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Ministerial tussle over ITDC divestment

Parul Gupta & Mamata Singh

The ITDC divestment has driven a wedge between the ministries of disvestment and tourism.

While the divestment ministry feels that certain officials in the tourism ministry are trying to scuttle the ITDC sell-off process, the latter has defended its position, saying that it was following the legal process.

It all began with the ministry of divestment pushing for inclusion of certain clauses in the affidavit to be filed with the department of company affairs.

While MoD verbally requested inclusion of an amendment in the affidavit at 0800 hrs IST on September 19, it refused to give any official letter.

The affidavit was to be filed by 1000 hrs IST the following morning. ITDC officials, however, pointed out that the amendment would have to be checked by the finance wing of ITDC and would therefore be ready only by the evening.

However, at 1500 hrs IST the next day, divestment secretary Pradip Baijal wrote a "complaint letter" to tourism secretary M P Bezbaruah claiming that certain officials were disrupting the process.

In a point by point rebuttal of the divestment secretary's letter, tourism minister Jagmohan has pointed out that the amendment, which was eventually included was quite different from what was originally proposed.

The final affidavit was handed over to the consultant - Lazard India Ltd -- at 2100 hrs IST on September 20.

Jagmohan added that had the officials not verified the accuracy of the amendment, "ITDC could have landed into serious financial difficulties at a subsequent date."

While addressing the divestment ministry's contention that ITDC had delayed passing a board resolution on demerger of the eight properties, Jagmohan stated in the letter, that the ITDC board had in fact passed the same resolution thrice because of repeated changes suggested by the MoD.

"The last two resolutions were passed in separate board meetings convened at a very short notice," he said.

"Every reference from the MoD has been taken up with the utmost urgency and seriousness. However, MoD officials or the advisors did not fully appreciate the compulsion of ITDC to follow each decision through process, both legal and procedural. Unless it is done, decisions may be defective, leading to further delay and possible public criticism," Jagmohan's letter stated.

MoD officials now claim that there has been no problem between the two ministries since September 20. However, the altercation is far from over.

The latest issue between the two ministries is that the ground rent for the Ashok Delhi property was raised from Rs 25,000 per year to Rs 140 million at the last minute.

"The sharp increase in ground rent was effected at the last minute," say MoD ministry officials.

"In fact, the land and development officer had raised the ground rent to Rs 180 million and the MoD had got it reduced to Rs 140 million per year. Even this is on the high side. Most other hotels in central Delhi pay a ground rent of under Rs 20 million per year," they added.

Meanwhile, in a fresh twist, DCA seems to have joined in to delay the process. The DCA has not yet cleared the demerger of Agra and Mamallapuram hotels put on the block in the first tranche.

At the minister level, law and company affairs minister Arun Jaitley has, however, assured divestment minister Arun Shourie that the matter would be cleared.

The DCA had opposed demerger on the grounds that the creditors had not approved the hive-off of the two hotels. However, the DCA officials are yet to sign the order.

In the meantime, the divestment ministry has asked the ITDC officials to ensure that the creditors give their approval for demerger.

While DCA has time till December 31 to clear the process, the final agreements cannot be signed unless DCA gives its nod. The actual handing over of the hotels is, therefore, likely to get delayed.

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