The plan, expected to be cleared by the cabinet shortly, envisages two land parcels to be offered on a longer-term licence term of up to 90 years, sources familiar with the development told TOI. Although the government is seeking to complete the process at the earliest, the entire transaction is unlikely to be completed in the current financial year.
The land parcels include a 6.3-acre plot, classified as spare land, that can be used for the development of serviced apartments or a hotel. The construction is proposed on the side facing the British High Commission. Another 1.8-acre plot, one the same side, is being offered for commercial development with a higher floor area ratio (FAR).
The remaining land in the complex is proposed to be offered to potential bidders, which can be part of the main hotel complex so that there is a possible upside for the entity that bags the deal. It will also help improve the realisation from the project, a source explained. 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% the permitted 40% ground coverage has been utilised, said a source.
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 by 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 hotel will be offered under the operate-maintain-develop model. 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, sources said.
“There will be the option for one bidder to take over the entire project or multiple players can come in,” an official said.
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 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.