Smart City: Govt’s move to compensate Tecom cloaked in mystery

Thiruvananthapuram: The state government's decision to absolve Tecom Group of accountability and offer compensation rather than address the lapses in completing the Kochi Smart City project by 2021 as per the agreement has raised serious concerns.

In an unusual move, the government has adopted a compensation assessment method agreed upon by Tecom, disregarding the contract's stipulation that failure to complete the project could result in the attachment of their deposit and investments.

Moreover, Baju George, the former CEO of Smart City, was included in the three-member committee tasked with assessing the compensation, which has only fueled suspicions about the government's true intentions.

A particularly questionable finding by the state government is its claim that the primary cause for the project's disruption, originally scheduled for completion in 2021, was not Tecom's failure but rather the global COVID-19 pandemic that began in 2019.

Of the various components promised in the project, including the construction of 88 lakh square feet (sq ft) of built-up space over ten years, with 62.1 lakh sq ft allocated for the IT industry and a target of 90,000 job opportunities, only 6.5 lakh sq ft of built-up area has been developed. The project stalled completely after reaching this phase in 2016, yet the government failed to intervene at any stage.

The project was further hampered by changes in ownership at Dubai Holding --the parent company of Tecom, in 2017, as well as a policy shift that prevented it from investing in projects outside the Gulf. Despite these issues contributing to the standstill, the government has sought to place the blame for the project's delays squarely on the COVID-19 pandemic.

Tecom had previously communicated to the government that the project had stalled due to the breakdown in global business caused by COVID-19. This reasoning was echoed in the report submitted by the Chief Secretary to the state government as well. As a result, the government has absolved Tecom of responsibility, attributing its failures to circumstances beyond the company's control.

The project contract also stipulated that the company should be served a notice within three months if such situations arose, with action for contract violation to be initiated after six months. However, the state government only intervened now, although the project was scheduled for completion in 2021. The Smart City has a Director Board, with the Chief Minister as its chairman and the IT secretary as a member. Despite this, the project's delays were met with scant attention.

The Memorandum of Understanding (MoU) prepared during the Oommen Chandy government only outlined the actions that Tecom could initiate against the government in cases of lapses on the state's part. However, the contract established during the VS Achuthanandan government in 2007 also included provisions addressing potential lapses by Tecom. The Pinarayi Vijayan government, however, has overlooked the most favourable provision for the state among these and opted instead to compensate Tecom.

Tecom holds an 84% stake in the Smart City project, while the state government owns the remaining 16%. The project is being developed on a 246-acre property in Kakkanad, Kochi, which was leased for a period of 99 years at a cost of Rs. 104 crore.

Seize or compensate? The unsettling choice
If Tecom commits a lapse, the government has three options, depending on the situation. However, the government chose the second option, which is more favourable to Tecom:
1. Tecom could be required to take over the government's share in the project through an independent valuation process.
2. The lease of the land could be canceled, allowing the government to take over Tecom's share through an independent valuation. The investments made by Tecom, including the lease payment for the land and the money expended on the project, would also be considered.
3. The government could attach the investments, expenditures, and deposits made by Tecom.

Commenting on the move, Chief Secretary Sharada Muraleedharan emphasised that the government's focus was on reclaiming the highly valuable land in Kochi city, which had been lying idle while ensuring adherence to the contract stipulations to avoid any disputes.

"All aspects will be thoroughly examined during the valuation process. The government will later decide on the type of project to be initiated on this land based on its investment potential," she said.