Govt Indecision On Divestment Stalls Itdc Expansion Plans
The governments indecision on the extent of disinvestment in India Tourism Development Corporation (ITDC) has put the corporations management in a bind over expansion plans.
ITDC had earlier deferred its proposed management and marketing tie-ups with foreign hotel chains on account of non-finalisation of disinvestment plans. ITDC chief managing director Anil Bhandari a fortnight ago had said that all expansion plans have been put on hold till the government takes a decision on disinvestment.
The disinvestment commission had recommended that the government should disinvest up to 74 per cent as ITDC was in the non-core sector. However, the ministry of tourism does not want the government to disinvest more than 49 per cent of its shareholding in ITDC. Presently, 10 per cent equity in ITDC is divided among the Taj group of companies (9.9 per cent) and three individuals.
Bhandari on Friday refused to go into the details of the impact of Tuesdays cabinet decision on disinvestment in ITDC and appointment of global financial and managerial advisors to study the feasibility of various options.
How can I comment on it when the options are yet to be studied, Bhandari said, adding, the matter is being handled by the ministry and I am not aware of the details. However, there are some alternatives, like demerging the non-metro hotels from those in big cities by spinning them off as separate companies, as had been suggested by the disinvestment commission, and then selling the stake to the private sector.
The disinvestment commission had said that ITDCs presence in all segments of the hotel industry like luxury, budget and economy had weakened its image among business travellers: The luxury hotels of the group have registered lower occupancy levels as a result. The commission had observed that a public sector undertaking does not have to play a role in providing hospitality services in the metros where the private sector had an adequate presence. Another option which the ITDC has is to hive off at least 50 per cent stake to strategic partners and let them manage the properties. ITDC has nine properties which are far from breaking even Ranjit Hotel in Delhi and properties in Khajuraho, Varanasi, Manali, Agra, Bhubaneshwar, Jammu, Jaipur and Ahmedabad.
Senior ITDC executives said the government should get out of the hospitality and service industry and enter into a deal with private sector organisations, which will be profitable, keeping in mind the prime properties ITDC has round the country, including metros.