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Will Taj Mansingh remain with the Tatas?

Will Taj Mansingh remain with the Tatas?
Will the Taj Mahal Hotel on Delhi’s Man Singh Road retain its name? Its answer will be known by the end of the month once the global advisory Ernst and Young submits its report to the New Delhi Municipal Council (NDMC). This property was leased to the Tata Group’s Indian Hotels for 33 years in 1978 and is now going through the process of lease renewal.

This unique property was handed over to the Indian Hotels at a measly share of just 10.5 per cent of gross income from room rents. In other words, the hefty earnings from its food and beverages section did not yield any return to the NDMC. Over a period of 33 years, the municipal corporation earned over Rs 200 crore from the hotel operator. The property on a prime 3.75 acre of land was constructed at a cost of Rs 6.75 crore, which was paid by the NDMC.

Had the times been different and the Comptroller and Auditor General (CAG) been not so watchful, the lease would have been renewed easily at a modest hike of five to seven per cent. In fact, a proposal to this effect was doing the rounds when the lease expired in October 2011. However, the vigilant CAG made the NDMC officials careful. Thus, the lease was renewed for just one year in 2011 and a consultant appointed to suggest the next step ahead.

HDFC was initially selected as an advisor for the job, but its chairperson Deepak Parekh was on the board of the Indian Hotels. This was viewed as a conflict of interest. The task fell on E&Y then.

While the Tata group will like to retain its signature property in the national capital, the problem is that the NDMC might not find it easy to settle the lease without calling for competitive bids. The recent Supreme Court judgment on the telecom issue clearly signals which way the wind is blowing. The NDMC officials will not like to suffer the fate of the former telecom secretary and land up in the Tihar jail just by towing the line of the political masters.

Come June and the picture will be clearer. Judged by the experience of Delhi’s Indira Gandhi International Airport, where the eventual bidder agreed to pay 45.99 per cent of gross revenue, the hotel should also see equally aggressive bidding. Reputed foreign hotel brands may also like to take part in the bid. So will several domestic hotel groups and potential investors. The outcome will be a rich experience for the NDMC but might not be so pleasant for the Tata group.

Raymond Bickson, the Indian Hotels MD and CEO, felt that his company was part owner of the hotel. But, that remains a public posture at the best to be consumed by the gullible. The NDMC officials have been following the procedures as per law and are unlikely to be influenced. If they are, one will hear more on yet another scandal.
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