 "Who will buy 4,000 acres of PSU land coming up for sale?")
As a first step, the government has initiated the closure of five sick PSUs – Hindustan Cables, Tungabhadra Steel, HMT (Watches), HMT (Chinar Watches) and HMT (Bearings) – with a collective land ownership of almost 1,950 acres across India. And, five others that are set to be closed, could release another 2,000 acres for auction.
Given that many of these PSUs have their land in premium urban localities, several real estate developers have been hoping to lay their hands on these prime properties. However, amid considerable pressure from both left and right wing trade unions, it remains unclear whether the government will conduct a public auction for the land or allow only other PSUs to participate in the auctions.
A closer look reveals that although the net worth of these PSUs has long eroded, their land holdings are of immense value and their unlocking could give the government’s coffers a substantial boost.
Hindustan Cables
Of the 1,950 acres owned by the PSUs on their way out, Hindustan Cables alone accounts for about 80 per cent. Its first factory, set up in West Bengal’s Rupnarayanpur in 1952, spans 89 acres. Additionally it holds 947 acres of land in Rupnarayanpur. When the company acquired another PSU, Machine Tool Works in the state’s Narendrapur in 1984, another 2.5 acres were added to its land holding. According to estimates by the Union heavy industry and public enterprises ministry, Hindustan Cables’ over 1,000 acres in two West Bengal towns are worth about Rs 115 crore.
While the volume of its idle land in West Bengal is greater, the value of land that Hindustan Cables holds in the southern parts of the country is much higher. Its Hyderabad land holdings measure 435 acres. According to government estimates, its land in the Telangana capital could be worth Rs 780 crore.
Also, its Allahabad unit, for fibre-optic cables, holds almost 90 acres, valued at Rs 21 crore. According to the ministry, Hindustan Cables’ total land holdings could be worth Rs 915 crore.
Tungabhadra Steel Products
Tungabhadra Steel Products Ltd, another PSU to be closed, holds 82.37 acres of land mortgaged with State Bank of India. Though Tungabhadra was a defaulter, SBI waived interest to the tune of almost Rs 70 crore on its loans. Heavy Industry & Public Enterprises Minister Anand Geete informed Parliament in a written note that, with the interest burden gone, a repayment of only the principal amount would free up the land, making it available for auction. The government estimates the value of the land at a little over Rs 100 crore.
Land with other PSUs set to close
While the government has estimated the value of land with Hindustan Cables and Tungabhadra Steel, it hasn’t been able to assess it for land with other PSUs that are set to wind down. The most lucrative of those could be the land owned by HMT (Watches) in Karnataka. The PSU owns close to 90 acres in the state capital Bengaluru, besides 120 acres in Tumakuru and close to 60 acres in Ranibagh. The land in Bengaluru is located at Jalahilli, which has seen a rapid influx of residential real estate developers over the past few years.
HMT (Bearings) Ltd, which started operations in 1970, owns 30 acres in Hyderabad, yet another mecca for India’s real estate developers. Unlike its watch-making counterpart, the bearings manufacturer has not mortgaged its land, despite owing the government close to Rs 135 crore.
Other sick PSUs
While the Cabinet Committee on Economic Affairs (CCEA) has cleared the closure of these PSUs, along with Hindustan Diamond Company (co-owned with De Beers Centenary Mauritius Ltd), five others that are in the pipeline for closure have even more lucrative land holdings.
Among them, one with the largest land holdings is Hindustan Papers Ltd – about 1,800 acres locked in its two plants, in Assam’s Nagaon and Cachar.
A more lucrative but a smaller piece of real estate is owned by Richardson and Cruddas in Mumbai. In September this year, the Cabinet gave its approval to making the land available for auction after converting the sick heavy engineering equipment manufacturer’s debt into equity and taking it out of the purview of the Board for Industrial and Financial Reconstruction. The PSU owns close to 50 acres in Byculla and Mulund localities of Mumbai. Almost 13 acres of its Mulund holdings have allegedly been encroached upon by the Municipal Corporation of Greater Mumbai and slum-dwellers. Additionally, the company holds 35 acres in Nagpur. According to reports, almost half a decade ago, the Maharashtra state government had offered to pay Rs 500 crore for the pieces of land in the two cities. The acquisition did not see the light of the day.
The auction route and the hurdles
With the NITI Aayog batting for unlocking the value of land in the sick PSUs’ possession, the government has been keen to move swiftly on the auction route. One major hurdle for the auction route, however, lies in the stiff opposition from trade unions, which are against the participation of private parties. Repeated warnings from the unions seem to have had the desired effect. In his written statement on August 6, Geete informed the Rajya Sabha that “land would be transferred to the central/state government or PSUs only.”
But if the government were to buy its own assets, it would militate against the stated objective of raising additional resources from the sale of the only precious resource left with these dead PSUs. At the same time, auctioning to private players would deny the public the use of land that was acquired using their money in the first place. It would be obvious for any real estate developer paying the market price for the land to cater to the tastes of those with cash, rather than to those in need of low-cost housing.
Samantak Das, chief economist at real estate consultancy Knight Frank, says: “The government can send out a signal by the sale of PSU land. If it conducts a public auction and the land goes to the highest bidder, its end use will be expensive. It will be prohibitive to use for public purposes. The government needs to find a mechanism where the PSUs should get the best value of their land and, at the same time, the land can be put to use for the public.”
