In the early decades of industrialisation it is a common practice for industrial units, especially in the public sector, to acquire and keep large acres of land far more than needed. Also, in the era of industrial licences, state governments used to build large land banks for setting up industrial estates as also for providing land to industrial units. Like gold, such land proved as excellent hedge against uncertain times and even failures. In several cases, years after the industrial units turned sick and died, the industrialists who owned such enterprises became millionaires. I provide two instances, one from the public sector and the other private.
The Indian Drugs & Pharmaceuticals Ltd, a PSU, was promoted with high expectations to service the healthcare sector. An antibiotics unit in the salubrious Rishikesh, a drug production unit in Hyderabad and a surgical instruments plant in Chennai were set up. For some time, under able business leaders like Devarajan, IDPL flourished and showed great promise. But this was not sustained. It turned sick and collapsed. The Chennai unit was a non-starter right from inception. Setup in collaboration with Russia, the instruments planned for production did not meet the requirements of the Indian user. It produced little and ended up in terminal sickness and closure. But the vast tracts of few hundred acres of land at Nandambakkam on the outskirts of the city was a boon. The massive spurt in land prices from a few thousand rupees an acre at the time of acquisition to a few hundred crores of rupees today have made the unit so prosperous! The company has sold large tracts of land at high profits to numerous private units and to the Indian Trade Promotion Organisation for setting up Chennai’s large convention and trade centre. Over 50 years, the entire workforce had been well taken care of – all without any production, sale or profit!
Binnys had been a great name in textiles. It had its origin in the 1870s. For over a century, the company was a large producer of textiles at its sprawling mills in Perambur and Bengaluru. It had thousands of acres of land. But textile policy was not favouring the large sector; in line with many large manufacturers of textiles, like the Birlas, DCM, Tatas... Binnys also declined. It changed hands several times and stopped production several decades ago. But it still owns over 3000 acres of prime property in Chennai Metro, Bengaluru and other places. And is worth a few thousand crores of rupees.
A more recent instance of such bonanza on a land locked for decades is the property developer VGN offering 1327 residential apartments in Guindy starting with the attractive price of Rs 6999 per sq.ft. The price was much lower than the current price of Rs 9000-Rs.10,000 per sq.ft in Guindy. Piramals offering funding at attractive terms is among the reasons. But more important was the availability of large tract of land acquired at modest prices.
The land was owned by Hindustan Teleprinters Ltd (HTL) for constructing houses for its workers. HTL was set up in the 1960s as a PSU under the Department of
Posts & Telegraphs to produce mechanical teleprinters. In the initial years, its products were sought after for easy communication by newspapers, hosts of government departments and big businesses. But HTL did not keep pace with the massive changes in telecommunication technology, became sick and produced little after the 1980s. The NDA I government under Vajpayee introduced a disinvestment policy and Arun Shourie as Minister of Telecom & Disinvestments took bold to sign off several non-profitable PSUs. HTL was one of these. Himachal Futuristic Communications Ltd (HFCL) acquired HTL apparently on the attractions of the large land assets. The loans taken from SBI couldn’t be serviced and after a lot of litigation courts have cleared the plan for developing these areas. The first phase of this was the hiving off a portion of the lands owned by HTL to VGN, the portion originally intended for housing. With construction promised to be completed over three years, the attractive pricing has resulted in quick time VGN fully selling off flats in the first three towers.
The massive spurt in land prices reconfirm the well-accepted maxim: there are only sick industrial units and not sick industrialists! The failure of attempts to put ceilings on land ownership and lack of laws to keep land idle by individuals, corporates and other institutions including those purported to be charities and NGOs, have resulted in such huge unearned bonanzas over non-performing assets. In the light of the massive increase in housing costs resulting from the huge price of land, such loopholes need to be plugged.