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LEGAL ISSUES IN LAND ACQUISITION FOR LARGE SCALE SOLAR PROJECTS

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USAID | India

Consultation Workshop: Accelerating Solar Energy Deployment in Public Sector Undertakings

15 September 2015

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LONG TERM CAPACITY TARGETS BY 2022

• Total renewable energy capacity - ~ 175 GW• Solar energy capacity - ~ 100 GW• Roof top solar capacity - ~ 40 GW

12th FIVE YEAR PLAN TARGETS

• Total renewable energy capacity - ~ 32 GW• Solar energy capacity – ~ 12 GW• Off-grid Solar – ~1 GW

STATE POLICY TARGETS

• Solar energy capacity – Targets of ~5 GW in next 5 years under most state policies

• Roof top solar capacity – Individual state targets between ~ 2-5 GW

SOLAR ENERGY TARGETS

SOLAR PARKS AND SOLAR SMART CITIES

• 25 solar parks to be developed for total solar capacity of ~ 20 GW• 50 solar smart cities announced

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“Land acquisition problems dog solar power plants.” – The Times of India

“Land Acquisition Bill row delays solar policy nod in Maharashtra.” - DNA

“if the Indian government could make land available, we might consider manufacturing the solar panels in India instead of importing them.” – CEO, Japan’s SoftBank (during press meet to announce a joint venture with India’s Bharti Enterprises and Taiwan’s Foxconn Technology Group)

CHALLENGES

“Telangana solar power developers seek clarity on land.” – Business Standard

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Land Acquisition

Act 2013

• Acquisition of private holdings under Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 (Land Acquisition Act 2013)

• Consent of 70% land owners required for PPP projects and 80% for other private projects

• Mandatory Social Impact Assessment (SIA)

• Timelines prescribed for SIA, preliminary notice for acquisition, award of compensation and taking possession of acquired land

• R&R – employment to a member of affected family

• Ceiling on acquisition of irrigated multi-cropped land

• Return of unutilised land

• Land Acquisition, Rehabilitation and Resettlement Authority

• Retrospective application

• Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (second Amendment) Bill 2015

Exempts five types of projects from consent and SIA requirements

Compensation in consonance with 13 other laws

Change from ‘private company’ to ‘private entity’

Reduction of overall timelines from 50 to 42 months

LEGAL REGIME FOR LAND ALLOTMENT

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Agricultural Land

• Allotment and usage governed by State land laws

• Deemed conversion of usage of land acquired for renewable energy projects

• Land ceiling

• Sale or lease of land permitted

LEGAL REGIME FOR LAND ALLOTMENT

Government Revenue Land

• Most state policies provide for allotment of government revenue land and waste land for solar projects

• Allotment and usage governed by State land laws

• Land banks created specifically for land allotments to solar projects

• Allocation by State designated Nodal Agencies and State Industrial Corporations

• Leases usually executed for operational life of projects

Forest Land

• Diversion of land reserved as government forest land under India Forest Act 1927 and Forest (Conservation) Act 1980

• Stage-I Clearance – In-principle approval

• Stage-II Clearance – Final approval

• Execution of principal lease deed; transfer of principal lease deed

• Statutorily prescribed timelines

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Availability of Land

• Large scale solar power projects are land intensive

• 1 MW of solar PV and thermal installations require ~5 acres of land

• Non-availability of suitable land holdings

• Uncertainty over provisions of Land Acquisition Act 2013

LEGAL ISSUES IN LAND ALLOTMENT

Ownership Issues

• Defects in title and poor land record management

• Multiple-owners and sub-division of parcels of land

• Purchase of agricultural land using foreign monies

• Land ceiling

• Restrictions on purchase of certain types of land; Conversion of usage

• Rights of constitutionally protected minorities

• ‘One-time’ transfer restrictions

Right of Way and Easement

Rights

• Required for constructing approach roads and laying of transmission lines

• No standard form contracts

• Ownership issues

• Determination of adequate compensation

• Time consuming and controversial

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LEGAL ISSUES IN LAND ALLOTMENT

Compensation Issues

• Adequacy of compensation questionable

• ‘Market value’ for determination of compensation prescribed by Government

• Risk of post-acquisition litigation

• Compulsory employment for members of affected families

Statutory Timelines

• Extremely long drawn process - Land Acquisition Act 2013 prescribes 50 months

• Most State land laws do not prescribe any timelines

• No provisions on deemed approval

Financing Issues

• Absence of clear title impedes security creation in favour of lenders

• Lenders’ rights subordinate to government’s right over revenue land

• Standard form lease agreements rarely recognise lenders’ step-in rights

• States like Gujarat specify financial institutions in whose favour government land can be mortgaged

• Exercise of step-in rights subject to prior government approval

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QUESTIONS?

DELHI

311 B,

DLF South Court,

Saket

New Delhi – 110017

T +91 11 4163 9393

MUMBAI

One Indiabulls Centre

14th Floor, Tower One

Elphinstone Road

Mumbai 400 013

T +91 22 4079 1000

BANGALORE

The Residency, 7th Floor

133/1, Residency Road

Bangalore 560 025

T +91 80 4343 4646

HYDERABAD

Jubilee Square

4th Floor, Road No. 36

Jubilee Hills

Hyderabad 500 033

T +91 40 2355 6781

Offices

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THANK YOU