Legal cover

Feb 20 2013, 01:07 IST
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SummaryPrior legal safeguards would prevent projects from getting stalled mid-way.

Investor interest in India’s infrastructure development is waning. Environment, land, policy and community issues are holding up several infrastructure projects, and it is important to know what legal safeguards can be taken against such eventualities.

The primary problem in the infrastructure sector is the lack of clarity of policy. It is often not clear to an investor whether all government agencies (central and state) are in favour of investment or not. If an investor knew beforehand the process required and the agencies from which approvals had to be taken, and the time required for such approvals, then the investor could plan out how to meet these challenges.

Too often after an investment has been made, an agency will prop up and ask the investor why its approval was not obtained. Such situations call for prior engagement with the government. The government (central and state) has to ensure that all agencies under its command are involved in the approval process in a coordinated manner.

The legal safeguard here is to ensure that a memorandum or agreement is executed with the government where all such terms are recorded. It would be useful to record a term where all the approvals required for a particular project are listed and noted down. The clause should also state that in the event that there are any other approvals required it would be the responsibility of the government to obtain such approvals at its own cost. Another problem is the non-involvement of local communities in the approval process. Environment and land issues affect the local people more than the people living far away from a project. Efforts to engage the local population should be made from the inception of a project. Again memorandums and agreements executed with local representatives, from the local panchayats or associations, is a legal step to be taken. The content of these memorandums should cover commitments for hiring locals, setting up downstream industries near the project area, etc. Though the binding value of these memorandums on the whole community is questionable, they do have considerable value in that they demonstrate the attempts made by the infrastructure company in engaging with the local populace.

With regard to land issues, it may be advisable to acquire land directly from government land banks or through the government. The government can acquire land from individual parties on a need basis and then re-notify the land use. This has usually been

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