Land acquisition delays financial closure for 23 projects

While the government has moved to resolve the issue of non-performing assets of banks in the infrastructure sector, land acquisition remains a major problem. As many 23 highway projects worth ~15,000 crore, belonging to Sadbhav Engineering, Dilip Buildcon, and MEP Infrastructure, among others, are stuck for lack of financial closure due to delays in land acquisition.

These are among the 67 highway contracts that were reviewed last week by the minister for road transport and highways, Nitin Gadkari, for time-bound land acquisition and compensation.

According to a source in the know, the 23 highway contracts have crossed the six-month threshold for completing financial closure. Typically, a concessionaire or highway developer has to tie up funds within six months of award, but these projects, comprising 17 engineering, procurement and construction (EPC) and six hybrid annuity model projects, are facing land acquisition bottlenecks, according to the source.

Some states, an official said, are asking for a higher compensation for making land available, whereas in other cases, states are facing public resistance. It is learnt that for one such project, a state-owned bank told the concessionaire that the funds would be released only after the land had been fully acquired. According to another official, the remaining 44 projects have tied up finances but are facing delays in their execution because of the problems related to land acquisition.

A few projects are stuck also because of delays in getting the environment and forest clearance.

Last month, Gadkari said the eastern peripheral expressway would be the country’s first infrastructure project where the land acquisition cost at ~5,900 crore was higher than the project cost of ~4,418 crore.

The ministry of road transport and highways and the National Highways Authority of India (NHAI) want to iron out the problems delaying the execution of highway projects, to begin construction work before the monsoon season, a time when the pace of road construction slackens.

Slow pace of work hampers the road construction target of the government, which aims to build 40 km of roads a day in the current year. In 2016-17, on average, 23 km of roads were constructed in a day.

Land acquisition had slowed down the pace of road construction under the UPA government, too. Before the NDA government came to power in May 2014, 3,621 km was awarded in 2013-14. Another 7,972 km of highway projects were awarded in 2014-15.