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Ambarish Mukherjee

The Government's interest is at stake because the due date for the Tatas to exercise its call option for acquiring residual stake is February 12.

New Delhi , Dec. 25

THE Government's plan to disinvest the residual 26 per cent stake in VSNL Ltd has run into a major hitch.

If it sells the residual stake, it stands to lose control over 773 acres of prime land valued around Rs 1,000 crore spread over various cities, which is VSNL's surplus land.

To avoid such a situation, VSNL disinvestment may be postponed for the time being, sources told Business Line.

According to the shareholders' agreement between the Government and the Tata Group, post-disinvestment, VSNL is to be de-merged into two companies. One would be the telecom company VSNL under Tata control.

The second would be a land company and would remain under Government control, to which VSNL's surplus land will be transferred.

By virtue of the residual stake in VSNL, the Government would naturally get a 26 per cent stake in the land company.

As per the shareholder's agreement, the Tatas will transfer their share of 25 per cent stake to the Government, thereby making it a Government company with a 51 per cent holding.

The Government's interest is at stake because the due date for the Tatas to exercise their call option for acquiring residual stake is fast approaching and the Department of Telecom (DoT) has not yet been able to put through all the modalities for such a land transfer.

"Time is running out very fast and any day after February 12, 2006, the Tatas can exercise the call option and the Government will have to part with its holdings along with the land," the sources said.

They pointed out that the Tatas have already incorporated a "land company" named Hemisphere Properties India Ltd in January this year, but the land has not yet been transferred to it.

"Last week, it has been communicated to the Cabinet Committee on Economic Affairs (CCEA) that DoT has not been able to indicate any time-frame by when the process of de-merger of the surplus land and creation of a land company can be done," officials said.

However, the DoT has formed a committee to expedite the matter, which too has not yet indicated any time-frame, the sources said.

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