KIADB eyes Rs 4,000 crore in dues in 4 months, industries question cost escalation

Bengaluru: A city-based entrepreneur was in for a rude shock recently when the Karnataka Industrial Areas Development Board (KIADB) asked him to cover land escalation cost amounting to Rs 2 crore, for an industrial plot allotted to him in 2008 at Rs 57 lakh per acre.

This is how it unfolded: In 2008, he was allotted an industrial plot at Dobbspet at Rs 57 lakh per acre, five years after which he was required to pay additional amount to cover escalated land price.

With the plot being entangled in disputes with local farmers over inadequate government compensation for land, it was only in April 2022 that the entrepreneur finally got the lease-cum-sale deed.

By then, the price of the plot had escalated to Rs 1.37 crore. In July this year, the Board sent another notice for him to pay Rs 61.14 lakh more, with the total cost of the plot adding up to nearly Rs 2 crore, leaving the entrepreneur flummoxed.

Seeking justice

The Karnataka Small Scale Industries Association (KASSIA) has now written to the KIADB seeking justice for the entrepreneur. 

KASSIA president Shashidhara Shetty told DH this is but one of the several such cases. 

Entrepreneurs are at a loss to pay such exorbitant sums as they cannot repeatedly raise bank loans, he says. 

Notices issued

Following a recent review meeting where it was found that the KIADB had to get Rs 4,248 crore in dues for plots allotted to 5,932 industries over the years, the Board has begun issuing notices with a target to collect all dues within four months.

As much as 50% of the pending dues pertain to the difference amount arising from escalation of land prices, according to KIADB officials.

The remaining half of the dues include cases where people have paid only 30% of the initial amount for a plot without paying the rest, which they are required to within 90 days.

Tentative price

The government allots plots to industrialists at a tentative price. The project is expected to start within three years of land allotment, upon which the government gives lease-cum-sale deed to the industrialist.

At that point, an additional cost including land escalation price and infrastructure charges are levied. Within 10 years, the project must be completed and sale deed obtained.

“The Board has to generate its own revenue and does not receive funds from the government. As such, we are required to pass on all the costs to industries,” Industries Minister M B Patil says, urging industries to pay dues at the earliest.

A 2018 government order caps this price escalation to 20% of the tentative amount collected from industries.

The order notes that the escalated prices are over a 100% in several cases. The KIADB must also declare the final price within two years of issuing the lease-cum-sale deed, the order stated, noting that prices are increased several years after land allotment.

Industrialists say KIADB is flouting this norm. Even though the ceiling is applicable retrospectively for projects, the KIADB has failed to extend the benefits. 

Other lands

As a result of such exorbitant costs, 96% of the entrepreneurs operate from private estates and revenue land without approaching KIADB, Shetty says.

Industrialists who spoke to DH explain that much time and money is wasted as these plots are tied up in litigations with farmers.

Industrialist and former president of FKCCI Sampath Raman said the problem has grown more complex post-Covid as industries are still reeling under losses.

“The government must act against willful defaulters, but extend time for dues for those who have a genuine problem,” he urges.

The government must incorporate the projected land cost at the time of plot allotment, KASSIA general secretary Nagaraju S opines.

Former industries minister R V Deshpande points out that the government must not speculate about land prices.

“Lands are acquired for industries to generate revenue for the state. As long as the industry is operational within the stipulated time, the government’s goal should not be escalation of price, but generation of investment,” he says.

Lands are acquired for industries to generate revenue for the state. As long as the industry is operational within the stipulated time the government’s goal should not be escalation of price but generation of investment

— R V Deshpande
former minister

The Board has to generate its own revenue and does not receive funds from the government. As such we are required to pass on all the costs to
industries. 

— M B Patil
Industries minister