resettlement Bill (2007). The LAAR encompasses multiple aspects of land acquisition process including a) higher realization for the farmers, b) adherence to stricter social impact conditions, c) differential consent norms for public and private projects, and d) a comprehensive resettlement and rehabilitation condition.
Impact: Considerable rise in capital outlay and longer acquisition process:a) The introduction of social impact assessment as a pre-condition in case of every land acquisition will increase the project life cycle. While the process of land acquisition is time bound, LARR provides enough scope for on ground for negotiation that could lengthen the acquisition process.b) Our analysis indicate that cost of infra/industrial projects can escalate significantly on account of the higher multiplier & Solatium for the acquired land, multiple R&R provisions and liability from the required infrastructural amenities.c) In our view, delays in land acquisition and steep rise in cost will likely slow industrial capex which will adversely impact the EPC companies.d) However we see companies holding large chunk of land at significant advantage like Adani Ports (19000 acres of land under possession) which likely to benefit of inventory re-pricing. Fixed cost of project could increase by over 250%According to our analysis the cost of acquiring the land including the R&R cost will increase the project cost by 256% compared to previous act (Scenario analysis assuming 500 acres of land is acquired and 500 families impacted). However along with higher outgo on land acquisition we believe that the cost of setting up houses and maintaining supporting infrastructure may further escalate the cost component which is negative for the industry.Higher on ground powers elevates uncertaintyThe consent is required for projects when the Government acquires land for ultimate transfer to private sector for a public partnership project or to private sector for undertaking an infrastructure project. Consent requirements are fora) public-private partnership projects (after 70% of the project affected families have given consent),b) Private companies taking up projects for public purpose which includes infrastructure projects (after 80% of the project affected families have given consent).We believe that higher consent ratio means groups other than owners such as agricultural laborers and sharecroppers will also be required to give their consent. While people covered under compensation would increase, envisages greater power to Affected People will increase the uncertainty factor while also increasing costs. 
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