Mumbai, Maharashtra's cabinet on Tuesday approved an amendment to the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (LARR) Act, 2013 that will raise the interest paid to landowners when compensation for acquired land is delayed.
Higher interest pegged to RBI lending rate
A government press release said the interest rate on delayed payments will now be set at 1% above the rate at which the Reserve Bank of India lends to commercial banks. An official involved in the process explained that the step is intended to address situations where land is handed over to the state before an award fixing compensation is finalised.
“Since there is a difference between this interest rate and the prevailing interest rate on bank loans, the state cabinet approved an amendment to Section 72 of the LARR Act, 2013,” the official said.
Officials said the amendment recognises that projects often require advance possession of land. When possession is taken early, payment of the award can be delayed by administrative procedures, inter-departmental coordination issues or delays in allocation of funds. The higher interest is intended to compensate affected persons for the additional waiting period.
Projects likely to be affected
The state is currently pursuing several large-scale acquisitions. The press release listed a number of major initiatives where land acquisition processes are underway or planned; these include urban expansion and industrial corridor projects that span several tehsils.
| Project | Area / Notes |
|---|---|
| Mumbai 3.0 | Planned over 323.44 sq km across 124 villages in Uran, Panvel and Pen tehsils |
| Eastern Vidarbha Industrial Corridor | Acquisition preparations for around 15,000 hectares |
| Other infrastructure | Vasai-Virar multimodal corridor, Vadhvan Port, Shaktipeeth Expressway and additional projects |
Officials said these projects, among others, involve early possession in some locations, which makes clarity on compensation accrual important for both landowners and implementing agencies.
Why the change was proposed
The press release and officials referenced routine causes for delayed disbursal of awards. These include paperwork and coordination problems between the revenue department and project departments, and delays in release of funds from the treasury. By linking the interest to the RBI lending rate plus a fixed margin, the state seeks to provide a more predictable and market-related compensation for periods of delay.
- Interest basis: RBI lending rate to commercial banks + 1%
- Legal change: Amendment to Section 72 of the LARR Act, 2013
- Rationale: Compensate landowners when advance possession precedes final award
Potential implications
For landowners, the revision is likely to raise the effective return when payments are held up, addressing grievances that can arise from protracted acquisition procedures. For departments implementing projects, the change could increase the cost of delayed acquisitions, particularly in prolonged cases or where large areas are concerned.
Financial implications for the state will depend on how frequently and for how long awards are delayed. Linking the interest to the RBI lending rate means the burden will fluctuate with monetary policy and market conditions.
Administration and next steps
The cabinet decision authorises the amendment; the state will follow statutory procedures to revise Section 72 of the LARR Act within its jurisdictional framework. Officials said departments involved in acquisition will need to factor the new rate into estimates and approvals going forward. They also indicated that improving inter-departmental coordination and timely fund allocation remain priorities to minimise the occurrence of delayed payments.
The move comes as the state pursues multiple high-value infrastructure and industrial projects that require extensive land assembly. As acquisitions proceed, affected landowners and local administrations across Uran, Panvel, Pen and parts of Vidarbha will be watching how the revised interest provision is applied in practice.
Reporting from Mumbai.
