Eyebrows raised as government bows down before Tecom; experts say govt need not pay compensation

Thiruvananthapuram: Despite failing to adhere to the terms of the agreement, the government has decided to provide compensation to TECOM as it exits from the Kochi Smart City project. This decision contradicts the contract, which specifies that compensation should be claimed from TECOM in the event of a breach. The opposition has strongly objected to this decision, emphasising that TECOM should only receive compensation if the government fails to meet its obligations.

Although 13 years have passed since the agreement with TECOM, the project has shown minimal progress. TECOM’s exit is reportedly due to government pressure, as TECOM failed to fulfill key contractual conditions, including creating 90,000 job opportunities and developing 8.8 million square feet of IT/non-IT space within 10 years.

According to the agreement, compensation to TECOM is only warranted if the government fails in critical areas such as issuing the Special Economic Zone (SEZ) notification, acquiring and handing over land, or providing necessary infrastructure.

Controversy over committee appointment

The inclusion of TECOM's former Managing Director Baju George in the government-appointed evaluation committee has sparked controversy. This committee was tasked with recommending an independent evaluator. Currently, Baju George serves as the MD of Overseas Keralites Investment and Holding Limited, a government-initiated company. Other members of the committee include the IT Mission Director and the CEO of Kochi Infopark.

Conditions if the government breaches the agreement:

1. TECOM can withdraw from the Smart City project, and in such a case, the government must take over TECOM’s and its affiliates' shares.
2. TECOM can acquire all shares held by the government. An independent evaluator will determine the value of these shares, after which the government will lose any claims over the project’s Special Purpose Vehicle (SPV) assets.
3. TECOM can recover expenses incurred so far, as determined by an independent chartered accountant appointed jointly by TECOM and the government.

Conditions if TECOM breaches the agreement:

1. An initial notice will be issued. If the breach persists for six months, the lease agreement with TECOM will be terminated, and the government can take over all shares held by TECOM.
2. The land provided by the government, valued at ₹91.52 crores, will revert to government control. TECOM will lose all claims over the SPV's assets.
3. The government can recover its expenses from TECOM. An independent chartered accountant, jointly appointed by both TECOM and the government, will determine the amount.
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