The Kerala government’s decision to pave the way for Dubai-based TECOM to exit from the Rs 1700-crore Kochi SmartCity Project has triggered an outcry in the state, with the opposition, Congress-led UDF accusing the CPI(M)-led regime of a land scam.
We explain the Kochi SmartCity project and why it has run into controversy.
About the project
Kochi SmartCity is an IT-based industrial township. It was conceived as a joint venture of the state government with TECOM Investment FZ LLC, Dubai, a subsidiary of Dubai Holdings, an investment company owned by the Dubai Government.
Billed as Kerala’s last bus to IT development, the smart city promised 90,000 direct jobs on its completion in ten years. It was supposed to provide infrastructure to IT and ITES firms with a built-up space of 8.8 million square feet. The project spurred a real estate boom in the surrounding Kochi urban area.
In 2005, the state government, then governed by the UDF, signed an MoU with TECOM for the project. One condition was the handover of the state-run Infopark in Kochi to TECOM. The CPI(M), then in opposition, raised strong objections to granting TECOM the freehold right, and the right to sell 12 per cent of the project area of 246 acres.
In 2011, the then-CPI(M) government inked the final deal which allowed TECOM to exercise a freehold of 12 per cent of the total project area but without the right to sell it. The remaining 88 per cent of the area would be given on lease for 99 years. TECOM jettisoned the demand for getting Infopark into the project.
Why the controversy
The state government last week constituted a committee to formulate an exit policy for TECOM from the Kochi Smart City project.
As part of the process, the committee would evaluate TECOM’s investment in the project and repay it an amount equal to the value of its shares in the project. To this end, an independent evaluator will be appointed.
The opposition, led by the UDF has objected to this, saying TECOM has failed to comply with the norms in the agreement.
What does the government plan to do next?
The government wants to retain the project as state property. Chief Minister Pinarayi Vijayan on Monday said there would not be any joint venture with private investors, instead the land of the Smart City will be utilised for government-backed IT development. TECOM had an 84 per cent stake in the venture and the state will buy back that shares. Several leading IT firms are waiting for land in Kerala. The government will allocate the Smart City project area to such investors sticking to norms. The government is of the view that if arbitration is allowed, it would cause much delay and would be against the interest of the state.
What CAG report said about Kochi Smart City
A CAG report stated that no feasibility study had been conducted for the project. It also questioned the State having a meagre stake of 16 per cent in the project and lack of transparency in selecting the partner TECOM. The audit report said it could not establish the real identity of the promoters of the TECOM. The state government should have ensured that the land acquired and handed over to the private partner was not more than what was essential for the project. The state handed over land more than required at below market price. The agreement condition of 90,000 jobs was diluted later.
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