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Thursday, Dec 09, 2004

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DoT says Tatas delaying demerger of VSNL land

Thomas K. Thomas

New Delhi , Dec. 8

THE Department of Telecommunications (DoT) has accused the Tata management of not taking any measures towards hiving off the surplus land belonging to Videsh Sanchar Nigam Ltd (VSNL) into a separate entity.

DoT said the Tatas were violating the share purchase agreement signed with the Government at the time of divesting 45 per cent of the Centre's stake in VSNL. The department has now sought the legal opinion of the Solicitor General to safeguard the Government's interest.

While divesting its equity stake in VSNL in 2002, the Government decided to hive off 773 acres of surplus land owned by the company into a separate entity. As part of the agreement, the strategic partner (the Tatas) was supposed to facilitate the process.

Sources in VSNL told Business Line that the company was in the process of facilitating the hiving off of the surplus land into a separate company. But it wanted clarity on certain issues - especially as to who will bear the cost of creating the new company.

The sources said the Tata management had been in discussions with DoT for the last two years on such contentious issues related to the hive-off. "The agreement signed with the Government asks the partner to facilitate the creation of the new company, but it does not ask us to bear the costs involved. The Tatas do not benefit in any way from hiving off the land. So why should the company bear the liabilities?" asked a Tata spokesperson.

DoT, on the other hand, has said in an internal note that the strategic partner "repeatedly tried to stall the process of formation of company by giving several arguments as to why a realty company cannot be formed by citing interest of ADR holders due to non-possibility of listing in the US."

The department has now sought legal opinion from the Solicitor General on the issue.

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