In a move that could allow more ministries to clear their own projects, without going through the time-consuming process of seeking the approval of the Cabinet Committee on Economic Affairs (CCEA), the government is likely to exclude the cost of land while computing the total cost of infrastructure projects
In order to implement the proposal, the government will need to amend the transaction of business rules for the CCEA. The proposals will benefit the ministries of urban development and railways. The Prime Minister's Office has supported the proposal to exclude the land cost from total project cost and now the road transport and highway Ministry are waiting for the Cabinets approval. Presently all infrastructure projects costing over Rs 1,000 crore have to be approved by the CCEA and given the high cost of land, many projects will remain below the threshold if this component is not included in the project cost.
Currently, in many cases the land cost makes up as much as 40% of the project cost. Earlier, the land cost for any project was not more than 10-15%, but because of the increased compensation for land acquisition in some cases prices of land are as high as the construction cost. Exclusion of land cost is a must if the Ministry has to increase the pace of awarding projects.
According to the data available with the road transport and highways ministry, the land cost in recent times has seen a significant increase in states including Delhi, Punjab, Haryana, Uttar Pradesh, Maharashtra and Karnataka. As per the National Highways Authority of India's figures, the estimated initial price of land has increased to Rs 3 crore per hectare on average from Rs 56 lakh in 2011-12.