Industries worried over mortgage of Idco land

Latest RBI direction comes as dampener

The prevailing imbroglio over mortgage of land leased out by Odisha Industrial Infrastructure Development Corporation (Idco) to industries has left investors worried with many projects stuck in the midst of implementation.

Without mortgage of land allotted by Idco, the nodal agency for land acquisition, the investors are finding it tough to raise fresh loans to pursue their expansion activities.

To make matters worse for the existing industries, the Reserve Bank of India (RBI) has issued direction to the banks to treat all loans given to industries as stressed loans/bad loans in the absence of creation or perfection of securities against the time specified.

Concerned over the fate of industries, the North Odisha Chamber of Commerce & Industry (NOCCI) has urged the state government to take corrective action.

“According to the RBI direction, all the industries having pendency of creation of securities will be treated as stressed loans/bad loans and will be subject to higher rate of penal interest by one per cent and will also be debarred from further disbursement/new loans for their expansion activities. RBI has also advised to take corrective action and start recovery proceedings, if creation of securities is not completed within three quarters from the date of sanction,” C P Bhartia, secretary, NOCCI wrote to Panchanan Dash, secretary, MSME (micro, small & medium enterprises).

The issue of no objection certificate (NOC) for creation of mortgage by industries, which have been set up on the land leased out by Idco, is held up for more than a year. Consequently, industries set up on Idco land were finding it difficult to expand.

“This will be big catastrophe and crisis for the industrial players who have set up their units on Idco leasehold land and are not being granted NOC for mortgage creation in favour of banks and financial institutions. It will greatly affect further growth of revenue and employment of the state,” the letter added.

Ramesh Mahapatra, president, Utkal Chamber of Commerce & Industry (UCCI) said, “Without mortgage of land, no bank or financial institution would come forward to advance loans. It is only the State Cabinet that had decided that Idco would have mortgage rights over leased land. The government should resolve the matter at the earliest.”

The land mortgage row had snowballed into a controversy with the office of the Comptroller & Auditor General of India (CAG) raising objections over Idco allowing mortgaging of leased land by industries. The central auditor had pointed out that Idco is not empowered to do so as it requires government approval.

But the government had defended the right of Idco to allow mortgage of land, stating that in order to achieve the legislative intention of creating industrial infrastructure, the corporation has been giving NOC for mortgaging the land.

A tripartite agreement involving the department of revenue & disaster management, Idco and the company to which land has been leased is in the works to facilitate the process.