Rs 4.5 lakh-crore required for Andhra Pradesh capital

Hyderabad: The Indian Institute for Human Settlements that prepared the report for the Sivaramakrishnan Co-mmittee, has indicated that a '4.5 lakh crore package is needed for Andhra Pradesh’s comprehensive economic development based on the agreements in the Andhra Pradesh Reorganisation Act (2014) and various statements made by the state.

Land acquisition has been identified as the biggest constraint. The report said that the estimated investment potential in the two largest items i.e. the Visakhapatnam-Chennai industrial corridor, which is expected to be part of the East Coast Industrial Corridor and the proposed IT Investment Region and Electronic Manufacturing Clusters,  will need extensive mobilisation of capital and private investor interest to execute.

“It is clear from this very broad estimate, that there is a pressing need to develop considerable capacity to structure, manage and regulate PPP investments in the overall estimate for buildings for the capital zone, that is about '10,500 crore,” said the report.

The government of AP is assessing suitability of land assembly options to consolidate 1,458 acres of land (to be potentially scaled up to 5,000-10,000 acres) for a new state capital in the Vijayawada-Guntur-Tenali-Mangal-agiri region. The basic land acquisition process would take between three to four years (35 months to 50 months) to implement, without any administrative delays.

Land assembly options being considered include Outright Acquisition; (PPP based Land Acquisition, and Land Pooling. The Town and Country Planning Department, of the government of AP recommended a PPP based land acquisition approach based on a comparative cost-benefit analysis of the three approaches.

The basic land acquisition process would take between three to four years (35 months to 50 months) to implement, without any administrative delays. The range of effective costs of land accruing to government range from Rs 1.96 crore to Rs 8.49 crore per acre (net developed area) indicating the need for a careful analysis before the choice of a greenfield site or areas where land prices are expected to be very high. Existing real estate listings in the areas are already exhibiting a sharp hike in prices, which exceed land cost assumptions, considered in the DTCP note. Land acquisition will quickly become financially unfeasible along with associated difficulties in gathering consent and completing the acquisition.

Findings regarding land acquisition (including a land sharing PPP model of acquisition):

1) Time is the chief constraint. Land acquisition, using Land Acquisition, Resettlement and Rehabilitation would require a minimum of three to four years to implement, without project delays.

2) As the financial analysis highlights increase in the base market price of land it would quickly make the project unfeasible from the cost perspective. Land acquisition may quickly become a very expensive option given that the base cost of land in the Vijayawada-Guntur area is already experiencing a hike.

3) Land consolidation on this scale has not been attempted successfully via LARR in the country yet. Delays and disputes that come up will have to be settled to satisfy the courts, which may mean project delays.

4) Along with considering the financial aspects, it would be necessary to consider the political feasibility of different levels of land sharing with the farmers/owners. The present estimate of giving landowners 36 per cent of net developed area back may be lower than the expectations of landowners (based on a 60:40, landowner: government of AP share, which has been assumed in the DTCP note).

Land pooling findings:

1) Land pooling, would require four years to implement, without project delays. However, unlike the land acquisition approach, land price increase will not directly increase costs for AP

2) Land consolidation on this scale has not been attempted via land pooling yet.

3) Land pooling may provide AP with non-contiguous land, which may not be suitable for developing city level facilities.

4) It would be necessary to consider the feasibility of different levels of land sharing with the farmers/owners. The present estimate of giving landowners 24 per cent of net developed area back may be lower than the expectations of landowners (based on a 40:60, landowner: government  of AP share, which has been assumed in the DTCP note). However, land pooling potentially offers a more politically feasible alternative.