ITDC disinvestment: Govt will do well to keep past mistakes in mind

The Ministry of Tourism and Culture has already begun the process for disinvestment of Government’s stake in 8 of the 16 hotels under ITDC. The Modi Government rightly feels it has no business to be in the business of hospitality. Besides, many hotels under the ITDC are loss making, some of them are non-functional and it would be a good idea to get these dud assets off the Government’s books.

Minister Mahesh Sharma told Firstpost in an exclusive chat that ITDC properties in Jammu & Kashmir, Guwahati, Bhubaneshwar and Puri will be on the block and the process of disinvstment has already begun. Besides, two Centaur Hotels (part of Hotel Corporation of India under Air India) at Delhi and Srinagar will also be on the disinvestment list. He did not say how much money the Government is looking to raise through the sale, merely saying “we have a price in mind for each hotel”. The disinvestment process would be open to Indian as well as foreign bidders and Sharma is looking at a mix of outright sale and long lease for attracting investors.

Sharma’s endeavour is good in spirit but may be rather tough to accomplish for several reasons. For one, there may be few takers for loss making hotel properties unless the minister proposes outright sale. Even then, he may find it tough to attract buyers in some cases.

Secondly, the NDA regime has not exactly covered itself in glory with previous attempts to disinvest hotel properties. In many instances the process got mired in legal tangles. As recently as 2014, the CBI registered a preliminary enquiry into the sale of Udaipur’s Laxmi Vilas hotel to Bharat Hotels during the NDA regime in 2002. And we all remember what happened when the NDA tried to offload Centaur in the same year in Mumbai - the hotel was sold for about Rs 83 crore to a Batra Hospitality which lost no time in selling it off at Rs 115 crore just four months later. This lead to allegations that the regime of the time booked a deliberate loss in the initial sale.

Sharma said the entire process of disinvestment in ITDC hotels “will be transparent. This Government does everything in a transparent manner - look at the spectrum auctions or coal block auctions. We will put the entire process online and there will be complete transparency”.

As per the ITDC website, the corporation presently has a network of eight Ashok Group of Hotels, five Joint Venture Hotels, 1 Restaurant, 11 Transport Units and 9 Duty Free Shops. Besides, ITDC is also managing a hotel at Bharatpur and a restaurant at Kosi on behalf of the Department of Tourism. Sharma said ITDC declared an operational profit in FY15 at Rs 5.22 crore versus an operational loss of Rs 18.65 crore in FY14. Profit before tax for FY15 stands at Rs 38.95 crore against Rs 11.93 crore in FY14.

The minister made it clear that one of the worst performers among all ITDC properties - Ashoka Hotel at Delhi - is not on the disinvestment list in the first phase. “We want to make Delhi Ashoka and Samrat hotels profitable within six months,” the minister said. He also made it clear that the brand name “Ashoka” will remain with the Government so in some cases of disinvestment, there may actually be joint ventures formed with private parties. In fact, of the 16 hotels under ITDC, any hotel which is “borderline or making a profit” will not be up for sale, the minister said.