Delayed Land Compensation to Earn Higher Interest: Major Relief for Project-Affected Farmers

Interest Rate Set One Percentage Point Above RBI Rate; Historic Amendment to Land Acquisition Law Approved

Mumbai, August 12: Farmers and landowners affected by government development projects will now be entitled to higher interest on delayed land acquisition compensation, providing significant financial relief to those forced to hand over their land before receiving the final compensation.

The Maharashtra Cabinet has approved a major amendment to the provisions governing interest payable on delayed land acquisition compensation. Under the proposed change, the interest rate will be linked to the Reserve Bank of India (RBI) rate and will be one percentage point higher, ensuring a more appropriate return to project-affected persons for the period of delay.

For several major development projects, authorities are required to take possession of land even before the formal land acquisition award is announced. As a result, farmers and landowners often have to surrender their land but wait for a considerable period to receive their compensation. This delay can cause substantial financial hardship.

Under the earlier provisions, the interest payable on delayed compensation was not adequately aligned with prevailing inflation and bank lending rates. This created a significant gap between the interest received by project-affected persons and the actual cost of borrowing from banks.

Section 72 to Be Amended

To address this disparity, the state government has approved an amendment to Section 72 of the land acquisition law. Once implemented, the revised provision will ensure that the interest paid on delayed compensation is one percentage point higher than the rate at which the RBI provides funds to commercial banks.

The move is expected to ensure that affected farmers receive a fairer and more substantial financial return for every day their compensation remains unpaid.

Direct Relief to Project-Affected Families

The government’s decision is particularly significant for families whose land is acquired for infrastructure and other development projects. In many cases, possession is taken in advance to prevent delays in project implementation, leaving landowners without either their land or the full compensation for an extended period.

The revised interest mechanism is intended to reduce this financial burden and provide compensation that is more closely aligned with prevailing financial conditions.

The state government will now undertake the necessary amendments to the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, giving legal effect to the new provision.

The decision marks a significant shift in the compensation framework and is expected to provide greater financial protection and fairness to farmers and other project-affected landowners awaiting delayed payments.