Leveraging land

The Centre is moving forward with its plan to create a bank of surplus land available with public sector units which can be auctioned. A committee constituted for drafting the guidelines for identification and disposal of such land is finalising its recommendations and the report is expected to be ready in a fortnight. PSUs are expected to upload the relevant information to a portal created specifically for the purpose. Per se, the idea to pool and later auction surplus land lying idle with PSUs — and there are several PSUs that would qualify for this — is not a bad one, especially given that land acquisition in large parcels has become a daunting prospect after the passage of the Land Acquisition, Rehabilitation and Resettlement Act in 2013. But the Centre has to be clear about one thing upfront: Is this about helping companies — PSU or private — access freehold land for setting up new projects or is it just about generating revenue to supplement that from disinvestment?

At this time, it appears to be a mix of both. There is also talk that land held by some PSUs in the heart of some cities can be used for social housing — which again is not a bad thing in itself. But the Centre would need to go about this exercise in a careful and considered manner. The large tracts of prime land that some PSUs hold, especially in and around urban agglomerations, might be attractive from the Centre’s point of view. Yet it would be wrong to assume that such land is ‘idle’ because chances are the PSUs may have earmarked it for their future expansion. So, the first caution is that the companies should not be either coaxed or coerced into parting with unused land. Forcing their hand would be tantamount to asset-stripping by the dominant shareholder, the Government. With several of these PSUs being listed entities and some of them even boasting of FII shareholding, the Centre would need to tread very carefully indeed. The last thing it would want is a sell-off in the market and consequent devaluation of its holdings.

Valuation is another tricky area. This will be a factor irrespective of whether the land is auctioned off to another PSU or to a private company or used for welfare purposes such as social housing. Valuation may not matter as much in the case of companies such as Hindustan Aeronautics or BSNL where the Centre holds the entire equity, as it would in the case of listed companies such as SAIL or Rashtriya Chemicals and Fertilisers, to name just two, where there is sizeable public shareholding. The auction process also needs to be implemented in a credible fashion. The committee that is now discussing the issue would hopefully take these ground realities into account while making its recommendations.

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