Land Acquisition Bill to affect mining, metal and infra firms
The proposed Land Acquisition Bill is likely to sharply inflate business costs for companies from the mining, metal and infrastructure sectors, a report by investment banking and institutional brokerage firm Religare Capital has said.business Updated: Sep 07, 2011 13:01 IST
The proposed Land Acquisition Bill is likely to sharply inflate business costs for companies from the mining, metal and infrastructure sectors, a report by investment banking and institutional brokerage firm Religare Capital has said.
At the same time, the bill might speed up land acquisition for companies by reducing the number of hurdles and disputes in the process, it added.
The report has named Tata Steel, JSW, Jindal Steel & Power and Sterlite Energy among the companies that could witness cost over-runs on various projects due to higher land acquisition prices.
The bill was cleared by cabinet earlier this week and was scheduled to be introduced in Parliament on Wednesday.
Religare said that "the bill, prima facie, is expected to increase the cost of land acquisition for the Railways, National Highways Authority of India (NHAI), mining, airport and metal projects, even as it is expected to speed up land acquisition due to better compensation and lesser disputes."
Some of the projects being undertaken by JSW in Bengal and Jharkhand may see cost over-runs, Religare Capital said in a research note.
An upward revision in project costs is also likely to be seen at Jindal Steel and Power's Jharkhand project, Tata Steel's Odisha project and Sterlite Energy's Jharsuguda project, where land acquisition is still going on, Religare Capital added.
However, a large part of the land acquisition for these greenfield projects is complete, the report added.
In the case of the Railways, there can be delays and an increase in the cost of projects like dedicated freight corridors, while the cost of future airports may also go up. The higher cost of land would also have a negative impact on the ports sector.
With respect to roads, land acquisition is mainly done by the NHAI at its own cost. Hence, while the overall cost of development will move up, the returns of private sector entities developing the roads will remain the same.
In the case of mining companies, the government allots them mining concessions/blocks and then the land is either leased out by the government or the mining companies need to acquire it, which may mean a higher cost of land acquisition.
Meanwhile, apex real estate body CREDAI had said that the proposed Act would make land costlier by up to 80%, adversely affecting housing development in the country.
The bill is believed to include a proposal that makes rehabilitation and resettlement mandatory if private companies buy 50 acres or more in urban areas, or 100 acres or more in rural areas.
The compensation offered to land owners would be four times higher than the market rate, along with other benefits, as per the bill.
Cabinet has already cleared the measure, billed as one of the landmark legislations of the UPA-II government, and it was scheduled to be introduced on Wednesday, within months of party leader Rahul Gandhi raking up the land acquisition issue in a major way by coming out in support of farmers' agitation at Bhatta-Parsaul, in Greater Noida, in Uttar Pradesh.