“This way the NHAI will not have to immediately shell out money and land can be bought via bonds. The cost of land acquisition
has increased due to higher compensation and also because land is available in urban areas and is costlier,” said Kushal Kumar Singh, partner, Deloitte India.
Under the value-capture financing mechanism, states can agree to pay 25 per cent of the acquisition cost and they will get a priority in project execution.
“One such case is of the government of Kerala, which has agreed to pay 25 per cent of the land cost for national highways in the state,” an NHAI official told Business Standard. The reason for this is the high cost of land, most of which is in urban areas, and the state needs better road connectivity because of floods in the last two consecutive years.
In addition to this, the upcoming projects under the Bharatmala scheme will be executed through this mechanism.
The Ministry of Road Transport and Highways has been grappling with higher land acquisition cost for the past few years. Approximately, a cost of Rs 12 crore per km is incurred in the expansion of a highway from two-lane to four-lane and the number would be five-six times higher in a greenfield project like an expressway.
The cost of the marquee Eastern Peripheral Expressway is Rs 11,000 crore, of which Rs 5,673.05 crore was the land cost.
“These are steps to address the larger issue of increasing land cost,” another official said.
While the allocation for the NHAI has risen in the past couple of years, the authority’s IEBR (Internal and Extra Budgetary Resources) has also gone up.
IEBR is the money the department raises in the form of profit, debt, and equity.
In FY18, the NHAI’s IEBR was Rs 50,532.41 crore. It went up to Rs 62,000 crore in FY19 and further to Rs 75,000 crore in FY20.