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In a major change in the way defence ministry manages its land, the Indian government has decided to treat all transactions of defence land as capital receipts. With the objective of cashing in on the real estate value of defence land in major cities and towns, all shops located on the property will be asked to pay lease/rent at the current market value.

The Ministry of Defence had set up a committee to figure out the modalities to have a better use of the cantonment land banks. Headed by former finance secretary Sumit Bose, the report examined better utilisation of its land bank and possible monetary benefits.

The policy is all set to rationalise the usage of land by the defence ministry. As per data with the Directorate General, Defence Estates, a body under the defence ministry, this amounts to about 1.75 million acres across the country. Of this, 9 percent is located in the 62 notified cantonment areas.

The ministries of Finance and Defence have both approved the government's proposal, which was based on reccommendations made by the committee.

Arun Jaitley
Former Defence Minister and current Minister of Finance, Arun Jaitley.Reuters

In the past, the Comptroller and Auditor General (CAG) had repeatedly highlighted the "unsatisfactory management of defence estates." The CAG reported that the defence land has been mismanaged either by local military authorities or unauthorised occupants who continue using the defence land despite the lease permission having expired long ago.

In a test run, the CAG calculated the losses incurred by the government in six such cases in four major cities - Delhi, Kolkata, Mumbai and Pune. The estimated losses amount to a whopping Rs 830 crore due to the defence ministry's delay in renewing lease with concerned parties.

Although the land held by the defence ministry is massive, the largest owner of land bank among all government departments is the Ministry of Railways. Authentic numbers on these real estate holdings do not exist as the data extracted from the government land information system are often not in line with the annual reports of the respective departments of the ministries.

According to the current year's budget report, the asset register of all land held by the government of India is approximately at Rs.3.52 trillion.