West Bengal land laws hurdle to Tyre Corp privatization
3 min read 28 Mar 2013, 11:12 PM ISTState views tyremaker’s sale as a violation of lease pact, indicates opposition to proposed move to centre
Premium(Indranil Bhoumik/Mint)
Kolkata: West Bengal’s restrictive laws on land ownership could scupper the Union government’s plan to privatize Tyre Corp. of India Ltd—an ailing company founded 29 years ago by nationalizing two private companies: Incheck Tyres Ltd and National Rubber Manufacturers Ltd.
Tyre Corp. has two factories in West Bengal—at Kalyani and Kankinara. The one at Kalyani is built on a 29-acre plot held on a 999-year lease from the state government; the Kankinara unit stands on a 30.77-acre plot owned by the company.
An officer in West Bengal’s urban development department said the state viewed the sale of Tyre Corp. as a violation of the terms of the lease. The state government has written to the centre’s department of disinvestment indicating its opposition to the proposed privatization of the tyremaker.
The state is of the view that it will not earn anything out of the deal though it owns a substantial part of the asset to be transferred to a new owner, this official added, asking not to be named.
Three Kolkata-based industrial groups recently expressed interest in acquiring the government’s 100% stake in Tyre Corp.
A section of Tyre Corp.’s workers believe these groups were only eyeing the company’s real estate assets. These workers, led by the Centre of India Trade Unions (Citu), too, have been opposing the disinvestment. They see the state government’s stand on the sale as a “blessing in disguise", said Nepal Deb Bhattacharya, a Citu leader and president of Tyre Corp.’s trade union.
Tyre Corp. inherited the dispute over the Kalyani unit from one of the firms that was taken over by the Union government. West Bengal’s urban development department had initiated proceedings to terminate its lease agreement with National Rubber before it was nationalized.
Though the state government did not seize the land after Tyre Corp. was founded in October 2009, it secured a commitment from the firm that further investments would be made either by the Union government on its own or jointly with a private partner to revive the factory.
“The company reiterated its stand even last year on making further investments at Kalyani even as the centre planned to sell its entire stake in the company," said the state government official cited above.
That apart, the state government may also not allow the new owners of Tyre Corp. to use the land it owns at Kakinara for any purpose other than running a factory under local laws that restrict ownership of land at 24 acres.
Land in excess of that threshold can only be held under exemption from the state government. To alter the usage of land held in excess of the land ceiling, the company would need clearance from the state government.
Though some companies such as Hindustan Motors Ltd have been granted permission in the past to develop homes and information technology parks on plots held for industrial use, getting a similar permission for Tyre Corp. may not be easy, according to an officer of the state’s land and land reforms department. This officer, too, refused to be named.
This appears to be a “political move" aimed at blocking the sale of Tyre Corp., said the head of one of the industrial groups that claims to be interested in the company. “Unless the new owner has unfettered rights to exploit the land at the two factories, finding a buyer for Tyre Corp. will be difficult," he said, asking not to be named.
Tyre Corp., whose factories are now closed, was surprised by the state’s stand on the stake sale, said S.K. Mutreja, the firm’s managing director. It threatens the future of some 800 workers, of whom 150 are permanent workers, he said.
In fiscal 2012, Tyre Corp. posted a pre-tax loss of ₹ 20.7 crore on a revenue of ₹ 12.6 crore, according to an information memorandum released by SBI Capital Markets Ltd, adviser to the government on the stake sale.
The company had an accumulated loss of ₹ 47 crore at the end of March 2012, having made losses for at least five consecutive years.
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