DLF looks for a way out of Rs 1,500 crore Chennai SEZ

D Govardan, Chennai
Financial Chronicle
DLF wants to get out of the Rs 1,500 crore IT SEZ project at Taramani in Chennai.
The company has asked the state government and Tidco to either call a re-tender at the original base price fixed for non-SEZ commercial activity, or refund the Rs 725 crore it had paid last year while taking possession of 26.64 acres on a 99-year lease.

DLF had planned to develop 4.5 million sq ft space along with the state-owned Tidco. The first phase of 2.5 million sq ft of processing area was to be ready by the end of 2009.

Among the reasons listed by the company for its demand is the delay in getting SEZ status for the special purpose vehicle, DLF Info Park Chennai (Developers), due to lack of contiguity of the land parcel.

The Tamil Nadu development commissioner for SEZs had cited the presence of a mass rapid transport system (MRTS) railway line that divides about a 3-acre chunk from the main land parcel for not recommending the SEZ status.

“Tidco had obtained the SEZ approval for the site even before it opened the price bids. The MRTS line existed even then. If Tidco could get the approval, how come DLF is now harping on the issue of non-contiguity of the land parcel,” a senior state government official said, when contacted by Financial Chronicle

He was skeptic about DLF being refunded Rs 725 crore.

“The company may have changed its plans due to the economic slowdown and the need to preserve or get back the cash,” the official added.

Tidco had invited bids for the IT SEZ project at Taramani in September 2007. DLF bagged the bid and signed a formal agreement with Tidco on April 23, 2008. It paid Rs 725 crore ahead of the July 31, 2008 deadline.

Other reasons cited by DLF include the refusal of the Chennai Metropolitan Development Authority (CMDA) to entertain DLF’s project plan and also a right-of-way claim by Ascendas IT Park for an 18-metre road.

According to the company, the land and the board of approval’s clearance have not been transferred to the SPV and remain in Tidco’s name. Several other approvals, including environment and airport height restriction clearances had been taken in the SPV’s name.

A way out now for DLF could be to seek extension of deadline for implementing the project.

“The 99-year lease period offers enough cushion for any level of commercial activity and viability,” the official said.