The Centre is all set to transfer the iconic Ashok Hotel–the country’s first state-owned 5-star and Delhi’s first–to the private sector on a 60-year contract on operate-maintain-develop model as part of its ambitious asset monetisation programme.
According to a report in the Times of India, the government will also offer land parcels in the 21.5-acre complex for the setting up of a hotel or serviced apartments and other development works.
The publication citing sources familiar with the development mentioned that the plan, expected to be cleared by the cabinet shortly, also envisages two land parcels to be offered on a longer licence term of up to 90 years. Although the government is seeking to complete the process at the earliest, the entire transaction is unlikely to be completed in the current fiscal.
The land parcels include a 6.3-acre plot, classified as spare land, that can be used for the development of serviced apartments etc. The construction is proposed on the side facing the British High Commission. Another 1.8-acre plot, on the same side, is being offered for commercial development with a higher floor area ratio.
The remaining land in the complex is proposed to be offered to potential bidders, which can be part of the main hotel complex as a possible upside for the entity that bags the deal. It will also help improve realisation from the project, the daily reported citing a source.
Ashok Hotel can be fully revamped, but no change allowed in exterior
Like other PPP projects, the land will come back to the government on expiry of the licence.
The winning bidder for the hotel can completely refurbish it but will not be allowed to make changes to the exterior of the property that came up in 1956 along with a large convention centre to host a conference by the UN.
An analysis by the tourism ministry, which is piloting the proposal, has suggested that there is vast commercial and revenue potential that has remained untapped. Against the permitted FAR of 3.25, just 1.3 has been utilised. Similarly, just 23% against the permitted 40% ground coverage has been utilised, an unnamed source told ToI.
Besides, there are non-revenue aspects, such as common utilities, power sub-stations (for Hotel Ashok and Samrat) as well as large parcels being used for staff quarters that are proposed to be offered. Samrat Hotel has been kept out due to security considerations.
The hotel, with more than 500 rooms, was included in the ambitious asset monetisation programme as its performance remains below par compared with other five-star properties in Lutyens’ Delhi. Replacing worn-out carpets and poorly maintained furniture, along with renovation, could cost Rs 400-500 crore as per conservative government estimates. In any case, the government believes it should not be in the business of running hotels, an area where the private sector is much more efficient.
The land parcels that are to be used for development of commercial or office complexes and hotel or serviced apartments are proposed to be given out through the design-build-finance-operate-transfer route, the daily mentioned citing sources.
“There will be the option for one bidder to take over the entire project or multiple players can come in,” the daily quoted an official as saying.
Apart from the upfront payment, the government is looking at an annual revenue share. A part of the upfront payment will be used to offer a voluntary retirement scheme and clear dues.
Several attempts have been made in the past to sell the iconic hotel in the heart of the Capital’s diplomatic area, run by ITDC, but the plans had to be abandoned due to a string of factors, including labour issues, dues and past contracts that the hotel had signed. In the Atal Bihari Vajpayee government, the disinvestment department under the then minister Arun Shourie had tried to sell the property as part of its wider policy to get out of the hospitality business. Subsequently, the NITI Aayog had suggested a new model but it did not go through.
