Kerala: Scrapping of Smart City project draws Oppn ire, triggers debate on investment flow
Government, however, defends its move stating that the Smart City land will be used to benefit the state, with key companies waiting for allocation
Kerala's decision to withdraw from the Kochi Smart City project agreement with Dubai-based Tecom Investments has sparked attacks on the Marxist government, but the administration insists this will only benefit the state in the long run.
According to critics, the exit of Tecom from the Kochi project raises broader questions about Kerala's investment climate.
Kerala has struggled to attract foreign investment in recent years, making this withdrawal particularly concerning for local stakeholders. Critics say the decision could deter potential investors who may perceive instability or mismanagement within state projects.
246 acres to be reclaimed
The Kerala cabinet recently approved the withdrawal from the agreement with Tecom, allowing the state government to reclaim the 246 acres of land originally leased for the project.
According to the government, there is significant demand for land in Kochi, with around 100 companies awaiting allocation.
Industries Minister P Rajeev has emphasised that this move does not mean abandoning the project, but rather aims to optimise land use for local companies.
How the land will be used
The move follows over a decade of stagnation in the project, which was initially envisioned as a transformative initiative for Kerala's IT landscape.
“The Smart City land will be utilised in a manner beneficial to the state, with prominent companies already waiting for allocation. Land distribution will follow clear guidelines, and the government is adhering to lawful procedures,” he said.
“The government is not giving any compensation to Tecom but a reimbursement based on an independent evaluation of their investments. Discussions will determine the extent of repayment. If the matter goes to arbitration, it could result in years of delay, which would harm the state’s interests,” the minister added.
Panel to decide compensation for Tecom
A committee formed to evaluate Tecom's investments and determine appropriate compensation for its withdrawal includes key figures such as the IT Mission Director and the CEO of Kochi Infopark.
The government has made it clear that the discussions with Tecom would focus on formulating a mutually agreeable exit policy while ensuring optimal land use under government supervision.
Despite these assurances, opposition leaders have raised concerns about the government's handling of the situation.
Govt sending troubling message: Congress
VD Satheesan, leader of the Opposition in the Kerala Assembly, criticised the government's decision to compensate Tecom despite its failure to meet contractual obligations.
He argued that compensating a "non-performer" sends a troubling message about accountability and transparency within the government
Satheesan pointed out that during previous administrations led by the Congress in particular, significant progress was made on the project, including the completion of a 6.2 lakh square feet building within a year and a half.
Congress questions ‘compensation’
He questioned why the current government was now terminating a project that was initially seen as vital for job creation and economic development. He alleged that the state government's decision to offer compensation indicates potential lapses on its part.
“The decision to compensate the Tecom sounds dubious and highly objectionable. The government is using the Smart City project as a pretext for engaging in real estate deals,” he said.
Congress Working Committee member Ramesh Chennithala was even more scathing, calling the cabinet decision "one of the biggest scams Kerala has witnessed".
The original agreement
"Allegations raised by the opposition and certain media outlets regarding the exclusion of Dubai's TECOM from the Kochi Smart City project are baseless," said minister Rajeev. "It is ironic that the Congress leadership during the UDF government’s attempts to hand over Infopark and other assets to the Dubai company is now criticising this decision.”
The Kochi project was launched in 2004 with ambitious goals, including the creation of an IT township that would generate 90,000 jobs and attract substantial investment. However, after 13 years, the project has seen minimal progress, with Tecom failing to deliver on its commitments.
The initial agreement promised significant development, yet only a fraction of the projected jobs and infrastructure were realised.
Challenges that the project faced
The project faced numerous challenges since its inception, particularly following the financial crisis in Dubai around 2008-09, which led to halted investments and stalled progress.
Former chief minister VS Achuthanandan had previously criticised Tecom's financial capabilities, suggesting it was "broke" and unable to fulfil its promise.
As the state prepares to navigate this transition following Tecom's exit, it remains crucial for state leaders to communicate effectively with stakeholders and potential investors about their plans for future development in Kochi.
The other view
The establishment of an independent evaluator to assess compensation claims is a step towards transparency, but it will be essential for the government to demonstrate accountability in its dealings moving forward.
A section of financial experts suggests that the decision to terminate the partnership could potentially open new avenues for investment. The transparent approach in handling the project's termination might send a positive signal to potential investors about Kerala's commitment to economic development.
