AG against mortgage of Idco land for project financing

The Accountant General (AG) office at Bhubaneswar has suggested that the companies being provided land by the state-owned agency, Industrial Infrastructure Development Corporation of Odisha (Idco) should take the construction-linked mortgage route to raise loans instead of resorting to mortgage of the allotted land.

"Instead of blanket mortgage of land, construction linked mortgage should be allowed to raise loan," the AG said in its recommendation after a performance audit of the land acquisition activity of Idco from 2001 to 2012.

In construction-linked mortgage, banks lend companies in phases as per the requirement of different stages of construction. After completion of the construction work, the property remains mortgaged till the full repayment is achieved.

In land mortgage, companies can get the entire money for construction at once by submitting the land papers as securities.

But the AG, during the audit, found many companies availing loans without beginning construction work.

An audit scrutiny of land acquisition cases revealed that 4,967.08 acres of land valued at Rs 165 crore (approximate present market value Rs 901.30 crore) were acquired between July, 2002, and March, 2011, for establishment of industries by six promoters such as Aditya Aluminium Ltd (Sambalpur)-2,021.41 acres, Bhushan Power & Steel Ltd (Sambalpur)-608.67 acres, Viraj Steel & Energy Ltd (Sambalpur)-2.58 acres, VAL (Kalahandi)-826.56 acres, Dhamra Port Company Ltd (Bhadrak)-1,070 acres and Posco India Ltd (Jagatsinghpur)-437.86 acres.

But the land has not been put to use for a period ranging from 15 months to six years three months from the date of publication of notification under Section 4 (1) of Land Acquisition Act.

In April this year, the AG had sought a status report from Idco on steps taken to resume the government land allotted to industries and others that has remained un-utilised for more than three years.

Earlier this year, the state cabinet decided to take back land from developers who did not utilise it within three years. As per the estimates of the state revenue & disaster management department, land worth Rs 1 lakh crore can come back under state control if the cabinet decision is implemented.

The estimate showed that huge tracts of land are lying unused in Bhubaneswar area and the districts of Khurda, Puri and Jajpur. At the Chandaka industrial estate on the city's outskirts, 780 acres, leased out by government for different industrial projects, is lying unused.

The AG has already recommended Idco to formulate a comprehensive policy for providing land to MoU (memorandum of understanding) signed companies.

The agency has completed the draft policy, and is awaiting government nod to implement it.