While this affects the government’s efforts to expedite road construction, it also chokes a source of liquidity in the market. Government pays higher-than-market prices for land acquired for public projects. With the economy in distress, continuing with land acquisition would offer an effective way to increase the supply of money in the market. But land acquisition has come down drastically in areas with a large number of Covid-19 cases, three officials aware of the matter said.
“Land acquisition is turning out to be the biggest bottleneck at this point,” one of them told ET. “District-level officials are busy on Covid-19 duty.”
The National Highways Authority of India has asked state governments to expedite the process, another official said.
While the shortage of officials is a major issue, another is the financial crunch of states, which have to bear a part of the acquisition cost. Most states are facing a shortage of funds due to a fall in their revenue and enhanced spending on healthcare amid the pandemic.
As of the last week of April, state governments were to clear Rs 25,000 crore of payments towards land already acquired.
“This is a time that even state governments are cash-strapped, so the question of disbursing money on account of land acquired takes the back seat,” said Arindam Guha, partner and lead-government and public sector, Deloitte India.
This, however, would be a good time for the government to push land acquisition for infrastructure projects as people would not want to hold on to a piece of land in expectation of a better offer as the “economy softens”, Guha said.