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Kerala government gets 16% share in Smart City, Malta gets 9%
James Debono
The Indian state government of Kerala will get a 16% stake in the joint venture with Tecom in the proposed internet city in Kochi, against the 9% shareholding the Maltese government will get in the Maltese Smart City, which is part of an exchange for waiving the Lm6.6 million premium on the sale of the land.
A 9% stake was also negotiated with former Kerala chief minister Oommen Chandy who was dumped by the electorate in 2006. This was announced by new Chief Minister V.S. Achuthanandan after a meeting with the Dubai investors last Wednesday.
The Communist-led Kerala government wanted an even larger share of 24% in the joint venture. Negotiations between the Kerala government and Tecom are now in the final stages and the agreement is expected to be signed in two weeks’ time.
The Indian state government will be leasing 995,526 square metres of land in Kochi for 99 years for a one-time sum of Lm8 million (Rs.104 crore).
Two representatives of the Kerala State government are expected to sit in the directors’ board of Smart City.
The Maltese government will be transferring 358,000 square metres of land in Ricasoli to Tecom for an annual ground rent of just Lm65,000. The Dubai investors will start paying the rent after eight years.
Kochi Smart City
In opposition the communist leader V.S. Achuthanandan opposed the project going as far as describing it as an exercise in speculation. But after being elected he took a more pragmatic approach in an attempt to secure the 33,000 jobs promised by the Dubai company. The same company is promising 5,600 jobs in Malta.
On Wednesday top officials of the Dubai-based Technology and Media Free Zone (Tecom) met Kerala Chief Minister V.S. Achuthanandan and reiterated their interest in setting up the Smart City project at Kakkanad in Kochi as a joint venture with the state government.
Tecom had sent a draft agreement to the government a few days ago accepting most of the conditions the government had set for the Lm113 million (Rs.1,500-crore) project.
The key change is that Tecom will not get exclusive rights for promoting IT infrastructure in Kochi region. In the earlier agreement, it wanted the government-run Infopark at Kakkanad to be made part of the Smart City, with an additional commitment from the government that the state will not promote any other IT park in the region.
The government also will not give 100 acres of land free to Tecom as previously proposed. And in place of giving the company 236 acres on outright sale for a price of Lm2 million (Rs.26 crore), the government will now give it 246 acres on lease for 99 years for Lm8 million (Rs.104 crore).
The government will further get 16% stake in the joint venture, against 9% promised earlier. There is an understanding now that, in due course, the state’s equity participation in the project will be increased to 26%. It is unclear as to whether the Indian government will have to invest more money to finance its shareholding.
Chief Secretary Lizzie Jacob, who led the Kerala team, said only minor issues, remained to be resolved. She said the agreement would be signed within a fortnight.
Malta’s Smart City
Last year Investments Minister Austin Gatt revealed that that 358,000 square metres of land will be transferred to Tecom, a third of which must remain public and accessible round the clock.
Tecom will be investing Lm10 million for the embellishment of the site and will also be responsible for its maintenance.
According to Gatt a total of 75% of the land will be earmarked for buildings that will generate ICT-related jobs while 25% will be designated for lodging. Plans seen by MaltaToday in September showed only 19% of the total land area earmarked for information technology related activities.
According to the agreement signed with the Maltese, land use cannot change without the government’s consent and the public areas cannot be transferred to third parties.
As a result of the deal, the government will have a 9% shareholding in SmartCity@Malta and at today’s rates it would have revenue of Lm12.5 million in income tax and national insurance contributions from the jobs generated.
The company was guaranteeing to invest a minimum of Lm100 million on the project. One-third of this sum will be share capital spread over 14 years and 5,600 jobs will be generated over eight years.
The government will get its shares instead of a premium of USD20 million for the land. The guaranteed jobs exclude employees that could come from Maltacom or any construction workers.
Though having only 9% shareholding, Gatt claims that the government will have a big say in various issues as the company cannot change its statute, be dissolved or reduce its share capital without the government’s blessing.
The agreement contemplates penalties of up to Lm400,000 annually in case of default. The annual ground rent is Lm65,000, which will start being paid after eight years. Tecom investments would be guaranteeing all the obligations and no share transfer can take place outside of Tecom’s fold for the first 14 years. It is only if the employment obligation is met before that time that this can be considered.
On its part, the government has committed itself to close the sewage outfall, to provide services to a point outside the site, to upgrade the roads leading to the site and to ensure the land will be leased for 99 years.
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