Financial Daily from THE HINDU group of publications
Saturday, May 07, 2005
Regulatory Bodies & Rulings
Industry & Economy - Textiles
CAG finds fault with surplus land sale of NTC unit
New Delhi , May 6
THE Comptroller and Auditor General of India (CAG) has found shortcomings on the sale of land of 18.69 acres of sick textile mills by one of the subsidiaries of NTC.
In a review on some of the commercial undertaking of PSUs, tabled in Parliament, the CAG studied the case of the sale of land from the NTC (Andhra Pradesh, Kerala, Karnataka & Mahe), located in Bangalore, which is one of the eight subsidiaries of the holding company, the NTC.
The scope of the audit covered the examination of the method adopted by the subsidiary for valuation and fixation of reserve price and the tendering process in the sale of land and building with particular reference to three mills viz., Mysore Spinning & Manufacturing Mills ; Minerva Mills (both in Bangalore) and Netha Spinning Mills, Secunderabad.
An Asset Sale Committee (ASC) was formed in June 2002 for sale of surplus assets.The remit of the ASC was to ensure that the land was sold in such a manner so as to generate maximum resources for revival plan, the sale was conducted in a transparent and fair manner and through open notifications and the procedures for sale and maintenance of accounts were as per the highest professional standards.
In spite of proceeding with all these precautions, the sale of surplus land and buildings of the NTC (APKK&M) is riddled with shortcomings, the CAG report said.
First, by not considering latest index formula of income- tax department, government guidance rates and by applying unjustified deductions for various charges, the company worked out the reserve price as Rs 173.70 crore instead of Rs 279.89 crore as worked out in audit. This resulted in lower fixation of reserve price by Rs 106.19 crore, the report said.
The guidelines issued (August 2002) by NTC (holding company) stipulate that the reserve price was to be fixed at the highest of Registration/CBDT/CPWD or Registered Valuers' valuation. But, the holding company revised (in December 2002) the method of computation of reserve price to `average' of the three valuations. This resulted in fixation of lower reserve price by Rs 199.56 crore. On being pointed out in audit, the holding company again changed the computation method to highest valuation of the values.
Due to fixation of lower reserve price by Rs 67.65 crore, one party managed to purchase 18.69 acres of land of Mysore Mills on single bid basis for Rs 79.16 crore which was even below the government guidance value as admitted by the purchaser himself. The administrative ministry had advised that ASC might sub-divide the land into plots urgently in case there were no bids or satisfactory bids. This was not followed in case of Mysore Mills' land where only one bid was received from Hamara Shelters Private Ltd(HSPL), which was also not a satisfactory one, the CAG said.
In the case of Minerva Mills and Netha Mills, the company had foregone a potential revenue realisation of Rs 23.26 crore and Rs 5.50 crore respectively, due to fixation of reserve price on lower side, even though the purchases had matched the reserve price, the CAG noted. In another instance of inept handling of the sale of land, non-consideration of remunerative offer from Karnataka Housing Board, Bangalore resulted in foregoing of opportunity to sell the surplus land for a higher consideration to the extent of Rs 55.61 crore, the report said.
In its recommendation, the CAG called for investigation of the sale of 18.69 acres of Mysore Mill land to HSPL to find out the reasons for sale below the Government guidance rates. But, this review forwarded to the Ministry in October 2004, remained unanswered till March 2005 when the report was finalised, the CAG said.
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