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This article was first published 13 years ago

Ratan Tata's cup of woes spills over

Last updated on: December 16, 2010 11:28 IST


Rajat Roy & Ishita Ayan Dutt in Kolkata

Tata Group's plans in Bengal have gone awry, once again.

It's not just Tata Motors, but Tata Housing Development Company's (THDC's) projects, too, have hit a wall.

THDC had spun big real estate plans - a 600-acre IT and residential project in the Bhangore Rajarhat Area Development Authority, on the outskirts of Kolkata.

Not just that, in neighbouring New Town Rajarhat, the company had to settle for 26 acres compared to the original 50 acres for a residential project, at rates higher than that prevailing at that point in time.

The first project got buried on the drawing board.

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Ratan Tata's cup of woes spills over

Image: Brotin Banerjee.
Photographs: Reuters

What has made matters worse is that the company is now confronted with issues raised by the Comptroller and Auditor General (CAG).

The issues range from subsidising land to cross-subsidising the West Bengal Industrial Development Corporation (WBIDC) for the proposed Nano project in Singur.

Tata Housing (THDC) paid an average of Rs 10.74 lakh (Rs 1.07 million) per katha for 26 acres, above the average rate of land in 2006, going by the price quoted in the CAG report.

But THDC managing director and chief executive officer, Brotin Banerjee, says the price of land had to be rationalised according to the location of the plot.

The project plots are situated in the interior and should not be compared with plots on the main road.

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Ratan Tata's cup of woes spills over


Photographs: Reuters

The CAG report mentions that the average land price during the time was Rs 786,000 per katha.

The CAG report, however, said that Tata Sons, the holding company of THDC, got land at prices lower than the average rate and, hence, Hidco, the nodal agency for distributing and developing land in the area, suffered a loss.

Also, Tata Sons paid Hidco Rs 69 crore (Rs 690 million) and Rs 100 crore (Rs 1 billion) to the WBIDC, which was responsible for creating infrastructure in the area as well as acquisition and development of land at Singur.

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Ratan Tata's cup of woes spills over


Photographs: Reuters

Why was WBIDC paid Rs 100 crore and not Hidco?

The company says, for all practical purposes, Tata Housing concluded the deal for the land at Rajarhat with the government of West Bengal wherein negotiations for the same were led by WBIDC.

CAG observed, "The revenue to be earned by WBIDC out of the JVC would enable WBIDC to meet the state government's commitment of providing infrastructural assistance to Tata Motors for its proposed small car project in West Bengal, without having to resort to budgetary support."

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Ratan Tata's cup of woes spills over


Photographs: Reuters

THDC disagrees. "The Rajarhat land transaction was not associated with any deal, which Tata Motors Limited may have entered into in West Bengal," Banerjee said.

"The transaction was formalised with the knowledge and consent of both WBIDC and WBHIDCO. We paid Rs 10.74 lakh per katha, which we believe is a fair price," he said, adding that there was no plan for a joint venture with WBIDC.

Incidentally, WBIDC was supposed to build infrastructure in the neighbouring area, which was to house the 600-acre IT cum residential project.

Source: source