ITC Blog

Monday, September 03, 2007

ITC set to get 3 acres for cigarette unit expansion

ITC’s plans to kick off a Rs 300-crore expansion at its cigarette factory in the city are on track. At the instance of the Union shipping ministry, Kolkata Port Trust (KoPT) is about to issue the crucial offer letter to ITC that will pave the way for allotment of a prime 3 acre slot adjacent to the company’s existing cigarette facility in Kidderpore.

But actual land allotment on a 99-year long-term lease will transpire after ITC shells out an upfront premium to Kolkata port, which owns the land. The upfront premium will be based on the land value computed by the state.

Land value of the 3 acres at Kidderpore has been pegged at roughly Rs 6.4 lakh per cottah by the state finance department. Accordingly, at 60 cottahs per acre, total land value would work out at a shade over Rs 11.5 crore. Final upfront premium payable by ITC will include statutory municipal and service taxes.

Confirming the development, a senior KoPT official told ET: “We have just received a communication from the West Bengal government that the 3 acres in Kidderpore proposed to be allotted to ITC (on a 99-year long-term lease) has been valued at roughly Rs 6.4 lakh per cottah.”

“While the Union shipping ministry has cleared ITC’s application, actual land allotment is conditional on ITC’s payment of upfront premium that is based on the land value computed by the state finance department. We will shortly send the offer letter to ITC,” the official added.

An ITC spokesperson said: “Our existing cigarette factory at Kidderpore is being upgraded with new investment and technology. For the proposed Rs 300-crore expansion, we require more space. We are awaiting a confirmation on the valuation of the 3 acres from the state government and a communication from KoPT.” Details of the upcoming expansion exercise and its impact on ITC’s cigarettes business remain under wraps.

In ITC’s case, the Union shipping ministry clearance was mandatory since it involves a land allotment application on a 99-year long-term lease. Over the years, the duration of all land allotments by KoPT on long-term lease basis have been capped at 30 years. Under the Major Port Trusts Act of 1963, KoPT’s board of trustees is not equipped to clear land allotment applications where the duration of a long-term lease agreement exceeds 30 years.

“Since ITC has sought land allotment from KoPT on a 99-year long-term lease, the Union shipping ministry had to step in and also involve the West Bengal government to ascertain the value of the particular 3 acres in Kidderpore,” said a Union shipping ministry source.

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