Maharashtra Cuts Interest Rate on Delayed Land Acquisition Payouts

MUMBAI — The Maharashtra state cabinet on Tuesday approved a new formula for calculating interest on delayed land acquisition compensation, effectively reducing the interest payouts received by farmers and other affected landowners in the state.

Under the revised policy approved during the cabinet meeting in Mumbai, delayed land acquisition compensation will now attract interest calculated at one percentage point above the Reserve Bank of India’s (RBI) repo rate. Government officials stated that the decision was aimed at reducing the financial burden on the state exchequer by containing the escalation in project costs arising from heavy interest payments on delayed compensation payouts.

For major infrastructure and development projects, the state government frequently takes possession of required land before the final compensation award is determined. Under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, landowners are legally entitled to receive interest if the payment of their compensation is delayed beyond specified timelines.

A release issued by the Chief Minister’s Office explained that because the existing statutory interest rate differed from prevailing bank lending rates, the cabinet approved amendments to Section 72 of the central act. Following this amendment, the interest payable on delayed compensation will be linked directly to the benchmark rate at which the Reserve Bank of India lends to commercial banks, plus an additional one percentage point.

The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 currently provides for interest on delayed compensation under different provisions of the law. Interest is payable at 12 percent under Section 30(3), 9 percent under Section 72, and 15 percent under Section 80, depending on the nature of the delay and the applicable provision involved.

Section 72 empowers the land acquisition, rehabilitation and resettlement authority to direct the district collector to pay interest in cases where the compensation awarded is determined to be lower than the amount legally due to the affected landowner. A revenue official pointed out that the revised policy clearly means that delayed compensation will be much less than what affected landowners have been receiving so far.