Thawakar-569_PPT

7/28/2019 Thawakar-569_PPT

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I. Context

II. Central Level Land Policy

III. The Largest Central Land Owners- Railways, Defense and Ports

IV. Major Port Trust Closer Look

V. Conclusions

Agenda


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Immense and growing needs of urban Indiain next two decades

121 mn persons or 31% of India

lives in urban areas, expected

to grow to 600mn by 2031

(nearly twice US today)

50 million plus cities; expected

to increase to 87 by 2031 (9 in

the US and 35 in Europe)

70 % of net new employment

will be generated in cities

Source: HPEC Report on Indian Urban Infrastructure and Services (2011) and Indias Urban Awakening (McKinsey, 2010), Census (India, 2011)

700-900 mn square meters of

residential and commercial

space needs to be built (a newChicago every year)

2.5 bn square meters of roads

will have to be paved, 20 times

the addition of last 20 years

Investment in basic services

like water, sewerage, solid

waste, street lights

Urban Growth Infrastructure Needs


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Can land be a means to more efficient

urban development? Government entities in India hold large amounts of public land

which are vacant or under-utilized

At the same time, urban India is deficient in basic infrastructureboth network and urban service infrastructure like water supply,waste removal, and transportation

This condition raises fundamental questions:

Are some of governments landholdings surplus? Can their economic value be captured to help finance infrastructure

investment?


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I. Context




V. Conclusions

Agenda


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Central level land policy in India

has marched back and forth in recent years

Pre 2011 Mar. 2011 Aug. 2012 Oct. 2012

- Delegated to individuallandowning institutions

- De facto right of Cabinetintervention

- All decisions on alienationof public lands to requireCabinet approval

- Only transfers from one

central department toanother accepted

- PM intervenes to unlockstalemate to speedprojects

- Narrowly crafted order

allowing inter-ministerialtransfer of land and tocompanies implementinginfra. projects

- Cabinet Note on publicland management inprogress

May 2011: Chawla Committee Report noting union government lands should be transparently managed

Sep. 2012: Kelkar Committee Report utilization of land assets for capital expenditure


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I. Context




V. Conclusions

Agenda


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Who are the largest Central level land

owners in India?

Ministry of Defense

Indian Railways

Airports Authority of India

Major Port Trusts


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Ministry of Defense- Land Holdings

Indias largest landowner with a total area of1,754,000acres

Part of this land158,000 acresis contained in 62

military cantonments Legal title to all Defence lands in India is held by the

Directorate General of Defence Estates (DGDE)

By branch of service, total Defence lands are allocated as

follows: Army: 80%, Air Force: 9%; Navy: 2% andOthers 9%

Decisions about land use are made by the respectivemilitary branches


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The role of defense lands in urban

development (1/2) Cantonments are separate

areas formed around militarybases, under military control

Delhi cantonment: 43 sq. kmin the heart of city

Eleven hotels are locatedwithin the cantonment,commercial establishmentsand upscale housing Map Source: KV Cantt


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The role of defense lands in urban

development (2/2) Secunderabad cantonment:

Heart of urban Hyderabad,covers 40 sq. km, sprawlsinstead of being compact bloc

Disrupts infrastructure networks

Cantonment has its own masterplan not subject to metropolitanland-use planning

Within Secunderabadcantonment, 27.5% of total landarea is leased to private partiesor government. Some of theland has been encroached

Source: Google Maps


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Does defense have surplus land?

A report of the CAG concludes that more than 81,000acres of defence lands are surplus

Bulk of this land (52,000 acres) is vacant and unutilized

However, some of the urban land is allocated to uses thatin the view of the Comptroller and Auditor General(CAG) are unauthorized. Example, defence has 97 golf

course (recreational land) re-labeled in 2004 asenvironmental parks and training areas

Various legacy leases also exist


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History of Defense land audit and

reforms

1977 1986 1997 Apr. 2011

- once per year all land

holdings to be reviewed byService Headquarterswith a view todetermining which arepermanently surplus toDefense requirements andwhich should be disposedof.

- Modification of

Policy stating NoDefense land shall bedeclared surplus. If atall any land is given up,it should be only on thebasis of exchange.

- No alienation without

Cabinet approval. Anamendment was issuedin 2000 which permitteduse by governmentdepartments on shortterm lease

- the Director General

Defense Estates(DGDE) issued anorder that revived theLand Audit

has seen changes in stance on surplus land


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Land Exchange to Facilitate Local

Infrastructure Projects Hyderabad-Secunderabad Metro:

Two acres of Defense land was secured to fill out the metro system

Two acres of Defense land being used for a riding school and parking (in

exchange for 25 acres of state land)

Coimbatore Airport:

Land exchange of 122 acres of vacant Air Force land and 6.4 acres ofvacant Navy land to Airpot Authority of India

Later, both services refused to transfer the land citing alternate proposeduses. This conflict has been referred to the Centre.


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Indian Railways- Land Ownership andStrategy

Owns 423,000 hectares of land (1,045,000 acres) of which 378,000hectares are used, 43,000 hectares are vacant

First central organization to develop an institutional strategy for

land monetization - motivated by its large operating deficit

In 2006, the Railway Land Development Authority was establishedand 138 land parcels transferred

Newspaper accounts estimate (optimistically) that more thanUS$100 bn could be realized

Actual monetization has lagged badly. As of July 2012, onlyone land development project was completed*

Of 138 parcels transferred to RLDA, 52 have been de-entrusted orproposed


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I. Context




V. Conclusions

Agenda


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Major Port Trusts - Overview

13 Major Ports of which 12 are under the Major PortsTrust Act (1963)

They report to Ministry of Shipping, but are quasi-independent in operations. Each Port Trust is managed bya Board of Trustees

Many of the Major Ports are legacy; Bombay Port Trust(1873); Calcutta Port (1890)

Several are struggling financially

Many of the ports have excess land, the landholdingsdetermined long ago


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Landholdings and Land Policy

Major Port Acres Major Port AcresParadip 534 New Mangalore 2,928

Visakhapatnam 587 Mormugao 6,382Ennore 1,047 Jawaharlal Nehru 7,576Mumbai 1,859 Kolkata 3,000Chennai 2,035 Haldia (Part of Kolkata Port Trust) 7,000Tuticorin 2,132 Kandla 220,416Cochin 2,353 Total (approx.) 257,000

Land Policy for Major Ports, 2010 governs land use and landpolicy

Shaped by Supreme Court rulings on leasing rates forcommercial land leased by Major Ports

July 2012: Further modified by central government instructionto limit local Port Trust Boards discretion in land allocation


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Major issues: Land Policy

The Policy laid out what Port Trusts normally orusually should do

Chairman of local Board authorized to allocate land by

nomination at favorable rates w/o policy justification. 2012Policy requires competitive auction for long term leases

2010 Policy allow Boards to enter into 30-year land leaseson their own. This authority has been upheld as long as the

auction route is followed

Dispute involves application of the new land pricing rulesto existing lease contracts. So far, the land rents built intolegacy leases have not been modified.


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Case I:Cochin Port TrustOverview

Smallest of all the ports

First of the Major Ports to complete theLand Use Planning exercise

Started with an inventory of currentland use, joined with an assessment ofthe special challenges andopportunities associated with land use.

Land Use Plan of the port states that itaims to use the land resource tomaximize cargo handling.

Source: Business Plan (Port of Rotterdam) and Maps (New Kerela)


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Cochin: Land Use Allocation

Several aspects of the inventory deserve emphasis :

Importance of commercial land leasing

Port activities scattered all over Willingdon Island. Land Use Plan became avehicle for combining complementary activities.

Small a portion of CoPT land was identified as surplus. The 5.8 hectares ofvacant land is little over 0.5% of COPTs total land holdings. More than 450hectares ofCoPTs land reserved for future expansion.

BASELINE LAND USE HA. NOTESUsed for Port Activities 157. Incompatible activities are located next to each otherLeased to Other Parties 305 Land rental rates have not been adjusted since 1996.Reserved for Expansion 466 Key proposed projects are logistics park , ship repair yard

and Free Trade Warehousing Zone in Willingdon Island.

A special economic zone is being developed in an area of285.8 ha. Puthuvypeen.Surplus 4.2TOTAL 932


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Issue in Focus: Land Use Planning

Rationalize CoPTs land allocation: The first action, initiated beforepreparation of the formal Land Use Plan, was to move container shipoperations to a new, specialized location.

Calls for sharpening the focus on other port activity: In the new land-useplan only 56.7 hectares on Willingdon Island are targeted for port operations. By2015, leases of about 25 hectares of land in the Island to expire and are proposedto be replaced by parties that guaranteed a minimum level of port throughput.

Revised lease rates: The previous (Till to 1995 and after 1996) lease rates wereapplied only on the basis of land use commercial, industrial and residentialwith no differential for location. The revised rates of 2010 allocates lease ratesbased both on land use and land location.


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Case II: Mumbai Port TrustOverview

Owns some of the most valuable land inIndia. Its 808.92 ha form about one sixthof the total island city.

Port in steady, relative decline for 30years.

Three basic choices confront the Port andits landholdings:

Maintain status quo, with existing landlessees, modest changes to existing rent and

some updating of port infrastructure

Expand the port in an attempt to revive theports historic importance to shipping

Open port land to redevelopment, creatingaccess to waterfront, monetizing part of the

landholdings and modernizes land useMap Source: Gokhle (MTHL Report)


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Mumbai Port: Land Use Allocation MbPT had over 2466 tenants as of

August 1, 2011, the recorded leasearea being 273 ha

Many of the leases of MbPT were

created years ago, a number beingover a century. The lease rents wererevised intermediately in an ad-hocmanner

The operating income for estateactivity (including rent from land) ofthe MbPT, stood at Rs 107 crores(USD 20 mn) in 2010-11. MPBT isable to collect about 30 percent of itsbilled rent. Net surplus from estateactivity was Rs 18.25 crores (US 3.3mn) in 2010-11 .


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Further in 1979-80, the Comptroller and Auditor General of India pointed theneed to revise its lease rates to be able to secure reasonable revenue

Port Trust issued notices to several lessees terminating tenancies with the optionof continuing subject to the agreement to pay the revised rent in accordance.

Some of the lessees filed writ petitions against the increase

The petitions were disposed by a single Judge in 1990

As per the ruling, the Port was entitled to increase revenue but it could notafford to behave like a private landlord indulging into rack-renting by co-relating the rates of rent with market rates.

Issue in focus: Tackling legacy leases


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Mumbai: Key Takeaways

The landholdings represent a valuable asseta patrimonythat shouldbe managed for the long-term benefit of the Mumbai region and thecountry.

If only 200 hectares ofMbPTs 752.7 hectares of landholdings could, in the longrun, be managed for their economic value, the proceeds could help finance animportant part of Mumbais needed infrastructure.

Assume that 200 hectares can be managed, over the long run, according toeconomic and urban development principles. Given recent land pricing in

Mumbai, this patrimony would have a value of roughly 125,000 crore, or in therange of US$25 billion.

It doesjustify managing Port land as a coherent estate.


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Case III: Kandla Port TrustOverview

Largest port in India, both in land area (morethan 220,000 acres) and in volume of cargohandled.

About 10% of KPTs landholdings are usable.

Salt Pan Lands. 16,000 acres of this totalhad been leased by KPT, to a small group ofmanufacturers.

Leases expiring in 2004-05 rolled for another

five-years on a nomination basis, withoutcompetition and adjustment in rates.

Land rentals small fraction of competitiverates. Majority of saltpan land was leased byKPT at Rs 144 ($2.7) per acre per annum, one-

third the rate charged to small manufacturers.

Source: Google maps


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Issue in focus: Revamping Land Rent

CVO of Kandla Port Trust issued a scathing report alleging multiple violations ofnational policy and law in land allocation.

The report asserted leases to favored parties rolled over without competition andwithout new valuation. Land rents were far below market rates.

The Chairman of the Port Trust and the Shipping Ministry accused of conspiring.

Allegations were picked up by the Centre for Public Interest Litigation, whichbrought a case against KPT before the Delhi High Court.

The Delhi High Court ordered auctioning of parcels. Thirteen of these sampleplots in the end were auctioned in 2012, again on the basis of upfront premiumfor 30-year leases.


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Kandla: Key Takeaway

Importance of competition and revision of legacy rates and leases:

KPT never did offer a public policy rationale to explain its deviation from thenational Land Policy standards. Argued Land Policy for Major Ports (2010) gavediscretion to Port Board Chairmen to grant new leases on a nomination basis.

Item BeforeAdjustment

(2010)After

Adjustment(2010)

Average Rent per Acre,per Annum USD 3 USD 430Rent Roll USD 50,000 USD 4,048,000

Increase in Salt Lands Rent, Kandla Port Trust (approx.)

80 times increasein rent roll


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I. Context




V. Conclusions

Agenda


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Conclusions

Centrally-controlled institutions rarely volunteer that they havesurplus land.

Policy should give equal weight to the economic loss caused by havingvaluable land assets sit vacant or underutilized

Strengthen procedures to facilitate provision of public land needed tocomplete local urban infrastructure projects

Central government should mandate transparent reporting of leases and

lease rates.

Land disposition needs to be managed over the real estate cycle.


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