Kolkata Port Trust to lease land in bid to boost revenue
The Kolkata Port Trust is looking to lease out at least 93 plots of land over the next few months, starting with 26 for which bids are to be received this month. These plots are to be leased for 30 years and can be developed into anything other than houses.
Some 40-50 potential bidders turned up for the pre-bid meeting last week. “Going by that, we expect a very good response,” said Vinit Kumar, chairman, Kolkata Port Trust. The port authority has eased several conditions with the aim of getting wider participation, and it appears to have worked, he added.
Previously, the trust would insist on bidders having a net worth of at least three times the minimum annual rent of a plot, or the reserve price. But this time, bidders’ minimum net worth requirement has been lowered to not less than the annual rent. However, such a bidder will have to provide a bank guarantee for an amount equal to the rent for two years.
However, the Kolkata Port Trust couldn’t do anything about extending the period of lease to more than 30 years. Also, the lease is not renewable. Under government regulations, these couldn’t be changed, according to Kumar.
This could be the key dampener, according to two senior lawyers, who asked not to be identified. Even if the Kolkata Port Trust allowed the development of residential complexes, there wouldn’t have been any takers because of this restrictive condition, they said.
Kumar clarified that successful bidders can build anything—even offices and hospitals, if they want to. They need not be turned into warehouses, as the common misconception goes. “Most people who came for the pre-bid meeting had questions about potential usage,” he said.
But because of the relatively short lease of 30 years, it is unlikely that people will consider investing heavily in these plots, said the lawyers cited earlier. And that, according to these lawyers, will result in sub-optimal price realization, though some of these plots are located in prime neighbourhoods of Kolkata.
Recently, some ministers in the West Bengal government had informally asked if the Kolkata Port Trust would allow the setting up of houses on encroached land occupied by squatters. The government had offered to provide funds as well to build the houses, Kumar said.
The arrangement would have benefited the trust too, because it would have to part with only a small portion of encroached plots—around 10-15%—and the rest would have been freed up for use by the port authority, he said.
But because of restrictions on converting land owned by the trust into residential complexes, this may not be immediately possible, he added.
The Kolkata Port Trust is looking at ways to augment its revenues. Though both the ports under it—Kolkata and Haldia—are “cash-flow positive”, its has huge pension liabilities. On the one hand, it is expanding its cargo handling capacity, and on the other, it is try to utilize redundant assets such as land, according to Kumar.