India eases land transfer rules

The Prime Minister’s office claims to have resolved a major land transfer bottleneck, paving the way for the speeding up of Indian infrastructure projects involving the transfer of government land. Sceptics say bigger problems will continue to hound investors.

The office of Indian Prime Minister Manmohan Singh announced yesterday that the transfer of government-owned land to those building infrastructure projects in partnership with government would no longer require cabinet approval.

The statement said the move “resolves [a] major land transfer bottleneck” and would speed up those projects requiring the transfer of government land. “Requiring cabinet approval for each PPP [public-private partnership] project meant adding a few months to complete the processes for securing cabinet approval” said the statement.

The previous policy, the statement claimed, had led to “long delays” in awarding concessions for road, rail, port, civil aviation and metro projects – where “the project is often built on government-owned land”.

However, market sources responded to the move by pointing out that private companies often build on government land without waiting for approval on the assumption that such approval will ultimately be granted. “I have never encountered any objections in such cases from the government,” R.Balarami Reddy, chief financial officer of road developer IVRCL, told the Wall Street Journal India. “The move merely formalises what happens on the ground.”

Other sources claimed that land transfer rules were not a major contributor to India’s stalled infrastructure investment market and that bigger concerns related to such things as the difficulty of accessing finance, high interest rates, the problem of acquiring private land and obtaining environmental clearances.

In describing a poor outlook for Indian infrastructure investment in a recent report, ratings agency Fitch highlighted: equity capital constraints; high interest rates; slowing GDP growth (6.5 percent predicted for 2012, compared with an average of 7.4 percent for the years 2000 to 2012); currency depreciation; fuel shortages; weak off-takers; execution delays for power projects; and prospects of slowing traffic growth for transport projects.