Representative image, image courtesy of itdc.co.in.
“The government has nothing to do with being in business”. Prime Minister Narendra Modi stated this in February during a webinar on privatization. A month later, sources told ET NOW that the government was in the final stages of checking out one of its most valuable hotels – the 25-acre Hotel Ashok in Lutyens Delhi. With the divestment, the government is confident that it can get close to 5000 rupees from a long 60 year lease.
In recent years the government has launched a divestment drive by the Ashok Group of Hotels, the ITDC (Indian Tourism Development Corporation) accommodation chain. In 2015 there were eight hotels in the group and now there are only four – of which Hotel Ashok in Jammu has been out of operation since June 2020.
Why is the government checking out these hotels?
Continuous losses
In ITDC, the Indian government holds 87.03%. In 2019-20, the company reported a meager profit of Rs 22.48 billion from operating these hotels. In 2018-19 the winning number was 39.57 billion rupees.
Before that, things were red. ITDC’s losses reportedly amounted to Rs.886 billion between 2014 and 2015; Rs 5.20 crore in 2015-2016; Rs 4.99 crore in 2016-17 and approximately Rs 95 lakh in March-December 2017, bringing the total loss to Rs 20 crore over the three years.
Keeping pace with others
In response to a question from Lok Sabha in 2020, Minister of State for Tourism, Prahlad Singh Patel stated: “Some of the reasons for losses are the wage structure of ITDC employees, which is higher than industry norms, non-renovation and renovation due to ongoing divestment process and competition from other modern hotels. ”
ICMR India also blames the high labor costs for the group’s demise. The increase in the availability of total space versus demand and a weak global economy are some of the other reasons, it is said.
A status check
Most of these ITDC assets change hands from central government to the states. In 2017, the Jaipur Ashok Hotel and the Lalitha Mahal Palace Hotel in Mysore were transferred to the Government of Rajasthan and the Government of Karnataka, respectively. In 2019, the Patliputra Ashok Hotel in Patna was transferred to the provincial government of Bihar for a negotiated value of 13 billion rupees. and the Janpath Hotel was handed over to the Delhi government.
According to the ITDC annual report, the disinvestment process for the remaining properties is currently underway, which includes the joint leasing of the Pondicherry Ashok hotel and the award of the operating and maintenance contract to the Kalinga Ashok hotel in Bhubaneswar.
The fate of others
The joint venture hotels operated by ITDC are also not in good shape. Hotel Ranchi Ashok closed in 2018, Hotel Nilachal Ashok in Puri has been out of service since March 2004, and Hotel Anandpur Sahib is an incomplete project.
In 2019-20, thirteen cases of group vigilance were resolved while eight are still pending. According to the company’s annual reports, the cases include anomalies in the tendering of sound and light shows, CBI cases demanding bribes for clearing payments, payment delays from suppliers, etc.
In such dire situations, the government felt it was best to check out of these hotels. In fact, ITDC Hotels disinvested began in the mid-1990s. However, the process stalled when the unions objected to the plans. After 20 years, the process with Hotel Ashok’s leasing plan has finally picked up speed again. If things go according to plan, the government will soon have only one core Ashok Group hotel in its kitten – the Samrat Hotel, which the government currently does not want to offer for sale for security reasons.
