Deshmukh defends land pricing for Videocon

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Maharashtra chief minister Vilasrao Deshmukh on Friday defended the Cabinet decision to allot 100 hectares to Videocon Industries in Navi Mumbai. Deshmukh has been under attack from his arch-rival and revenue minister Narayan Rane for allotting the land at a “throwaway price.” The chief minister said the land cost, at Rs 3 crore a hectare, is about five times more than the price of Rs 64 lakh a hectare set for Reliance Industries Navi Mumbai special economic zone back in 2003.

In his six-page communication dashed off to Congress president Sonia Gandhi on Friday, Deshmukh has rebutted Ranes claim that had the land allotment taken place through bidding, it would have fetched the state-run Cidco Rs 3,000 crore. Deshmukhs missive comes after Rane handed over his resignation letter to Congress general secretary Margaret Alva on Thursday. Rane quit over the Videocon controversy.

Deshmukh, who has refrained from making any public statements on this controversy, has clarified in the letter: “There is no under-valuation of the land. Bulk, undeveloped land like the one being offered to Videocon does not attract the market rates since the usable lands are about 55% as per the planning norms and substantial investment in infrastructure is required for making such lands market friendly. Valuation calculated by Cidco in terms of the reservations on the existing land and also by considering the sale of land in nearby zones is Rs 792 crore, in phases.”

The CM said Videocons project was approved as it has fab technology patent rights of IBM. Deshmukh explained that land valuation of Rs 792 crore (which Cidco would have realised over a period after investing Rs 150 crore in development) is actually Rs 642 crore. Moreover, Videocon has promised to buy back Cidcos 26% equity after five years at Rs 910 crore, the discounted net present value (NPV) of which is about Rs 610 crore at 7.5% to 8% discount. But Cidco will retain the option of selling its holding at the prevailing market valuation any time after five years.

The CM said land had not been sold to Videocon and there are no major concessions offered. He defended that Cidcos decision to offer land was for a cutting-edge technology project in the form of equity, unlike selling bulk underdeveloped land for residential and commercial users. Cidco sees multifold returns from the agreement.