Taj Highway Clash Shows India’s Land Struggle

A deadly confrontation this week over a highway to the Taj Mahal may add pressure on Indian Prime Minister Manmohan Singh to accelerate changes to land laws as growth threatens to alienate the nation’s 234 million farmers.

Police in the nation’s Uttar Pradesh state clashed with villagers demanding greater compensation for land earmarked for a new motorway from New Delhi to the city of Agra, home to the Taj Mahal, the 17th century monument that is India’s biggest tourist attraction. Two policemen and two farmers were killed.

Conflict between farmers and companies trying to secure land for projects has hampered India’s plans to expand highways, crucial to luring investment as they account for 2 percent of the nation’s road network and carry 40 percent of the traffic. Singh, 78, is trying to replace the colonial 1894 Land Acquisition Act with a law aimed at reducing disputes over valuation and limiting the social impact of projects.

“The clashes around land acquisition highlight the need for greater efficiency in dealing with this issue,” said Siddhartha Sanyal, a Mumbai-based economist at Barclays Plc. “Policy makers need to come out with clear policies to ensure land acquisition is done as smoothly as possible and doesn’t come in the way of development programs.”

Tussles over land have sparked rioting and stalled more than $100 billion of projects across India, according to the Associated Chambers of Commerce & Industry. In the fiscal year ended March 31, 2010, only 3,360 kilometers of road projects were awarded in India against a target of 9,800 kilometers because of tardy progress in procuring land, according to the nation’s Planning Commission.

Major Bottleneck

The delays have prevented India from reducing business costs and making it easier for companies to operate in Asia’s third-biggest economy.

“Congested highways is the major bottleneck hurting manufacturing companies like us,” said Ajay Seth, New Delhi- based chief financial officer at Maruti Suzuki India Ltd. (MSIL), the nation’s biggest carmaker. “We have no choice but to spend more on logistics and that adds to the cost of doing business.”

The cost of hauling goods on Indian roads is 30 percent more than in the U.S. because of inefficiencies, resulting in higher prices and lower competitiveness while curbing economic growth, according to McKinsey & Co. It estimates that India’s poor logistics infrastructure costs the economy an extra $45 billion, or 4.3 percent of gross domestic product, each year.

India’s reliance on roads to move freight is three times larger than that of China, and a 2 1/2-time increase in traffic in the next decade will put further pressure on the nation’s transportation, McKinsey said in a report on its website.

Five-Hour Trip

The South Asian nation transports 57 percent of its goods by road, 36 percent by rail, 6 percent on waterways and less than 1 percent by air. China transports 22 percent by road, 47 percent by rail, 30 percent by water and less than 1 percent by air, according to McKinsey report.

The government has said the highway between New Delhi and Agra will promote economic development and cut about two hours off the current five-hour trip. The 165-kilometre, six-lane Yamuna Expressway being constructed by Jaypee Infratech Ltd. (JPIN), a unit of the country’s biggest builder of dams, is due to be finished by October.

Jaiprakash Associates Ltd. (JPA), which owns Jaypee Infratech, said in a statement May 8 that “all required land for development has been acquired and mutually agreed compensation paid to the farmers.”

Torching Vehicles

Still, protesting villagers torched several vehicles and tents at a road construction site over the weekend, Rajeev Malhotra, a spokesman for police in Uttar Pradesh, said May 9. The violence that began in Noida, on the outskirts of New Delhi, spread to cities including Agra and Aligarh on May 8. Extra police teams have been dispatched along the motorway to maintain law and order, Uttar Pradesh Special Director General of Police Brij Lal said the next day.

Past protests have held up industrial projects such as a proposal from Posco (005490), South Korea’s biggest steelmaker, to build a $12 billion plant in eastern Orissa state.

Posco on May 2 won final environmental clearance for its planned steel complex in India, delayed since 2005 because of resistance from farmers unwilling to give up their land. The environment ministry has asked Orissa’s government to resolve issues pertaining to forestry laws with two villages affected by the project.

Prime Minister Singh is seeking to scrap the 1894 law, which allows state governments to buy land cheaply on behalf of private projects. Under the provisions of the new bill, still under discussion, companies would have to agree on terms with farmers for at least 70 percent of the land they need before asking authorities for help with the rest. The proposals provide specific guidelines for valuing land and require a social impact study before evictions.

“The recent clashes are symptomatic of inefficiencies in the land acquisition system,” said Manoj Singh, an adviser at the nation’s Planning Commission in New Delhi. “Roads are especially vital for India’s economic progress.”

To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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