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Wanted: law that’s fair to everyone

Existing law on land acquisition is loaded against landowners. Critics say new law will make it unviable for industry to acquire land. Can govt find the right balance?
Hindustan Times | By HT Correspondent, New Delhi
UPDATED ON JUL 23, 2013 03:28 AM IST

The costs are rising by the day — 400,000-500,000 potential new jobs are held up and almost eight lakh crore of corporate expenditure is getting shelved.

The main culprit: land acquisition. There are other issues — like environmental clearances, red tape and corruption — that make India a difficult place to do business in, but land is arguably the biggest issue holding up investments. The stalled projects could have added 0.1% to India’s GDP growth rate.

Investors are beginning to lose patience. Within days of the Centre announcing liberalised norms to attract FDI, two of the world’s largest steel companies, ArcelorMittal and Posco, pulled out of two steel projects in Odisha and Karnataka, respectively. The combined investments in these projects: Rs 72,000 crore. The main problem: land.

The existing Land Acquisition Act of 1894 is loaded against the landowner. To make it more equitable, the government has drawn up a new law, which, critics say will make land prohibitively expensive and, thus, unviable for industry.

“Compensation for land, resettlement and rehabilitation should leave affected families better off while also balancing the viability of projects,” said .

“State governments must play an important role in the whole thing... We must set up cabinet committee on investments at the state level to expedite the whole process,” said Rana Kapoor, president, Assocham. The new law doesn’t address this issue.

The frustration among investors is showing. “Over the last seven years, we have invested considerable resources in this (Karnataka) project. However, the delays relating to land acquisition and allocation of captive iron ore blocks means this project is no longer viable,” said Vijay Bhatnagar, CEO, India and China, ArcelorMittal.

Such statements create negative international sentiment about India.

“It’s a pity that big projects should suffer because of land acquisition problems. One cannot wait for so many years,” Naina Lal Kidwai, Ficci president, said.

But foreign investors aren’t writing India off totally. “Given India’s huge potential, it remains an attractive investment destination. However, the government should speed up the tedious procedures for setting up industries,” Posco said in an email to HT.

The new law, when it is passed by Parliament, will, hopefully, address these concerns and balance the competing demands of industry and landowners.

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