An Analysis of External Development Charges in Andhra Pradesh
Introduction
For nearly two decades, the Andhra Pradesh Agricultural Land (Conversion for Non-Agricultural Purposes) Act, 2006 (“NALA Act”), governed the conversion of agricultural land for non-agricultural purposes in Andhra Pradesh. Over time, the NALA Act came to be viewed as a source of procedural complexity and administrative delay, hindering effective urban planning and ease of doing business.
The Government of Andhra Pradesh (“Government”) has since repealed the NALA Act and, in place of the non-agricultural land conversion charges, introduced External Development Charges (“EDC”) as a dedicated statutory levy earmarked for urban infrastructure.
EDC: A New Levy for Urban Infrastructure
By Ordinance No. 5 of 2025 dated 03 September 2025, the Governor of Andhra Pradesh repealed the NALA Act. Thereafter, Andhra Pradesh Municipal Laws (Amendment) Ordinance, 2025 (Ordinance No. 6 of 2025) and (Ordinance No. 7 of 2025) were issued, which amended various laws to provide the legal basis for EDC. Accordingly, the State Legislature enacted the Andhra Pradesh Agricultural Land (Conversion for Non-Agricultural Purposes) (Repeal) Act, 2025 dated 15 October 2025 (“Repeal Act”), which is deemed effective from 03 September 2025.
EDC is defined as “charges collected for conversion of agricultural land into non-agricultural purpose, and which shall be used for laying major trunk infrastructure such as roads, flyovers, regional parks, and other city-wide amenities, external facilities supporting the larger urban area etc.”[1]
EDC is the successor to the non-agricultural land conversion tax, now administered by Urban Local Bodies, Urban Development Authorities, Andhra Pradesh Capital Region Development Authority (“APCRDA”), Visakhapatnam Metropolitan Region Development Authority, etc., rather than the Revenue Department.
The Government operationalised the levy of EDC through G.O. Ms. No. 211, dated 08 October 2025, notifying the Andhra Pradesh (Levy and Collection of External Development Charges) Rules, 2025 (“EDC Rules”), and the EDC Rules apply to the APCRDA (barring the Capital City Area), all Metropolitan and Urban Development Authorities, Urban Local Bodies, and notified Gram Panchayat areas, with effect from 03 September 2025.
As per Rule 12 of the EDC Rules, all existing rules, regulations, byelaws and orders that conflict with the EDC Rules stand modified only to the extent of such inconsistency. Consequently, all existing rules, regulations, byelaws and orders that are not in conflict with the EDC Rules continue to prevail.
Caught in Transition: Pending Non-Agricultural Land Applications
The Repeal Act is framed to protect rights accrued under the NALA Act. As per Rule 5(x) of the EDC Rules, all applications pending immediately before the commencement of the Repeal Act are to be disposed of under the NALA Act, as though the repeal had not occurred. Further, any conversion tax or penalty already assessed under the NALA Act remains valid and recoverable. Land conversion applications which are already approved under the NALA Act are deemed to be approved under the EDC Rules.
All unauthorised layouts shall stand validly converted for non-agricultural purposes under the Repeal Act on payment of the conversion tax on the basic value of the land in force during the respective period of the unauthorised layout, without imposition of any penalty or interest. However, this provision will remain in force for one year from the effective date of the Repeal Act, i.e., until 03 September 2026.
Who Pays and Who Doesn't: The Exemptions
There are certain lands which are exempted from EDC as set out below:
(a) Lands owned by the Government;
(b) Lands owned by a local authority and used for communal purposes, so long as the land is not put to commercial use;
(c) Lands used for religious or charitable purposes;
(d) Lands used by the owner for household industries involving traditional occupation, not exceeding one acre;
(e) Lands used for such other purposes as may be notified by the Government from time to time;
(f) Lands used for aquaculture, dairy, and poultry activities;
(g) Lands allotted to the Andhra Pradesh Industrial Infrastructure Corporation (“APIIC”). However, APIIC shall issue a certificate to individual industrial units that the lands allotted to them are converted for non-agricultural purposes;[2] and
(h) Lands allotted to the Andhra Pradesh Green Energy Corporation Limited.
The EDC Rules additionally exclude (a) sites for which conversion permission had already been obtained under the NALA Act, and (b) plots registered prior to 02 January 2006, i.e., preceding the commencement of the NALA Act.
The Digital Route: Applying Through APDPMS
Every person or entity seeking building or layout permission must apply electronically through the Andhra Pradesh Development Permission Management System (“APDPMS”) portal. Where the land is agricultural, the applicant must pay the requisite EDC with the application, along with ownership and link documents, market value certificate, field measurement sketch signed by the Mandal or Town Surveyor, and an affidavit confirming that no irrigation channel, water body, vanka, cheruvu, or buffer area is affected, and no ownership-related court case is pending.
The APDPMS system cross-checks applications against the prohibited properties list, rejects applications falling wholly within the prohibited properties list, and refers part-affected survey numbers for issuance of a no-objection certificate. Once the order is passed and EDC is paid, the application proceeds to regular scrutiny. After granting permission, Town Planning officials verify that no Government land is involved and send details for auto-mutation. Applications not disposed of within 30 working days are deemed approved, subject to post-verification.
Pricing the Conversion: The EDC Levy
Under Rule 6 of the EDC Rules, no development permission involving conversion of agricultural land may be granted without prior clearance from the Competent Authority. EDC is charged at 4% of the prevailing SRO (basic) value of the agricultural land, as notified from time to time, computed as on the date of application, over and above any other development or scrutiny fees.
Amounts already collected by the Revenue Department on or after 03 September 2025 are transferred to the concerned Local Bodies or Development Authorities. All EDC collections are kept in separate accounts and applied solely to the development of roads, drains, water supply, sewerage, parks, and other public amenities, with devolution between Local Bodies and Development Authorities in the ratio of 85:15.
The Cost of Getting It Wrong: Penalties and Appeals
The Competent Authority may, after giving advance notice, enter, inspect, and measure the land and verify the declared area, payment of charges, and title. Any fraudulent conversion or unauthorised development is punishable with imprisonment of up to three years or a fine of 20% of the land and building value as per Registration Department rates. In case of a continuing offence, an additional daily fine of up to 1% of the land value may be imposed for each day after conviction[3]. Anyone who misrepresents land use, exemptions, or valuation to evade EDC must pay double the prescribed charge, in addition to other penalties.
An applicant aggrieved by an order of the Competent Authority may appeal to the Appellate Committee within 30 days. The appeal shall be disposed of within 45 days, and the decision of the Appellate Committee shall be final.
Conclusion
The shift from the NALA Act regime to the EDC regime by the Government is a deliberate shift in the approach to land conversion, i.e., from a revenue-oriented tax to a levy earmarked to finance urban infrastructure. Urban Local Bodies and Development Authorities now administer land conversion, with approvals streamlined through the APDPMS portal to support planned growth and ease of doing business. At the same time, the savings provisions, exemptions and the one-year grace period for regularisation preserve existing rights while providing a clear path to compliance.
[1] As defined under Section 2 (2A) of Andhra Pradesh Town Planning Act, 1920, Section 2(15A) of the APCRDA Act, 2014, and Section 2(14A) of the AP MR&UDA Act, 2016.
[2] Rule 5 of the Andhra Pradesh Agricultural Land (conversion for non-agricultural purposes) Rules, 2018.
[3] Section 88 of the Andhra Pradesh Metropolitan Region and Urban Development Authorities (AP MR&UDA) Act, 2016, Section 114 of the APCRDA Act, 2014 and other enactments.