Inhospitable Terrain

Last fortnight, when Union disinvestment minister Arun Shourie announced the sale of four ITDC hotels, he helped ease the government's burden a bit more. The decaying properties have been a drain on the central exchequer for years. With high inefficiency and an average occupancy rate of just 15 to 20 per cent, 24 of the 33 hotels ran up losses in 2001-02.

But even though most ITDC hotels have great locations, the disinvestment process is being tripped up by legal and procedural loose ends. Says a senior disinvestment ministry official: "In many cases, the hotels have huge outstanding liabilities of property tax, electricity and water charges. In others, books of accounts were not maintained properly. In some cases, even the title deed is not clearly held by the government."

Says Manav Thadani, CEO, HVS International, former global advisors to the ITDC disinvestment process: "There is a lack of clarity over several issues like pending cases regarding provident fund dues, vrs liabilities and the future of leases of restaurants. Most of these hotels don't even have a completion certificate."

The state of the hotels is another dampener. Any buyer would have to spend at least Rs 100 crore to bring them up to international standards. Says tourism analyst Rabindra Seth, "Ever since budgetary allocations towards ITDC stopped, there has been no investment in renovation or even routine maintenance." According to industry estimates, it takes between Rs 35 lakh and Rs 40 lakh to upgrade a room to five-star deluxe standard, while building a new room of that quality costs over Rs 1 crore. Even in smaller cities, the annual maintenance cost of a room runs into lakhs of rupees.

So far, seven ITDC properties—at Agra, Bodh Gaya, Madurai, Hassan and Udaipur, the Lodhi and Qutab Hotels in Delhi and a beach resort in Mamallapuram—have been sold. The Bangalore Ashoka has been given on a long-term lease. On May 31, the government announced the sale of four more: Airport Ashok, Calcutta, to Bright Enterprises, the Aurangabad Ashok to the Loksangam Group of Hotels, the Manali Ashok to Auto Impex and the Kovalam Beach Resort to the Muscat-based M. Far Hotels.

Later this month, six more will take the call: Kanishka, Ranjit and Indraprastha (Ashok Yatri Niwas) in Delhi, the Varanasi Ashok, an unfinished project in Chandigarh and the Khajuraho Ashok, which did not receive any bids last time thanks to its huge liabilities. These will be followed by the Pataliputra Ashok, Patna, Kalinga Ashok, Bhubaneshwar, and hotels in Jaipur and Jammu. Yet again, the lack of clarity over the Kanishka and Indraprastha properties—the government had earlier decided to club them together—may delay privatisation. Says Thadani: "In Ashok Yatri Niwas, the garden restaurant was sealed following the tandoor murder case. It's not clear if the new owner would be allowed to use that area."

Privatisation of the Ashoka, Samrat and Janpath hotels in Delhi and the Lalitha Mahal Palace Hotel in Mysore are on hold. Samrat is held back on security grounds due to its proximity to the PM's residence. Hotel Janpath the government plans to convert into a one-stop tourist mart. As for Hotel Ranjit, the hotel was marked as a commercial complex under the Delhi Master Plan, which the authorities seem to have realised decades later. So it will cease to be a hotel when it is sold. Says Thadani: "The government should do a rethink. Janpath can fetch a good price for its location while Samrat should be converted into a tourism mart. Sixty per cent of it is anyway already government offices."

Delhi's Ashoka is another story. It's the ITDC flagship—with 25 acres of land and more rooms (563) than any other hotel in India—but failed to attract bids for a long-term lease despite being on the block twice.This, sources say, was primarily due to the shoddy maintenance. Says Seth, "Ashoka isn't a viable proposition. One needs to spend Rs 200 crore to Rs 300 crore to refurbish it to compete with others, an amount that can't be recovered in a 30-year lease." That's not taking into account an annual ground rent of Rs 14 crore the buyer is required to pay.

Clearly, the road ahead to ITDC privatisation will be a long and winding one.