Higher Interest on Delayed Land Acquisition Compensation

Farmers and Project-Affected Landowners to Get Major Relief; Interest Rate to Be One Percentage Point Above RBI Rate

Mumbai: Farmers and landowners whose properties are acquired for various state government development projects will now be entitled to fairer compensation for delays in receiving their land acquisition payments. In a significant decision, the Maharashtra Cabinet has approved a major revision to the interest rate applicable to delayed compensation.

For several ambitious government projects, authorities often have to take advance possession of land even before the land acquisition award is formally announced. When compensation is delayed after landowners hand over possession of their property, project-affected persons face considerable financial hardship. The existing interest rate payable on delayed compensation was often significantly lower than prevailing bank lending rates, resulting in financial losses for affected landowners.

To address this disparity, the state government has approved an amendment to Section 72 of the land acquisition law.

Under the proposed amendment, project-affected persons will receive interest on delayed compensation at a rate one percentage point higher than the rate at which the Reserve Bank of India lends to commercial banks. The government will accordingly amend the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

The decision is expected to provide substantial relief to farmers and landowners who have to wait for their compensation after surrendering possession of their land for development projects. Linking the interest rate to the RBI’s lending rate, with an additional one percentage point, is intended to ensure that the compensation for delayed payments more adequately reflects prevailing financial conditions.

Historic Change and Direct Benefit to Project-Affected Persons

Landowners affected by development projects were often required to hand over possession of their land before the final acquisition award, placing them under financial pressure while awaiting compensation. Under the earlier provisions, the interest payable on delayed compensation was not adequately aligned with inflation or prevailing bank lending rates.

With the proposed amendment to Section 72, the interest payable on delayed compensation will now be linked to the RBI’s applicable rate, with an additional one percentage point. The move is expected to provide affected farmers and landowners with a more appropriate and enhanced return for the period during which payment of their rightful compensation is delayed.