Auction VSNL land bank: DoT

The Department of Telecom (DoT) has recently said the best option to deal with Videsh Sanchar Nigam Ltd's huge surplus land bank of 773 acres is to sell it through a public auction.

The view follows a detailed review of the matter by DoT since March this year, after Dayanidhi Maran, then communications minister, asked officials to provide details about the possibility of the Tata-owned VSNL being allowed to retain the land.

This latest recommendation, made in September, comes despite the fact that the Cabinet Committee of Economic Affairs (CCEA) had, in December 2005, approved hiving off the land bank into a separate company.

The issue of what to do with the land bank has been pending for several years after the Tata group acquired 45 per cent of the telecom and internet service provider that was formerly the government's overseas communications company.

The land bank "" of which the government owns 53 per cent "" was not part of the disinvestment process when the Tata group initially bought 25 per cent in 2001 from the government (the remaining stake was acquired through an open offer later).

The finance ministry has been urging that the land be sold to help bridge the revenue deficit and criticised DoT for taking so much time to implement the CCEA's decision.

On March 13, Maran had asked DoT officials to do a ground level check on the land and find out the prevailing market price.

After an exhaustive verification of the land bank spread across four cities in five locations, DoT proposed three options to the Telecom Commission, the highest decision-making body in the communications ministry.

One, demerge the land into a realty company "" Hemisphere Properties India (Ltd), a company set up by Panatone Finvest Ltd, a special purpose vehicle of the Tata group that had acquired the stake in VSNL from the government. This is in line with the CCEA decision.

The second option is to allow VSNL to retain the land by acquiring it from the government at a "fair consideration". Panatone has committed to pay the government compensation of 25 per cent of the appraised value of the land and other shareholders 20 per cent of the apprised value minus income tax.

However, the land bank was last valued in 2003 by the "civil wing" of Bharat Sanchar Nigam Ltd at an extremely conservative Rs 151.22 crore, significantly below its current market value.

The third option, to auction the land, will fetch the government maximum value since land prices have shot up in the past five years, DoT said.

It added the rider that "VSNL is not interested as it would have to pay 25 per cent of its proceeds to the government within seven days".

A Tata group spokesperson said the company had not heard anything on the issue from DoT. The Telecom Commission's decision is not yet known.