The Karnataka Industrial Areas Development Board (KIADB), the Karnataka government undertaking that acquires land and allots to industries, has caused a loss of Rs 104.40 crore to the government by allotting developed industrial plots at subsidised rates to three companies in 2012-13.
According to a report of the Comptroller and Auditor General of India (CAG), which was tabled in the state legislature on Wednesday, the KIADB allotted fully developed plots at Narasapura Industrial Area (NIA) at subsidised rate as against the government's approval for allotment of undeveloped plots to three companies such as Mahindra Aerospace Private Limited (MAPL), Honda Motorcycles and Scooter India Private Limited (HMSI) and Cerebra Integrated Technologies Limited.
KIADB approved formation of the NIA in August 2010 and fixed tentative price (FTP) at Rs 85 lakh per acre to allottees. In addition to the FTP, Rs 6.70 lakh per acre was payable by allottee towards tertiary treated water (TTW).
In November 2010, the government accorded in principle approval for establishing aerospace components, structures and assembly unit proposed by MAPL and allotted 12 acres of undeveloped land at subsidised rate of Rs 42.65 lakh plus TTW of Rs 6.70 lakh per acre. The board allotted 12 acres to MAPL initially and later allotted 20 acres of developed land after the company requested for additional eight acres in lieu of original allotment.
The government concurred in September 2011 and November 2011 to the allotment of 96 acres to HMSI for establishing their third factory and 12 acres to Cerebra for establishing E-waste recycling plant as proposed by the board at the subsidised rate of Rs 40.62 lakh per acre similar to allotment made in respect of Mahindra.
The board while approving the allotment of 96 acres to HMSI resolved (November 2011) that any additional land to HMSI would be allotted at regular rate of Rs 85 lakh per acre. However, the KIADB allotted an additional land of 23.05 acres to HMSI (September 2012) at the same subsidised rate in contravention of its earlier resolution. Thus, HMSI was allotted 119.05 acres in all of developed land at subsidised rate.
"We observed that the total development cost for establishing NIA was Rs 462.09 crore with allotable area of 418.29 acres. Thus, the cost per acre of allotable area works out to Rs 1.10 crore. Though, government in their letters approved the board's proposal of allotment of undeveloped land at subsidised rate, the board allotted developed plots at subsidised rate to these three firms which resulted in loss of Rs 104.40 crore," CAG said in its report.
Subsequently, the government stated (December 2013) that board has resolved for revision of the tentative allotment rate to Rs 138.50 lakh per acre for allotments made at NIA excluding bulk allotment made at subsidised rates to three companies since they are anchor industries in the field of automobiles, which attracts vendor industries. There would be no loss to the Board in view of revision of tentative allotment rates to other allottees.
However, the CAG has not accepted the government's argument. "As per the prevailing rules, there is no provision to fix or approve any cross subsidised rate in allotment of land and to adjust underrecovery of cost from one set of industries against cost on vendor industries.
The government had approved allotment of undeveloped lands, but the board allotted developed lands to these companies," the CAG said in its report. The anchor industry is defined as an "industry with capital investment of Rs 500 crore or more in the first phase and having a minimum of 15 vendor units in the same industrial area.
As per this definition, the Mahindra project cannot be categorized as anchor industry as their capital investment was Rs 284 crore only, the CAG pointed out.
