Modi’s land amendment would do very little for stalled projects

Thanks to a Right to Information request to the Ministry of Finance by Venkatesh Nayak of the Commonwealth Human Rights Initiative, we have more detail regarding how many industrial projects are being held up by land acquisition difficulties. The data were collected by the Centre for Monitoring Indian Economy (CMIE) and analysed in Chapter 4 (PDF) in the first volume of the 2014-15 Economic Survey.

As low as the headline number of 8% appears, it may be an overstatement in the context of the government’s land acquisition amendments, since it includes government projects that do not fall under their purview. Remember that the hotly-debated consent clauses of the 2013 Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act applied only to land acquisition by the state on behalf of private companies (whether directly or via public-private partnerships). This means that the amendments will do nothing for public sector projects.

The 8% headline number comes from the list of 66 (of 804) projects that the CMIE has identified as held up by land acquisition difficulties, but 27 of these happen to be government-owned projects that will be unaffected by the land acquisition ordinance. Therefore the proportion of projects that stands to benefit from the Modi government’s land acquisition amendments is in fact 39 of 804, or 5% of the total.

If we take a stricter view and filter out real estate projects (townships, malls etc.), then the number of private industrial projects held up by land acquisition problems drops further to 26, around 3% of the total.

Now there is a view that the the observed number of projects could understate the effect of land acquisition difficulties on investment, since many projects will have been considered and dismissed without actually being launched. But this holds true of all factors of production (labour, capital, etc.), so it’s pretty hard to come up with a comprehensive and correctly weighted counterfactual.

So far as the current land act amendments are concerned, a quick scan of the list of 804 projects shows that many of them date back a decade (such as POSCO’s Paradip steel plant and Tata Steel’s Jharkhand plant). The 2013 land act came into force on 1 January 2014, which means that the consent and social impact assessment clauses can’t be really be blamed for the observed delays.

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