BackHindustan Salts to raise funds from land bank
The firm gives ITDC the right to use more than 80,000 acres in three states to develop tourism projects
Premium(Priyanka Parashar)
New Delhi: In an attempt to raise money from surplus land holdings, state-owned Hindustan Salts Ltd and its subsidiary Sambhar Salts Ltd signed a deal with India Tourism Development Corp Ltd (ITDC) on Thursday, giving ITDC the right to use more than 80,000 acres in three states to develop tourism projects.
Hindustan Salts, in the red until last year, is seeking to diversify its revenue sources and earn incremental revenue from the 57,000 acres it will hand over to ITDC in Sambhar (Rajasthan), 23,000 acres in Khara Ghoda (Gujarat) and 133 acres in Mandi (Himachal Pradesh), said R. K. Tandon, chairman and managing director.
The in-principle agreement gives ITDC the rights to use the land for the development and implementation of tourism-related projects. ITDC will provide the expertise and technical support for development of infrastructure and will facilitate individual projects.
The projects will be executed through joint ventures between ITDC and Hindustan Salts or as public-private partnerships (PPPs) with the support of state governments.
“As a mandate for a public sector company, we are now diversifying into other areas which will give us incremental revenues," said Tandon, adding that salt production would remain its primary business.
For instance, Sambhar has India’s largest saline lake, heritage buildings and a 90km railway line that can make it an ideal location for developing tourism infrastructure. Hindustan Salts and ITDC intend to promote “eco tourism, salt lake tourism and adventure mine tourism in Sambhar and Khara Ghoda", Tondon said.
Hindustan Salts’ attempt is among the first by public sector companies to monetize land holdings to earn extra revenue. Many state-owned companies in the country own large land holdings, but the strategy being adopted by Hindustan Salts may not work for all, an expert said.
“We cannot necessarily broad-based the strategy of using land banks for tourism purposes because there has to be an inter linkage between tourism and the land used for the purpose," said Pankaj Arora, managing director of Protiviti, a business consulting firm that works with hospitality companies. “In the case of Hindustan Salts Ltd, because of the history attached to Sambhar, it may work but then it will depend upon the implementation."
Two executives from Hindustan Salts and and two from ITDC will team up to coordinate and provide support for preparation of a master plan detailing different projects that can be implemented in the three areas.
“This will be done in a fixed time in a phased manner. ITDC will be hiring a consultant by December end to draw a master plan for entire region and based on that it will take up the projects," said ITDC’s managing director and vice- chairman Lalit Panwar. “By the end of March, we expect to have a detailed project report and decide what projects to take up and how to implement them."
In joint ventures, ITDC and Hindustan Salts will invest money and share profits on a 50:50 basis, Panwar said. In projects executed on the PPP model, the salt maker will contribute the land and an investor will put in the money. They will share the profits; ITDC will play the role of a facilitator and earn a commission, he said.
Tandon said the company had hired Punjab National Bank Financial Services to recommend a revenue model and the commission it should charge for allowing the use of its land.
Besides tourism projects, both companies will also consider developing a centre for research on ecotourism, a centre for skill development and a salt heritage museum. The agreement they signed on Thursday will initially be valid for three years.
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