In a landmark decision aimed at curbing decades-old malpractice in industrial plot conversions, the Punjab Cabinet has rolled out a transparent and legally sound policy to regulate the conversion of leasehold plots into freehold. This move targets what officials describe as a systemic abuse of power by previous governments and bureaucrats, which led to the illegal conversion of hundreds of plots without any financial gain to the state exchequer.
At the heart of the problem was the controversial unearned increase clause—introduced in 1975—which mandated that 50% of the land’s appreciated value must be paid to the government upon transfer after a lock-in period. Over time, this clause was effectively nullified through corrupt practices. Instead of following due process, many industrialists allegedly used bribes and political connections to convert their leasehold plots to freehold without paying a single rupee to the government.
According to official records, Before the year 1992, out of 1,850 industrial plots governed by this clause, around 1,425 to 1,430 were transferred without adherence to the policy. These transactions, conducted without enforcement of the unearned increase clause, are estimated to have cost the Punjab treasury several thousand crores over the years. The irregularities weren’t just fiscal; they created a deep trust deficit between the industrial community and the state machinery, leading to paralysis in several industrial estates. Legitimate allottees who followed the rules found themselves stuck in legal limbo, while those with influence walked away with clear titles.
Now, the newly approved policy—finalized by a seven-member committee, vetted by the Advocate General, and passed by the Council of Ministers on June 26, 2025—offers a clear and fair route to freehold conversion for all plot holders. The policy applies to over 11,500 industrial plots managed by the Punjab Small Industries and Export Corporation (PSIEC), including those inherited from Punjab Infotech, PSIDC, and the Directorate of Industries. The committee examined not only the historical misuse of provisions but also best practices from other states, ensuring that the new policy stands on solid legal and administrative ground.
Major Takeaways of the New Policy:
* Conversion Fee:
Allottees must pay 20% of the Current Reserve Price (CRP) or Collector Rate (whichever is higher) to convert plots from leasehold to freehold. This figure is pegged to market dynamics to ensure a fair return to the state treasury.
* Relief for Allottees:
Original allottees with the unearned increase clause will receive a 50% remission, bringing their fee to 10% of CRP/Collector Rate. Allottees without the clause will get a 75% remission and pay only 5%.
* Prerequisites:
Applicants must clear all dues, including land cost, interest, extension fees, and ensure the plot is free from legal encumbrances. This ensures that defaulters do not exploit the policy benefits.
* Commercial Use Permitted:
Industrial plots between 1,000 and 4,000 square yards, once converted, can now legally house commercial establishments, hotels, convention centres, hospitals, and hostels. This provision is expected to boost economic activity and land utilization across the state’s industrial estates.
* Appeals Process & Oversight:
A defined appeals mechanism has been set up, and conversion approvals will be monitored by the Functional Head, Estate Wing, PSIEC, under a new Standard Operating Procedure (SOP). This layer of accountability aims to eliminate discretion and corruption in future dealings.
* Safeguards & Amendments:
A cancellation clause is built in for cases of misrepresentation or non-compliance. The Chief Minister is empowered to amend the policy if needed, keeping it adaptable to future requirements.
Cabinet Minister Aman Arora also strongly endorsed the move:
“For years, industrialists were left to suffer while plots were quietly converted under the table by powerful individuals, and the state earned nothing. This new policy is a historic correction. It brings fairness and legality, and it gives industry in Punjab a chance to breathe again,” he said.
He emphasized that this policy is a powerful signal that the current government will not tolerate discretionary corruption, and instead seeks to implement equitable solutions rooted in due process. Arora pointed out that genuine allottees had been penalized while corrupt actors benefitted in the past. The new policy, he said, restores trust.
Cabinet Minister Tarunpreet Sond said the policy is not just about regulatory fairness but also a revenue-generating opportunity:
“Not only will the decisions help in encouraging economic activity in the industrial estates, by allowing these decisions, the state government will earn at least ₹1,000 crore only for conversion of plots from leasehold to freehold,” he said.
Sond added that the new provisions allowing commercial activity on large industrial plots would rejuvenate idle or locked properties and attract investment in infrastructure and services that these industrial areas had long lacked.
For years, industrialists were trapped in leasehold status, unable to transfer or utilize their plots, and many industrial units had even shut down due to this legal freeze. The new policy opens the door for revival. With clear terms and defined fees, plot holders can now legally convert and even repurpose their land for commercial use, thus bringing idle assets back into the economic fold. Legal clarity and bureaucratic cooperation, which were once major stumbling blocks, are now seen as facilitators in a climate of reform.
“Industrial plots that were lying vacant and non-functional for years can now be easily converted and re-used. The age-old plight of plot owners has finally ended. At least someone from the government thought of us. Since ages, we had lost all hope. At least someone has drafted a policy for us to revive our plots,” said Vishal Goyal, President of the Industry Association, Kotkapura .
Vipin Kumar, secretary of the same industry, association also expressed optimism and said “The conversion policy is a fresh start for countless industrialists who had given up hope. It will help unlock the true potential of unused plots and channel them into productive ventures.”
Officials say this reform will not only end litigation and corruption but also generate much-needed revenue. “The unearned increase clause existed only on paper. In reality, it was either evaded or used selectively. This policy corrects that structural flaw and brings every stakeholder onto a level playing field,” said a senior PSIEC official.
The policy also aligns Punjab with best practices from cities like Chandigarh, which recently reduced its own unearned increase rates to promote compliance and development. By benchmarking Punjab’s rules to those already functioning effectively elsewhere, the government has ensured a policy that is progressive and feasible.
With over a thousand plots already converted illegally in the past, this policy marks a turning point—transforming what was once an opaque and exploitable process into a transparent and revenue-generating system. The Punjab Government has not only taken a firm stance against past irregularities but also laid the foundation for industrial revival and orderly urban planning going forward.
For industrial associations, this is also a moment of vindication. They had long complained about being caught in an arbitrary system, where policy enforcement depended on political access rather than legal standing. With this new framework, the industrial community feels it has been heard.
While challenges in enforcement and transition are expected, the government has committed to setting up a dedicated cell within PSIEC to assist applicants and monitor progress. Training for estate officers, digital filing systems, and public dashboards for accountability are also on the anvil.
In a state grappling with industrial stagnation, land misutilization, and broken investor confidence, this policy could well become a case study in land reform, fiscal discipline, and governance revival. If implemented sincerely, it will not only fill Punjab’s coffers but also restore its status as an industrial growth hub in North India.