The Kerala government’s decision to allow Dubai-based TECOM to exit the Rs 1,700-crore Kochi SmartCity project has sparked protests in the state, with the opposition, Congress-led UDF accusing the CPI(M)-led regime. A land scam.
We explain the Kochi SmartCity project and why it has become controversial.
About the project
Kochi SmartCity is an IT based industrial township. was envisioned as joint venture State Government’s TECOM Investment FZ LLC, Dubai, a subsidiary of Dubai Holdings, an investment company owned by the Government of Dubai.
Billed as Kerala’s last bus for IT development, the smart city promises 90,000 direct jobs after its completion in ten years. It was supposed to provide infrastructure to IT and ITES firms with a built-up space of 8.8 million square feet. The project spurred a real estate boom in the surrounding Kochi urban area.
In 2005, the then UDF-ruled state government signed an MoU with TECOM for the project. One of the conditions was handing over the government infopark in Kochi to TECOM. The CPI(M) which was in the opposition at the time strongly objected to TECOM being given freehold rights and the right to sell 12 percent of the project area of 246 acres.
In 2011, the then CPI(M) government signed a final agreement that allowed TECOM to use freehold of 12 percent of the total project area but without the right to sell it. The remaining 88 percent of the land will be leased for 99 years. TECOM rejected the demand to bring Infopark into the project.
Why the dispute?
The state government last week constituted a committee to formulate an exit policy for TECOM from the Kochi Smart City project.
As part of the process, the committee will evaluate TECOM’s investment in the project and return an amount equal to the value of its share in the project. For this purpose, an independent assessor will be appointed.
The opposition, led by the UDF, has objected to Tecom’s failure to meet the criteria in the agreement.
What is the government’s next plan?
The government wants to keep the project as state property. Chief Minister Pinarayi Vijayan said on Monday that there would be no joint venture with private investors, instead the land in the smart city would be used for government-backed IT development. TECOM had an 84 percent stake in the venture and the state will return that stake. Many leading IT firms are waiting for land in Kerala. The government will allocate the smart city project area to such investors who follow the criteria. The government is of the opinion that if mediation is allowed, it will cause a lot of delay and it will be against the interest of the state.
What did the CAG report say about Kochi Smart City?
It is mentioned in the CAG report that there is no feasibility study of the project. It also questioned the state’s meager 16 percent stake in the project and the lack of transparency in the selection of partner TECOM. The audit report stated that the true identity of Tecom’s founders could not be established. It should have been ensured that the land acquired by the state government and handed over to private partners is not more than required for the project. The state has transferred the land at a price lower than the market value. The terms of the contract for 90,000 jobs were later removed.
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