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This Land Is Your Land

Ten lakh acres—that’s 4,000 sq km, the size of Trinidad and Tobago­—are lying idle with central PSUs. How can India benefit?

This Land Is Your Land
Asansol Hindustan Cables Ltd
The fate of nearly 900 acres in Rupnarayanpur is yet to be decided
Photograph by Sandipan Chatterjee
This Land Is Your Land
outlookindia.com
2016-09-16T18:06:15+0530

If the figures are fed into a regular calculator, it will throw up an ­error message. The acres and acres of land lying idle and locked up for decades in industrial units, mostly public sector and, at times, ­private, add up to the size of a small country. So far no attempt has been made to evaluate its real worth. Now, the central government has finally ­embarked on a mammoth exercise: creating a data­bank for an estimated 10 lakh acres of surplus land held by 298 central public sector enterprises (CPSEs), ­including many closed units, spread across India. Even putting a bare minimum rate of Rs 25 lakh for an acre (which is absur­dly low for cities like Mumbai or Bangalore), the worth of the government’s surplus landholding tots up over Rs 2.5 lakh crore, more than the notional loss in the 2G scam—or the famed hidden treasure of the Padmanabhaswamy temple in Thiruvananthapuram.

The idea is to take stock of surplus and underutilised land and other CPSE assets and gradually unlock it for optimal use—at least by government entities in need of land. It’s a travesty, for instance, that land worth thousands of crores lies idle, often in city centres, when there is no space for new educational institutions, social inf­rastructure projects like health facilities, affordable housing, urban forestry, or even roads. For physical sites, projects now have to scrounge around in rural swathes bey­ond city limits. Add to this the voracious appetite for land from the private sector for housing, commercial and industrial ventures. The unlocking of the CPSE treasure-chest could become a big boon for the housing sector, which is reeling under a severe land shortage in urban centres.

Union finance minister Arun Jaitley had in his budget speech spoken about plans to “encourage CPSEs to divest ­individual assets like land, manufacturing units etc to realise their asset value for making ­investment in new projects”. The trade unions insist this is part of the disinvestment exercise (Rs 58,500 crore is targe­ted for 2016-17) and an attempt to free up land for private sector projects, given the government’s failure to push through the amended Land Acquisition Bill.

Ranchi, Heavy Engineering Corporation

Surplus land taken to set up an IT City and IIM Ranchi

Photograph by Rajesh Kumar

Beyond the guesstimate of 10 lakh acres, there is no concrete data on surplus land with the 298 CPSEs, let alone the humongous amount of land over and above this held by mining and exploration companies, ports, railways, defence and power plants under various ministries, departments and autonomous bodies. Shaktika­nta Das, secretary, economic affairs, points out that a clear mapping of government land has only begun now (see interview).

“The surplus land gives new responsibilities to improve our cities. It should be used to create new assets, generate new forest cover and so on.”
Vijay Kelkar, Economist

Preliminary surveys show that just 58 CPSEs, including the defunct HMT Chinar Watches Ltd, HMT Watches Ltd, HMT Bearings Ltd, Tungabhadra Steel Products Ltd (TSPL), and ailing units like National Textile Corporation (NTC), Braithwaith and Company, Bharat Wagons and Engineering, Bengal Chemicals and Pharmaceuticals Limited, Heavy Engineering Corporation and Hindustan Antibiotics Ltd, hold as much as 2.38 lakh acres of land. This is land that the companies did not require for their operations even when they were alive and kicking. Officials point out that most PSUs would have an average of 200-400 acres of land, while some like the locked-up Hindustan Cables have over 1,200 acres, including 900 acres in Asansol, West Bengal.

Sure, the Indian Railways and various defence departments together hold the largest parcels of land, but even the top 12 state-owned ports have 77,191.14 acres and an additional 1.98 lakh acres of submerged land (the majority of which is with the Kandla Port Trust). But true to the reputation of government bodies, the title deeds for 34,943.41 acres—or 45.27 per cent of the ports’ total landholding—are still missing. Many CPSEs too are searching for the title deeds.

There is no concrete data on surplus land with the 298 CPSEs and under various ministries.

Like old, decaying feudal families, many PSUs have been selling off land to pay bills and keep the creditors at bay. Some of them are HMT, Praga Tools and NTC, which at one time had 119 mills in prime locations. In August, the Cabinet Committee on Economic Affairs (CCEA) took an in-principle decision that the land of HMT Chinar Watches, HMT Watches, HMT Bearings and Tungabhadra Steel would be transferred or sold to central entities after the closure of the companies. The disposal is to be done through sale or transfer after inviting expressions of interest (EOIs).

The process of land disposal, however, is no easy task. Besides the absence of a regulator who can control, arbitrate and ensure a fair process, the CPSEs really do not know how much land is theirs to sell, and how much is on conditional or long lease from the state government. So, any attempt to put a price to such land could only be hypothetical. In rural areas, land cost varies from Rs 25 lakh an acre to over a couple of crores, while in land-scarce Mumbai or Bangalore, the cost could be around Rs 250 crore an acre.

Bangalore, Indian Telephone Industries

Technology parks are to be built on this CPSE’s surplus land

Photograph by Kashif Masood

So, the least the government can expect to rake in is around Rs. 2.5 lakh crore (at the low end of Rs 25 lakh/acre) even if it restricts its sale to just government entities. For instance, in 2010, the government had raised nearly Rs 2,125 crore by selling around 20 acres belonging to two sick NTC mills in Mumbai. Today, the same land would fetch at least three to four times more, given the scarcity of commercial land in Mumbai.

Experts point out that most of the CPSE units are in prime locations—bang in the middle of many big and small ­industrial and educational hubs across India—and so the land they occupy would easily be the most expensive in that region. Moreover, in the case of many CPSEs—some set up in the 1950s—the factory-office complex would occupy a mere 15-20 per cent of the total land, with the remaining marked for housing, schools, hospital, shopping complex, banks and other amenities for the employees.

Scores of these “temples of modern ­India” are now in a dismal state, with many facing closure, or already shut down like the Cement Corporation of India. Faced with competition from the private sector, both domestic and foreign, after liberalisation in the 1990s, dozens of poorly managed and technologically handicapped PSEs have fallen sick. Unlike the valuation process followed in previous disinvestment programmes, the government has fin­ally spelt out that while the sick unit may be a handicap, the assets of the company may well fetch enough to not just settle the dues—owed to the banks and for employees to be laid off—but also leave a surplus in the disinvestment kitty.

“For the first time, land is being looked at as a separate and valuable asset. ­Except for their land, some PSUs are worthless in terms of machinery and other assets, besides being loss-making,” says Jayshree Sengupta, senior fellow with Observer Research Foundation’s economy and ­development programme and author of A Nation in Transition: ­Understanding the Indian Economy.

In a 2011 study (Indian Social Democracy: The Resource Perspective), economist Vijay Kelkar had suggested that the government follow the example of other countries to get out of the business of running airlines and hotels, and instead use the land and other resources to create public infrastructure such as hospitals, research institutions and rural roads, which would not happen without government intervention.

“The infrastructure of even profitable companies can be put to better use. Many of them have huge tracts of land lying underutilised.”
S.K. Roongta, Former chairman, SAIL

Kelkar’s study had estimated that in Ahmedabad alone, there was around Rs 22,000 crore worth of surplus land with state-owned firms in 2010-11. “The surplus land gives new responsibilities to improve our cities,” says Kelkar. “It should be used to create new assets, rebalance and create new balancesheets, get out of non-performing or underperforming activities and instead generate new forest cover, public health infrastructure, recharge ground water, etc—assets required for the public.” Such a reorientation of the state’s role does not imply its retreat, he emphasises. It is instead the creation of a new, more meaningful role—one that breeds new talent and meets new requirements of city infrastructure, which in many cases is not able to cope with growing population needs.

Uttar Pradesh, UP State Sugar Corporation

22.61 ­hectares of the Hardoi mill has been sold to the UP Housing Board for Rs 99 crore

Photograph by Nirala Tripathi

Another report by a government-appointed committee headed by S.K. Roongta, former chairman of state-owned steel major SAIL, had similarly recommended back in 2012 that “since many of our loss-making CPSEs have surplus land in excess of their current/future needs, it would be desirable to create a Public Sector Land Development Authority (PSLDA) (on the lines of the Rail Land Development Authority), for the purpose of developing such lands and unlocking their real value”. The report had suggested that the PSLDA, which ­never came into being due to inter-mini­sterial disagreements, would identity excess lands and bid them to be developed commercially, while the resources generated could be used for revival of sick enterprises or to create new businesses, leveraging the excellent infrastructure at the disposal of many loss-making CPSEs.

“Land transfer between our departments is streamlined and easy. This has helped us take up new projects and ­complete them on time.”
Rahul Bhatnagar, Principal secretary (finance), UP

Roongta recalls that the report was submitted to the Group of Ministers (GoM), which was to prepare a note for cabinet approval. That did not go far, but, meanwhile, a NITI Aayog report is said to have taken on board several of the Roongta committee recommendations. “Not just sick units, even in the case of profitable companies, their infrastructure could be put to better use,” says Roongta. “Many of them have huge tracts of land lying underutilised. With upgradation of technology, the need for manpower has gone down, making for leaner operations, leaving residential quarters unused. These can be put to better or alternate use.”

There are many like Roongta who stress on the role of state-owned enterprises in the economy. They point to the significant presence of public sector enterpri­ses/state-owned enterprises in terms of investment and employment in countries such as France, Italy, Greece, Finland, ­Korea, China and Russia.

Barring 58 CPSEs, the rest “are in a very good position, earning either operatio­nal profit or very good net profit,” says U.D. Choubey, director-general of SCOPE (Standing Committee of Public Enterpri­ses). Government investment in CPSEs so far has been around Rs 9.8 lakh crore, while in the last 10 years alone, the net profit of CPSEs has been Rs 25 lakh crore—their contribution to the exchequer has been around Rs 1.6 lakh crore every year, besides the employment they continue to provide. Choubey supports the sale and transfer of land and other assets only for revival of CPSEs, improvement of project management, research and development, and social sector projects—“not to meet fiscal deficit targets” or for the private sector to set up malls and luxury apartments.

Rae Bareli: Nandganj Sirohi Sugar Mill

39.5 hectares were transferred for a new AIIMS hospital

Photograph by Nirala Tripathi

Opposing the government’s plans, Vrijesh Upadhyay, general secretary of Bharatiya Mazdoor Sangh (BMS), contends that all facilities in an industrial township are not developed in one go, but as demand for more infrastructure grows—as in the case of Bharat Heavy Electricals Ltd (BHEL), which has used the excess land in Jagdishpur, Uttar Pradesh, for setting up anot­her plant. Upadhyay points out that in the case of several CPSEs such as BSNL and NTC, the predefined use of the land allotted to them has led to companies being handicapped “in seeking its use for alternate purposes, including customer services and solutions”. Together with other trade unions, BMS has been opposing the government’s disinvestment plans.

The trade unions also blame government policies and continuing poor management for the failure of efforts to revive the sick CPSEs. For instance, NTC insiders blame mismanagement by top bosses in the last six years and lack of “provisioning for punishing those indulging in malpractices” for the continuing losses in 22 out of 24 textile mills under government control.

While this stock-taking exercise is on, Jharkhand is moving ahead with plans to acquire surplus land of CPSEs such as the Heavy Engineering Corporation (HEC) to set up a 441-acre smart city and a 60-acre campus for IIM Ranchi.

Uttar Pradesh, India’s largest state, has had a policy in place since 1977 on the transfer and sale of public sector land, which is normally restricted to another state entity (the exception being public-private partnership projects). “Our system of land transfer between departments is very streamlined and very easy,” says Rahul Bhatnagar, the state’s principal secretary (finance). “This has helped us take up new projects in the last two years and complete them on schedule.” Among recent transfers has been the land allotment for setting up two AIIMS hospitals and one housing project. UP follows one thumb rule—to recover the circle rate for land allotted to any commercial activity other than those involving public services.

“Inefficient land utilisation is a function of lack of urban planning and coordination between state departments,” says ­Rohan Sharma, associate director (res­earch and real estate intelligence service) of JLL ­India. “At a time when our cities are facing the pressure of infrastructure creation to support the growth in urban centres, proper planning and freeing up vacant, unutilised land is critical.”

Even as everyone eyes the surplus and underutilised land of CPSEs for improving urban infrastructure, there is also some unease among a section of policymakers who fear a repeat of what happened during the spectrum and earlier coal mine allocations. Many corporate giants are already squatting on large tracts of leased or procured land in industrial townships or in the 400-plus SEZs. In many metros, the CPSE townships provide the much-needed green cover amid the rising concrete jungles. If not for public sector revival, experts point out that the government ought to use this surplus land for education, sports, health and affordable housing facilities to improve living conditions in the cities.

***

Public Domain

  • Total CPSEs 298
  • In operation 235
  • Yet to start 63
  • Profitable 158
  • Sick/loss-making/closed 77
  • Earmarked for sale 26
  • Projected surplus land 10 lakh acres
  • Profitable CPSEs  reserve surplus Rs 8,22,378 cr

CPSEs’ Landholding

  • Railways 1,13,000*
  • Defence 42,00,000*
  • AAI 49,400*
  • Ports 2,75,000
  • BSNL 16,447
  • Bhel 8,000

On The Block

  • HMT Watches ltd (Bangalore, Tumkur, Ranibagh) 294.29 (Freehold/leasehold)
  • HMT Ltd, J&K 62
  • HMT Hyderabad 30

* Surplus land (figures in acres)

***

What Is To Be Done?

Unfinished 1991 reforms agenda

What it seeks to achieve

  • Create a databank of landholdings with CPSEs
  • Mark out unused/underutilised land
  • Make assessment of future CPSE plans for its use
  • If surplus, allow other CPSEs with concrete plans to bid
  • Treat as separate asset before ­strategic sale of any CPSE
  • Overcome land acquisition hurdles for industry/infrastructure

Challenges Ahead

  • Ownership of land parcels with CPSEs not clear in many cases
  • Original land use stipulation may prove constricting
  • Sick/closed units need to clear dues owed to banks and workers
  • Ecological damage may limit land use

***

The UP Story

Free transfers in Uttar Pradesh

  • Nandganj Sirohi Sugar Mill, Rai Bareli 39.51 hectares for AIIMS
  • UP State Sugar Corporation Ltd 41.74 hectares for District Jail, Rampur
  • UP Sugarcane Research Centre, Gorakhpur: 45.33 hectares for AIIMS
  • UP Tourism, Sidharthnagar district 50 acres for Sidharth University
  • UP Housing Board, CG City, Lucknow 100 acres for IT city (IT department)
  • UP Housing Board, CG City, Lucknow 50 acres for IIIT (Education department)
  • UP Housing Board, CG City, Lucknow 100 acres for Medicity (Health dept)
  • UP Housing Board, CG City, Lucknow 20 acres for super-speciality hospital (Health department)
  • UP Housing Board, CG City, Lucknow 25 acres for UP State Academy

 

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