Smart City payment to TECOM is not compensation, but repaying value of shares: CM Pinarayi

Thiruvananthapuram, Dec 9 (PTI) Kerala Chief Minister Pinarayi Vijayan on Monday clarified that the payment to be made to Dubai-based TECOM for its exit from the Smart City Project in Kochi is not compensation but the cost of its shares in the venture.

Responding to the Congress-led UDF's allegations, Vijayan said that the transaction will be a rightful settlement of TECOM's investment.

Addressing the media here, CM made it clear that all future developments under the project will remain entirely under government control.

His statement came after the leader of Opposition in the Assembly, V D Satheesan, alleged that it was a purported decision by the government to hand over the 246 acres of land, which cost crores of rupees, to its favoured individuals. The Congress leader further claimed that a real estate agenda was behind the government’s move.

The Chief Minister said the cost of the shares invested by TECOM in Smart City will need to be repaid, as determined by an independent evaluator, and this could not be considered as compensation. "There is a common misconception that the payment to TECOM is a compensation amount," the CM said.

"In reality, it is not a compensation for losses but the value of the Dubai firms' 84 per cent stake in Smart City, determined by an independent evaluator, he added.

As per the framework agreement, in the event of a lease cancellation, the lease premium amount of Rs 91.52 crore and the expenses incurred on infrastructure should be repaid. According to this, an independent evaluator is appointed under Clause 7.2.2 of the agreement to estimate the share price to be paid to TECOM, CM stated.

The Chief Minister said that the government has no intention of merely offering compensation and sending back the Dubai-based firm TECOM. The Smart City project had been envisaged as a joint venture between the Kerala government and Dubai's TECOM investments.

According to CM, the plans for Smart City will continue as intended. The rumours being spread that the government will abandon the Smart City project are baseless, and any interventions will be focused on advancing Kerala's future IT development.

"The UAE and its government hold a special emotional connection for Malayalees, being home to the largest diaspora from the state. The Smart City agreement is the outcome of extensive discussions and collaboration between the governments of Kerala and the UAE," he added.

A committee has been appointed to draft the withdrawal policy, and future steps will be decided based on its recommendations, CM said. According to the CM, the committee has started examining all aspects. The chief minister added that the government has no plans to enter into joint ventures with private companies or engage in any private partnerships. All future developments will remain entirely under government control.

Replying to the queries about how this withdrawal agreement was reached, CM said that a committee at the Chief Secretary level, including the Finance, Revenue, Law, and IT Secretaries, has been constituted to conduct a study about the issues and further functioning of Smart City and to take necessary actions based on the Advocate General's recommendations.

The Advocate General advised that, instead of issuing a notice to TECOM under Clause 7.2.1 of the Smart City Framework Agreement, it would be more appropriate to negotiate with TECOM and establish an agreement regarding the withdrawal policy. This would enable the Kerala government or its nominee to purchase TECOM's shares and release them from their contractual obligations.

Additionally, it was decided to appoint an independent evaluator to determine the share price to be paid to TECOM, as per Clause 7.2.2 of the Framework Agreement. Considering these actions, the cabinet decided to proceed with drafting the withdrawal agreement.

The agreement includes provisions for resolving any lapses in project implementation through mediation and arbitration proceedings. "However, the government's effort is to avoid arbitration and legal complications and acquire the land as soon as possible to utilise it for IT development effectively.

The Smart City Special Purpose Vehicle (SPV) was established by leasing 246 acres of government land, which can now be effectively utilised for the development of Kerala's IT sector.

Currently, 99 percent of the space in Kochi Infopark is occupied by various IT companies and the scarcity of space has become a hindrance for new entrants or additional infrastructure development, CM said. In this context, the 246 acres of land adjacent to Infopark present a significant opportunity to expand Kerala's IT sector. This expansion will attract more companies to the state, he added.

The current scenario of Smart City is also a result of Dubai Holdings' decision in 2017 to cease operations outside Dubai, he stated. The cabinet meeting chaired by Chief Minister Pinarayi Vijayan last Wednesday decided to accept the recommendations submitted by a Chief Secretary-headed panel to resolve the issues connected with the Smart City project in Kochi. PTI ARM ARM ADB