Nepal lies at a critical juncture to accelerate its infrastructure projects in a post-Covid economic order. The economic shocks induced by the pandemic were severe on the infrastructure sector which was already struggling with poor progress and deficit financing. The government needs to make a sincere effort to address casual factors associated with project delays and cost overruns. As such, a long-pending reform in Nepal’s land laws deserves greater attention which, by far, remains an impediment to smooth project development. It still remains an ambiguous and ad-hoc approach despite several policy and legal reforms in place.

Nearly all of Nepal’s infrastructure development projects have gone through complex issues concerning land acquisition. While the hindrances are greater for transmission line projects, other projects, including road construction, have not been unaffected. One of such schemes is the 90-km-long 132 kV Kabeli Corridor in Ilam district in eastern Nepal. This took more than a decade to be completed due to public protests demanding full compensation for land under the right of way of the transmission line. Similarly, the land dispute concerning the Kathmandu-Tarai Fast Track Project in Khokana in Lalitpur district is far from being settled.

While demands for infrastructure projects are ever increasing, it is an apt time to delve deeper into understanding the underlying reasons for resistance to such schemes. One of the major reasons is the public outcry demanding a better compensation package. Presently, the Land Acquisition Act 1977 under the Compensation Determination Committee takes into consideration the present market price and overshadows the prospect of price appreciation. However, the determination of compensation on consensual terms between landowners and developers often gets ambiguous due to varying prices between (a) Market rate, (b) Value based on land revenue registration fee, and (c) Valuation made by the banking sector.

In addition to this, a poor stakeholder strategy has consistently failed to ensure public ownership of projects. On the contrary, the public is seen as an impediment to development and is thus alienated during the entire project planning phase. These tendencies, therefore, not just fuel public resistance against the project, but equally fail to inform the public about the direct and indirect benefits derived thereafter. Similarly, Nepal’s feeble land zoning practices have led to unscientific land pricing, and ultimately made land acquisition more expensive and the projects costly.

Economic impact

The enormous cost overruns in projects caused by delays are ultimately borne by the taxpayer. As per the report issued by the National Planning Commission, delays in the completion of National Pride Projects have increased cost overruns by a whopping Rs283 billion. This is just an account of the direct costs as a result of the increased prices to complete the project. The opportunity costs, social costs and other opportunities that a country has to sacrifice are something beyond economic estimation.

Furthermore, due to this infrastructure deficit, we are losing a significant share of our GDP leading to economic inefficiencies. With the world witnessing the biggest GDP growth contraction since the Second World War, prudent and efficient spending holds utmost importance to combat cash-strapped situations. The financial burden added by these cost overruns not only hampers the growth trajectory, but also damages public confidence in our baby institutions, and hence obstructs the larger goal towards a prosperous Nepal.

Way forward

In order to solve this enigma, there should be collaborative efforts by all stakeholders involved in the process. However, the role of the government is to outline immediate priorities in major bottlenecks.

As the compensation amount has been the major impediment, it is apt to revisit the compensation determination mechanism with due classification of land and consideration of future prospects. In Nepal, land has been long viewed as a secure investment, and hence, any scheme to address it must ensure that not one project-affected household has to bear the financial brunt of project development. This basically means compensating the landowners well enough through pragmatic, scientific and non-discriminatory price determination that can be monitored independently by a committee. In addition to this, vulnerable groups with minimal landholdings below a certain threshold can be treated specially so as to address their needs.

However, the government's compensation method, being the only financial tool, cannot solve the problem of expropriation, dispossession and impoverishment inflicted by forced displacement. In this situation, a benefit sharing mechanism can become another financial tool wherein the proceeds of the projects will also be distributed to the displaced families to prevent the risk of impoverishment. Many countries have successfully implemented this mechanism by sharing the benefits on a family-by-family basis or by collectively reinvesting them in the welfare of the relocated groups. This modality will also help us to transform the notion of addressing the relocated families from "project-affected people" to "project beneficiaries". It will also increase project ownership, and eventually assist to tackle the Not-in-My-Backyard syndrome.

Furthermore, this should be facilitated by a strategic stakeholder engagement approach to handle such complications. As per the Project Management Institute, one-third of the projects fail due to the poor stakeholder management. To combat this problem, prioritisation of stakeholder needs, and effective and transparent communication of the information is vital. Successfully including the people’s stake in a development project expedites development, showcases good governance and drives a country towards the path of sustainable development.

Most importantly, Nepal needs to effectively implement land zoning policy to address the problem of unscientific determination of land prices. The multiplier effect of this phenomenon is an increase in the total cost of development that is ultimately transferred to the customers. Considering all these additional costs, a proper zoning policy should be introduced to clearly segregate agricultural and non-agricultural lands. Dedicated zones for industrial development and infrastructural development is an equally important aspect, and an aggressive policy revision in this regard is the need of the hour.

As of now, these problems have drawn less attention from the concerned stakeholders while land-related disputes are on the rise as infrastructure projects proliferate. Overcoming these issues will require introspection and learning from global experiences, particularly from neighbouring economies like India and Bangladesh which have similar socio-economic and cultural dynamics. However, given the bureaucratic regulatory administration and pervasive corruption in the country, what this process will look like, only time will tell.