The government has finally managed to resolve issues related to VSNL's surplus land, 15 years after the company was sold to Tatas. The government will file an application with National Company Law Tribunal (NCLT) next week for the demerger of the land.
The government had floated a special purpose vehicle, namely Hemisphere Properties India Ltd (HPIL), to take over VSNL's surplus land. Hemisphere Properties was formed in 2005-06 and the government had picked up 51.12 percent stake in the company in March 2014.
In 2002, Tata Communications had bought a 45 percent stake in VSNL for around Rs 1,500 crore. However, VSNL’s land assets were not part of the transaction. The VSNL now owns 738 acres of land across Delhi, Chennai, Pune and Kolkata.
Table: VSNL's surplus land
Last year, Hemisphere Properties had appointed DSK Legal as a consultant to assess the valuations and to suggest the methodology to dispose of the land. The consultant in its report has stated that the present value of this land at circle rate is around Rs 15,000 crores. DSK Legal has also suggested that if the government takes NBCC on board to develop property on the land, it can realize more value.
PMO's push behind the land sale
Sources at the Department of Telecom indicate that the Prime Minister's office (PMO) has put its weight behind the VSNL land sale and directed the department to fast track it. Last month, re-measurement of land was carried out and now the land measures 738 acres.
Originally in 2002, when the government divested its stake in VSNL the land bank was 773 acre. However, around 30 acres of land was taken over by societies in Tamil Nadu after Madras High Court order. Another 2.5 acre land in Delhi's posh area, Greater Kailash, was acquired by the Delhi Metro. In a letter written to the Telecom ministry last month, Tata Communications had raised an objection on the shrinking land bank but the department chucked its objections.
Gains for Tata Communications
Earlier, demerger of land could not take place because the Tata group had refused to pay the stamp duty as it was neither the owner of the land, nor it is going to be the beneficiary in any form. However, the government last year had passed the Taxation Laws (Amendment) Bill, which helped VSNL to unlock the land value. The Bill aimed to exempt the land sale from capital gains tax (CGT) and help the government to transfer its land.
The major beneficiary by the sale of land now would be the government, which has 51% stake in HPIL. According to the agreement, minority shareholders and ADR holders will get around 25%, while around 4% will go to the Tata group.