CAG's Noida report highlights urgent need for city audits to check massive corruption in land allotment

Noida (Image: AFP)

The Comptroller and Auditor General’s (CAG) audit report of the Noida Authority’s process of acquiring land and allotting it for development is a case study on how everything can go wrong if rules are not created, implemented or relaxed. Basic planning principles were ignored as a clutch of officials wantonly flouted every rule.

The report scrutinised Noida Authority’s activities between 2005 and 2018 and has exposed what could well be the largest organised fraud in the land allotment process by a government authority. Deep corruption and arbitrary allotment led not only to revenue loss for the authority but also cost it when it had to hand out no-litigation bonuses to farmers, instead of computing social impact and giving rehabilitation packages.

A 1970s need

Planning Noida as an industrial city abutting Delhi was a need in the 1970s. However, land acquisition was slow. The nature of land demand also changed in the 2000s when India transitioned to a service-led economy. After the first few allotments to technology giants such as HCL and Adobe, even campus facilities slowed down. Till 2020, Noida allotted only 18.38 percent of acquired land for industrial use.

Residential use became the primary objective of allotment after 2005, even though it contravened planned norms.

Rules stipulated that the Noida Master Plan had to be aligned to the Regional Plan and cleared by the National Capital Regional Planning Board (NCRPB).

Take the Noida Master Plan 2021, for instance, formulated before 2006. It was given conditional approval by the Government of Uttar Pradesh (GoUP) and was not cleared by the NCRPB in 2006.

In 2008, Noida decided to incorporate changes only in Master Plan 2031. However, this was prepared in 2011, still without a Regional Plan. Transport linkages, water and sewage, and power are planned on a regional basis for better efficiency. Objections raised by the Chief Town and Country Planner (CTCP) in Noida were also ignored.

Such master plans had also to conform to the NOIDA (Preparation & Finalisation of Plan) Regulations. These regulations were amended in 2010 and the specific definitions for land uses were swapped with very general definitions/clauses. These amendments gave the Noida Authority greater discretion to change the character of the Plan and also reduced disclosure requirements.

The developer-official nexus

Such tweaks to rules meant that of the 67 group housing plots allotted by the Noida Authority, many were subdivided to take the final tally to 113. Of these, 63 percent remained incomplete or partially complete by 2020.

Many allottees qualified neither technically nor financially. The upfront allotment money to be paid as percentage of land premium was reduced to as low as 10 percent of the total value in 2009-10 and the developers were allowed to leverage their net worth multiple times.

Little wonder then, of the 130,005 flats allotted, 44 percent were not even issued occupancy certificates. Clearly, development capability matters.

In many cases, commercial or institutional plots were allotted to consortia with overseas entities as lead companies, which withdrew after the allotment. Institutional land to be allotted for research, education or other public good was sold as office plots at discounted rates. Residential allowances in institutional plots were used up for sale in the open market. Farmhouse sectors were allotted on prime land, next to commercial sectors and selectively given to a preferred few at lower values. All these blatantly violated planning norms.

Despite penalty provisions for non-payment of dues existing under the Uttar Pradesh Industrial Area Development Act 1976, developers were not charged penalty, even after the lapse of the tenure when the final payment should have been made.

The net result

The change in the character of the township from industrial to mixed use led to revenue loss for the city. Commercial activities were allowed in recreational and industrial areas and land was sold at lower rates, leading to loss of revenue.

The Land Acquisition Act 1894 (LAA) prevailed till a new law came into force in 2013. Almost 80 percent of land acquisition on the basis of the new land acquisition law post 2005 used the Urgency Clause, stating industrialisation as the objective. This allowed the land collector to dispense with the rights of landowners and over-ride objections. Despite this, administrative delays of 11-46 months in submitting proposals ensued, showing the lack of urgency.

After the new Land Act of 2013, the Noida Authority gave out a lump-sum amount of Rs 373.85 crore as no-litigation bonus to farmers, instead of an assessed rehabilitation package. The new law required a social impact study after which the relief and rehabilitation settlement could be made. Additional payouts of over Rs 570 crore were paid out even to ineligible land transactions as sale deeds were direct. After all this, there was a huge area that still remained encroached. Clearly follow-ups had not been made.

Finally, neither the GoUP nor the Noida Authority created nor followed any guidelines in determining the cost of land. Arbitrary allotment rates cost the exchequer Rs 1,316.51 crore while Rs 13,968.49 crore of revenue loss took place because of incorrect factoring of enhanced development norms and floor area ratios, said the CAG report.

Group housing sectors were mis-categorised leading to plots being sold at lower rates because of lower reserve prices. No cost recovery mechanisms were created and the authority ended up bearing Rs 1,424.56 crore costs from its own reserves.

A wake-up call

When the Supreme Court appointed a Court Receiver to get the Amrapali projects completed, it was to create a model to stop such excesses in future. The CAG report is a step in the same direction as it addresses the scope for improvement in policies and procedures, process of preparing Master Plans, and effective pricing of land.

This report calls out the importance of checks and balances in city planning. This is especially important as India is moving towards 50 percent urbanisation in the next few years. The law provides for a system of periodic checks in planning, policy and pricing. Regular city audits are critical to effective execution. This report needs to catalyse stringent implementation of the law by multiple authorities.

The author is Director - Real Estate & Cities at Wordmeister Editorial Services and Communications Advisor, National Institute of Urban Affairs.

Views are personal and do not represent the stand of this publication.