Hotels May Lead Govt Selloff Plan

Industry minister M Maran has indicated to the Disinvestment Commission that the government would be willing to kick off its disinvestment programme with hotels followed by the tourism industry.

These sectors seen as non-core, non-strategic areas are expected to face least resistance and it would be ideal to kick off the disinvestment programme from these sectors, according to sources. It is felt that divestment of majority stake, including divestment of management control, would be acceptable to all constituents of the United Front, the trade unions and the Opposition. The protectionist lobby within the government led by ministers like C M Ibrahim also agree that the government should distance itself from these sectors.

 

The commission, too, has considered this possibility but a decision is likely only after its two-day-long deliberations end tomorrow. It will submit its recommendations to the industry minister soon after.

The commission is weighing the possibility of recommending the outright sale of comfort hotels (motels), franchising of resort hotels (three-star hotels) and divestment of management control in prestigious five-star hotels like Hotel Ashok. Though the government is agreeable to this, in the case of five-star hotels like Ashok it has favoured inviting joint venture partners for upgradation and management.

This is likely to come as a disappointment for the real estate lobby which has been waiting for prime properties like Ashok to be put on the block. However, the government is against such a move since it is feels a certain amount of national prestige is attached to this hotel. Besides, since the property also overlooks the Prime Ministers residence, diversion of the land to any other purpose is being viewed as a potential security risk.

A Tourism Development Finance Corporations evaluation of Indian Tourism Development Corporation (ITDC) two years ago pegged the value of its assets at around Rs 2,200 crore. The report had also recommended a share price of about Rs 350, provided the government decides in favour of divestment of management control. A revaluation should peg the asset value much higher at present rates, provided divestment of management control is made part of the deal.