Mega-land sale for VSNL proposed

Revenue department eyes proceeds to 'bridge' the revenue deficit.

The government may soon ask Tata-owned Videsh Sanchar Nigam Ltd (VSNL) to sell the surplus land bank of 773 acres through an open market sale.

The move follows a request from the revenue department to auction the land and use the proceeds to partially bridge the estimated revenue deficit of Rs 71,478 crore for 2007-08.

The government will get 51.12 per cent of the net sale proceeds, which is equivalent to its ownership of the surplus land bank. 
 

LYING FALLOW
Surplus land (in acres)	Before   disinvestment	Surplus
Dighi-Pune	774.00	524.00
Halishahar-Kolkata	82.19	35.19
Chattarpur-New Delhi	161.00	58.00
Greater Kailash-New Delhi	127.00	70.00
Padianallur-Chennai	85.94	85.94
Total	1230.13	773.13

The proposal has been discussed at senior government levels, which include the Ministry of Communications, VSNL's former parent department.

The current market price of the land bank will be determined by the "civil wing" of the Bharat Sanchar Nigam Ltd, the government-owned telecom service provider. The land was last valued in 2003 at an extremely conservative Rs 151.22 crore by the same agency.

Based on current market rates in various cities over which the land bank is spread, the sale could raise up to Rs 10,000 crore. Seen in the context of VSNL's market capitalisation of Rs 10,957 crore (the scrip was up 1.97 per cent to Rs 384.45 at today's close), the land bank sale can result in a windfall for shareholders.

Several events have prompted this decision. First, there was no consensus between the government and VSNL on the earlier plan to demerge the land into a separate company.

That plan had been acted upon, with VSNL forming a company "" Hemisphere Properties India Ltd (HPIL) "" in January 2005.

A demerger scheme was also set out by the company, listing several conditions, including one where the Tata firm said it would not incur any liabilities on account of income tax on capital gains or stamp duties.

However, the revenue department insists that the liabilities will have to be borne by VSNL.

In March 2006, the department of telecom (DoT) proposed to the Cabinet that HPIL be converted into a government company and given a Rs 50-crore loan, repayable in two years, to meet stamp duty and other liabilities.

The proposal has met with stiff opposition from other arms of the government, including the Ministry of Finance, department of public enterprises and the Planning Commission.

The plan to sell VSNL's real estate on the open market is believed to have been discussed with Communications Minister Dayanidhi Maran around a week ago.

Sources said the DoT is also of the view that the plan may not require Cabinet approval as it is in line with the existing shareholders' and share purchase agreements between the government and VSNL.