Interstate transmission system (ISTS) developers must pay 60% of the land value for municipal corporations and metropolitan area land parcels as compensation for the right-of-way (RoW).

The Ministry of Power has issued supplementary guidelines for determining the market rate and RoW compensation for ISTS lines to resolve challenges hindering transmission projects.

Recently, Shripad Naik, Minister of State for Power, informed the Rajya Sabha that 14 ISTS projects are facing prolonged RoW issues, primarily because of the demand for higher compensation compared to rates determined by state governments.

Power evacuation infrastructure growth in India lags behind the pace of power capacity additions due to unique challenges faced by transmission projects. Project implementation delays have run into several months and even years.

The new guidelines have set different RoW compensation packages for urban and rural areas. The compensation has been determined at 30% of the land value in rural areas and 45% of the land value for municipalities, town panchayats, and other planning areas.

The supplementary guidelines will only apply when landowners object to compensation when circle rates are lower than market rates. The Ministry of Power has allowed state governments to adopt these guidelines or issue modifications.

The supplementary guidelines will apply to states that have not already issued guidelines for determining the land’s market value.

The Ministry observed that RoW is more pronounced in urban and semi-urban areas where district collectors face difficulties arriving at a fair market rate.

It noted that compensation of 30% of land value paid for RoW in rural areas would be unfair to urban areas. Urban landowners have to incur higher opportunity costs, and rural land can be used for agriculture.

The land’s market rate will be determined by the market rate committee (MRC) comprising the district magistrate/collector/deputy commissioner or their nominee as the chair. It will also include a representative of landowners and a nominee of the ISTS transmission service provider as members.

The district magistrate/collector/deputy commissioner may co-opt up to two additional members.

Land Valuation Methodology

The MRC will appoint two valuers, one representative from the transmission service provider and a representative of landowners. It will engage the land valuers empaneled by the Insolvency and Bankruptcy Board of India per the list available on their website. Valuers must preferably be from the same state.

The reference market value will be determined as follows:

• If the difference in the market values worked out by the valuers is less than 20% over the lowest value, then the average of the two valuations will be considered as a reference market value.
• If the difference is more than 20%, MRC will negotiate the reference market value.
• If the negotiation fails, MRC will engage a third valuer, and the reference market value will be the average of the two values closest to each other.

The reference market value will serve as the basis for determining the market rate by MRC.

The transmission service provider will bear the land valuers’ professional fees/charges, which will be included in the RoW compensation cost.

The transmission service provider must determine the market rate within one month of application.

The compensation for the tower base will be 200% of the land value.

The district collector may allow the construction of ISTS lines if the RoW compensation is paid based on the market rate determined by MRC.

If the RoW compensation paid by the transmission service providers differs from the compensation accounted in the tariff for setting up the transmission project, a developer can approach the Central Electricity Regulation Commission citing a change in law event.

Subscribe to Mercom’s real-time Regulatory Updates to ensure you do not miss any critical updates from the renewable industry.