A controversial project

Published : Jan 30, 2004 00:00 IST

The Rs.2,000-crore project which entails the acquisition of 8,077.2 hectares of land for a toll expressway between Bangalore and Mysore is caught in allegations of a real estate scam.

RAVI SHARMA in Bangalore, Mandya and Srirangapatna

IS the Rs.2,000-crore Bangalore-Mysore Infrastructure Corridor Project (BMICP), which entails the acquisition of 20,193 acres (8,077.2 hectares) of land for a toll expressway between Bangalore and Mysore, about to end up as a real estate scam? Many people would believe so. The four-lane, 111-km project, which includes a 41-km peripheral road, a 9.8-km link road, interchanges and five townships, has bumped from one controversy to another.

Despite concessions from three successive Karnataka governments, the company that is executing the project, Nandi Infrastructure Corridor Enterprises Limited (NICEL), has not been able to start even Phase I nine years after it signed a Memorandum of Understanding with the State government. In 2002, NICEL assigned its rights to a subsidiary company, Nandi Economic Corridor Enterprises Limited (NECEL), for the implementation of Section A of the BMICP. Interestingly, the Registrar of Companies, Karnataka, has listed NECEL as a defaulting company. But that is just the tip of the iceberg as far as the BMICP goes.

So far NICEL has sold 110.25 acres or 44.1 ha (all in Bangalore South and North taluks) out of a total of 14,505 acres (5,802 ha) of private land, and has been leased (for 40 years) 4,982 acres or 1,992.8 ha (out of the total sanctioned 5,688 acres or 2,275.2 ha) of government land. NICEL also has the option to buy out around 3,919 acres (1,567.6 ha) of the leased government land that it has used for commercial purposes, at guideline values of 1999-2000, provided it did so within 10 years from the date of financial closure of the project (that is, March 2003).

It was the S.M. Krishna government that, in 2001, allowed NICEL to do this. Until then, the land was available only on a 40-year lease and had to be returned to the government at the end of that period.

The question is why the Krishna government is favouring NICEL. With around 5,688 acres being leased, and only around 1,500 acres being used for the road, the remaining land could in theory be used for commercial purposes and hence be bought by NICEL, at prices that will be frozen at the 1999-2000 level. If the average cost per acre is taken at Rs.10 lakhs, NICEL could end up buying 4,000 acres of government land for just Rs.400 crores even in 2013.

In July 2003, the Krishna government withdrew 307 acres of forest land at Badamanvarthi Kaval from the Forest Department, and handed it over to NICEL. In June 2001 the government withdrew 49 acres of land that had been given for the construction of houses under the Ashraya scheme and handed the same to NICEL.

The whimsical ways of the Karnataka Industrial Area Development Board (KIADB), which in many instances is not aware of the road's alignment, has resulted in a landowner (H.V. Vijayaraghavan of Survey No. 104/2-7) first having his lands notified, then dropped and then recommended for notification again. The last two decisions took place within two months of each other (on October 17, 2003, and December 24, 2003).

NICEL/NECEL has received favourable decisions from three successive Karnataka governments. The Janata Dal governments of J.H. Patel amended the KIADB Act to include transport (meaning construction of an expressway/roads), and townships as industrial infrastructural facilities. Concessions made later include substantial exemptions in stamp duty and registration charges for the land transferred from KIADB to NECEL and from NECEL to its lenders/financial institutions, and exemption of industrial conversion charges (which at the rate of Rs.1.6 lakhs an acre for over 20,000 acres of land meant huge savings for NICEL).

In a bid to help NICEL achieve financial closure, the Krishna government wrote to NICEL on June 29, 2002, "that it has no objection to NECEL creating a charge, mortgage, hypothecation or other encumbrances on the whole or part of NECEL's right, title and interest under the Project Documents, the Land, and Project Facilities and/or the Project revenues in favour of the lenders and in this regard grants such rights and such obligations as may be required by the lenders, including the step-in rights, which shall subsist till all amounts payable to the lenders have been paid in full". The government also agreed to the proposal of the lenders, "whereby in the event of the government exercising its rights to terminate any of the project agreements, then the government shall pay to the lenders directly, on termination, the termination purchase price payable under the Framework Agreement".

On July 4, 2002, over 5,000 acres of demised government land was transferred "in favour of NECEL by way of lease with the right to (NECEL) to purchase any part thereof". The lease deed also allows the lessee (NECEL) to mortgage, charge, assign or otherwise encumber the demised land in favour of any financial institution/banks (lenders) to secure monies advanced for the construction and development of Stage I of the Infrastructure Corridor with a right to the lenders to substitute the lessee and/or to exercise any and all rights of the lessee. On November 27, 2002, NECEL entered into a mortgage agreement with its bankers, ICICI Bank Limited, with regard to the government land.

The latest controversy to hit the project is former Prime Minister H.D. Deve Gowda's accusation that Chief Minister Krishna, Chief Secretary B.S. Patil and an unnamed senior Minister colluded to part with government land on the outskirts of Bangalore using acquisition for the BMICP as a ruse. Informed sources pointed out that there were gross irregularities and improprieties in the acquisition of land for the project. In many instances, land that was originally in the path of the BMICP was left out and lands that were not required were acquired.

The government has denied the allegations as "baseless and reckless". Minister for Large and Medium Scale Industries R.V. Deshpande said the Krishna government had included a default clause as per which the government could change the promoter and transfer all the assets free of cost, if sufficient progress was not made in the project.

On December 18, a single-Judge Bench of the Karnataka High Court, in response to a clutch of writ petitions from those who would lose land in Bangalore North and South taluks, ruled that while the acquisition of the petitioners' land for the purpose of peripheral road, link road, service road, interchange and ramps was within the purview of the law, acquisition for the construction of townships and convention centres and for allotting sites to those who would lose land, was not. The Judge also observed that as seen from the project report and maps, "several lands which were situated outside the peripheral road, link road and service road were also proposed for acquisition". The government should take a re-look whether the said lands were really required for public purpose or not, he added. He also directed that landowners should be given an opportunity to file objections and be heard. The matter comes up for hearing on January 22.

NICEL has secured financial closure only for the first phase. As per the latest schedule, the first phase - construction of the 9.8-km ground-level link road on the Bangalore side, the 41-km southern section of the Outer Peripheral Road and the 13-km section of the expressway from Bangalore to Bidadi - will begin on February 5. This phase is scheduled to be completed by August 2005, and the whole project within four years.

Ashok Kheny, managing director, NICEL, told Frontline that the financial closure for Phase I was over: "The government has promised to hand over another 2,500 acres (1,000 ha) of land within the next two months for us to start the peripheral road." Unlikely, say many people whose lands have been notified by the KIADB, the nodal agency to acquire the land and hand it over to NICEL. Many landowners said they would approach the courts for a stay on being dispossessed of their lands. There are also plans to file two public interest litigation petitions seeking a stay on the land acquisition, alleging mala fide intentions.

As many as 10 key government officials have taken up employment with NICEL almost immediately after retirement. They include C.R. Ramesh, formerly Secretary, Public Works Department (PWD), N. Vishwanathan, who retired as Additional Chief Secretary, and K.B. Gopalkrishna, formerly Executive Engineer, PWD.

There has been no freezing of the alignment of the project. The KIADB is acquiring land haphazardly. A letter written by the Special Deputy Commissioner, KIADB (BMICP), S. Anees Siraj to the Chief Engineer (South), PWD, on July 2, 2003, reflects this lack of planning. "While reviewing the progress of the BMICP and the land acquisition notifications issued, the Chief Executive Officer and Executive Member, KIADB, has desired to know the alignment drawings for the peripheral road, link road including interchange and the expressway as approved by the PWD," the letter states. It is surprising that the KIADB, the agency that is to acquire the land, is unaware of the alignment. If the KIADB did not have copies of the alignment, how did it acquire the land?

Again, as per the proceedings of the meeting held under the chairmanship of Deshpande on November 12, 2003 to review the BMICP, the Minister noted with concern that copies of the (road) alignment as approved by the Karnataka PWD had not been made available either to the Commerce and Industries Department or to the KIADB. Against the requirement of 20,193 acres of land (including 5,688 acres of government land), 20,824 acres had so far been notified. In other words, 6,319 acres of private land in excess of what was required had been notified. Deshpande directed that lands notified but not required for the project could be denotified. Many evacuees said the KIADB haphazardly served notices to landowners throughout the project area, and then offered to drop notification proceedings for a price.

Frontline investigations revealed a number of instances where the alignment of the peripheral road has been changed. A number of land survey numbers were deleted in the final notification (the landowners had been earlier served with a preliminary notification). According to the owners, the current fee (depending on the location of the land) for getting land deleted from the acquisition list is around Rs.2.5 lakhs per acre. All deletions have to be signed by the Industries Minister.

In Gottigere on Bangalore's outskirts, as many as 14 survey numbers were dropped. In another instance, an owner who was served a preliminary notification for his 30 acres (12 ha) of land near Kengeri (on Bangalore's outskirts) had the acquisition proceedings dropped.

According to a land acquisition officer, the problem is that nearly 40 per cent of the land on Bangalore's outskirts is held in benami (proxy) names "with many influential people being the real owners". This has made acquiring land a nightmare.

Owners have also suddenly found themselves being served with a notification. Said H.V. Vijayaraghavan, who stands to lose 13 acres (5.2 ha) of land close to the Gottigere tank: "My land had not been notified till January 2003. The peripheral road is supposed to dovetail the ring road proposed in 1995 as part of the Bangalore Development Authority's (BDA) Comprehensive Development Plan (CDP). An overpass should be built over the Gottigere tank. But in January just to skirt a certain farmhouse and to help provide easy access to another property, NICEL diverted the peripheral road (see map). In an order in June 1999 the High Court had directed that no road should be laid bisecting the Gottigere tank or preventing or disturbing the inflow of water into the tank. The court said that in case NICEL wanted to lay a ring road, it was open to lay any such road by providing an overpass without disturbing the free flow of water to the tank. But NICEL has diverted the road and blocked the inflow of water from the southern side."

Srinivas Reddy of Talaghattpura on the outskirts of Bangalore said: "I am losing 1.5 acres of land that I have converted to industrial use and set up a small-scale industry. My land is not part of the original CDP, and the BDA even gave me a no-objection certificate. But now, because a politician has developed 9 acres of land in the vicinity, officials were told to shift the alignment of the peripheral road."

A.C. Ananthaswamy of Hosakerehalli (Bangalore) accused NICEL of identifying land that was part of the BDA's designated Regional Park (green belt pockets): "I have grown coconut, areca, coffee, pepper and teak in an area designated for the a regional park but still the land is being taken for an industrial project."

Increasingly, many owners are not in favour of parting with their land, especially those whose land hugs Bangalore or those in the rice- and sugarcane-growing areas of Mandya district. Many owners near Bangalore, after paying a fee of Rs.1.6 lakhs an acre, converted their agricultural lands for non-agricultural use.

NICEL's offer of around Rs.10 lakhs an acre in places close to Bangalore has also not pleased many of the landowners. While some, especially those near Bidadi and Ramnagaram (mostly with dry lands), have accepted the amount, others have not. They averred that the market rate was much higher and even the BDA had paid higher rates. They alleged that NICEL sold 30 acres of land near Madavara (Bangalore Rural district) to the Indian Machine Tool Manufacturers Association (for establishing a convention centre) at Rs.32 lakhs an acre. The KIADB had acquired the land from original owners paying under Rs.10 lakhs an acre and then handed it over to NICEL.

Kheny said that NICEL was well within its rights to sell the land. "The Karnataka government wanted the Association to establish an exhibition centre in Bangalore. Since this land was readily available, they asked me to give it. Otherwise the Association would have taken their exhibition centre to Hyderabad. The land was sold for the same price that we bought it from the KIADB plus development costs. The Association wanted infrastructure such as a parking lot, a sewage plant, a 100-foot road and a power substation. Not Rs.32 lakhs but around Rs.20 lakhs an acre." Kheny also confided that NICEL was engaged in talks with the Harvard Medical School (which wanted to set up a school in India) to sell 5 acres of land.

Documents with Frontline show that NICEL had in June 2002 offered 10 acres to LIC Home Finance Limited's Care Homes Ltd at the BMICP's Mysore road interchange. The letter specifies that BMICP would establish "electric infrastructure, supply of portable water, sewage disposal and an approach road" and then hand over the land to the LIC "for developing their own layout and (for) constructing buildings". The price tag: Rs.27.5 lakhs an acre. Land losers cite this as another example of how the project has become a plain and simple real estate deal.

Asked Leo Saldhana of the Environment Support Group: "NICEL can sell real estate in their townships, but how is it doing it at the Mysore road interchange? And at Madavara? The project's first township is at Bidadi."

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