Industry bodies flay CAG report on land mortgage

With the CAG (Comptroller and Auditor General) report on mortgage of leased land by project promoters to raise finance snowballing into a major controversy, the industry bodies have come forward to defend the Odisha Industrial Infrastructure Development Corporation (Idco), which had issued no objection certificates (NoC) to industries for the mortgage of land.

"Taking into account the objection raised by CAG in its last report where it had questioned Idco's authority to grant such permissions, the state government has devised a system and authorised Idco board to grant NOC," said Ramesh Mohapatra, president, Utkal Chamber of Commerce & Industry (UCCI).

"The matter was discussed and approved in the last board meeting of Idco held on February 10, 2014. The process is quite transparent," he said, adding, "UCCI strongly feels that their (CAG's) over activism will kill the industries in the state and we condemn the report." UCCI said, no bank will give loan only against mortgage of land unless there is a viable project which comes in the land.

"The financing by the banks for the land is only 40-50 per cent of the land cost while about 75 per cent is extended for the building and machinery. Further, the industries are required to repay the loan and all assets are mortgaged to the banks as primary assets including the land apart from whatever collateral that the projects can offer. It is baseless to state that the industries are raising huge funds as if the funds are misutilised by the industrialists. The disbursement by banks is made as and when assets are created after inspection," said a statement by the industry body.

Expressing similar views, Gorachand Mohanty, president, Sea Food Exporters Association of India (Odisha) said, "CAG's observation on mortgaging the leased out land to industries is a simple procedural lapse which can be rectified. The general practice all over the country is that all industrial estates are allowed to mortgage the land as no bank will finance any industry if the primary property (land) is not mortgaged. Such an observation will affect the industrial climate of the state."

The CAG in its report has pointed out that based on the NOCs issued by Idco, 12 companies availed loans worth Rs 52,423.50 crore by mortgaging 8,489.89 acres land allotted to them. Data from the financial institutions showed that out of the sanctioned loan amount, Rs 8,625.89 crore has been released so far.

The report which was tabled in the state assembly on Monday says, Idco was not authorised to confer mortgage rights to industries. Idco has executed lease deeds with 52 MoU based and 54 non-MoU based industries and handed over possession of 46,732.894 acres land to them by March end, 2013.