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Land-price skew puts brakes on National Highway projects

High circle rates and varying norms for fixing the rate based on the size of land parcels have made it difficult for the National Highways Authority of India to acquire land for expansion of existing highways in Uttar Pradesh and Madhya Pradesh.

, TNN|
Oct 27, 2019, 10.42 AM IST
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BCCL
Highway-BCCL
For non-viable projects, the NHAI will seek funds from the road transport ministry.
(This story originally appeared in on Oct 27, 2019)
NEW DELHI: High circle rates and varying norms for fixing the rate based on the size of land parcels have made it difficult for the National Highways Authority of India to acquire land for expansion of existing highways in Uttar Pradesh and Madhya Pradesh. While acquiring one hectare of land in these states could cost up to Rs 9.5 crore if the land parcels along the NHs are small, big parcels could cost just Rs 1 crore per hectare.

Citing these discrepancies which have pushed up the compensation amount, the road transport ministry has urged the two states to rationalise circle rates.

This is a big concern particularly in eastern UP in areas such as Ghazipur, Jaunpur and Varanasi where circle rates of small land parcels (less than 500 sq m) are close to Rs 2.4 crore. As per the land acquisition law, the NHAI needs to pay compensation which is four times of the circle rate in rural areas.

But, if the land parcel is larger than 500 sq m, the circle rate is close to Rs 24 lakh per hectare. “So, there is almost a 10-fold difference in the circle rates for two types of land parcels. Ideally, circle rates should be fixed taking into account the price at which properties were sold recently. We have suggested the states to have one circle rate for one region,” said an official.

Besides the arbitrary increase in circle rates, the states are also charging huge amounts for shifting of utilities such as water and gas pipelines and electricity lines. Recently, last NHAI chairman N N Sinha had flagged these issues in a meeting with state government representatives.

How high land costs and hefty charges for shifting utilities have hit the viability of projects is evident from the latest NHAI data.

This shows that, in the past two years, while the civil construction cost of highway projects under the Bharatmala scheme increased by 40%, the cost of pre-construction activities increased by 240%. Pre-construction activities include land acquisition and shifting of utilities.

According to an estimate, the NHAI will require about Rs 9.2 lakh crore for the 25,000-km Bharatmala scheme against the approved budget of Rs 5.5 lakh crore.

Meanwhile, the NHAI has decided to take up only viable projects which have more than 6.8% internal rate of return. Sources said the highways authority has chalked out plans to award about 3,600km during this financial year and efforts would be made to push the award of another 1,800km.

For non-viable projects, the NHAI will seek funds from the road transport ministry.

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