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Government may buy back private infra firms’ stake in DMICDC

07 Jun 2011 Evaluate

The government is planning to replace private firms with state-backed institutions from Delhi Mumbai Industrial Corridor Development Corporation (DMICDC). The DMICDC is a special purpose vehicle (SPV) set up by the government and private infra firms IL&FS and IDCF. At present, IL&FS and IDCF holds 41% and 10% stake in DMICDC, respectively. The union government owns the remaining 49% of DMICDC.

The ministry of industry has requested the cabinet to buy back 51% stake held by private firms as it does not want private players to make profits from the upside investment made by the government. The preliminary requirement of project is estimated to be around Rs 17, 000 crore. The other reason of this replacement is that government wants to avoid any conflict on biding for projects as both private firms will be allowed to bid for the projects, such as industrial zones. The 51% stake held by these two private firms will be offered to state run financial institutions such as LIC and IIFCL. RP Singh, secretary, Department of Industrial Development and Policy said, “we want the SPV to be owned by the government and government institution.'

The DIMC project is one of the ambitious infra development project of government. The 1,500 km corridor runs across six state of western region - Uttar Pradesh, Haryana, Rajasthan, Madhya Pradesh, Gujarat and Maharashtra. The DMIC includes nine mega industrial zones of about 200 to 250 sq km, a high speed rail freight line, two airports and three ports, six-lane intersection-free expressway connecting Nation’s Capital Delhi and Financial Capital Mumbai and a 4000 MW power plant. The $90 billion project will be funded by government of India and Japanese loans and investment by Japanese firms and through Japan depository receipts issued by the Indian companies. 
 

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