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CAG raps KTDC's venture with Taj Group
A joint-venture struck by a subsidiary of the Kerala Tourism Development Corporation (KTDC) with one of the biggest names in the country’s hospitality industry, Taj Group, had been registering huge losses consecutively for the past nine years.Now, 15 years after the deal was struck, Tourism Resorts Kerala Limited (TRKL), KTDC’s subsidiary, looks trapped. It cannot even hope to terminate the jointventure because the arrangement was decidedly loaded in favour of the Taj Group, the report of the Comptroller and Auditor General (CAG) noted.
Monday March 3 2008 09:37 IST
The New Indian Express
ENS
T'PURAM: During a decade when the state’s tourism growth was nothing short of staggering, a joint-venture struck by a subsidiary of the Kerala Tourism Development Corporation (KTDC) with one of the biggest names in the country’s hospitality industry, Taj Group, had been registering huge losses consecutively for the past nine years.
Now, 15 years after the deal was struck, Tourism Resorts Kerala Limited (TRKL), KTDC’s subsidiary, looks trapped.
It cannot even hope to terminate the jointventure because the arrangement was decidedly loaded in favour of the Taj Group.
The joint- venture by the name Taj Kerala Hotels and Resorts Limited (TKHRL), the agreement for which was executed in October 1990, was founded on unsound business practices.
Taj Group was selected as the partner without giving adequate publicity or inviting expression of interest from other leading hotel groups in the country, the report of the Comptroller and Auditor General (CAG) noted.
The interests of the state, too, were ignored. "Several terms of the agreement were detrimental to the interests of the government," the report noted.
TRKL, because it had only 20 percent shareholding, could not control the affairs or effectively participate in the management of the joint-venture.
Taj Group has 40 percent shareholding. Another 40 percent was supposed to come through public issue/private placement.
Since this had not happened, Taj Group had absolute control over the joint-venture. Between 1992-93 and 2006-07, TRKL had invested Rs 16.67 crore in the joint-venture company.
This included a contribution of Rs 11.17 crore made during 2002-04, when the accumulated losses of TKHRL were between Rs 18.05 crore and Rs 21.75 crore.
'This additional investment lacked financial prudence," the CAG report states. In spite of the investment, no progress had been made on the tourism front.
"Out of the 14 locations identified to develop tourism, only three were transferred to TKHRL. The remaining are yet to be taken up by the joint-venture company even after a lapse of more than 15 years," the report notes.
The Government investment in the company had not yielded any return for the past 15 years, the CAG report noted.
As against an accumulated profit of Rs 42 crore, TKHRL could earn operating profit of only Rs 22.75 crore as on March 31, 2006. A shortfall of Rs 19.25 crore.
All this while, the Taj Group operated on a high-gain-lowresponsibility basis.
"The payment of operating fees and reimbursement of expenses to the Taj Group was not linked to profitability. Therefore, the Taj Group was not made responsible for the profitable functioning of the company but could secure the returns by way of operating fees and reimbursement of expenses,’’ the CAG report says.
