As part of its ambitious asset monetisation programme, the Centre is all set to transfer the iconic Ashok Hotel—India’s first state-owned 5-star and Delhi’s first —to the private sector on a 60-year contract. It will also offer land parcels in the 21.5-acre complex for the setting up of a hotel or serviced apartments and other development works.
The plan, expected to be cleared by the cabinet shortly, envisages two land parcels to be offered on a longer-term licence term of up to 90 years. Although the government is seeking to complete the process at the earliest, the entire transaction is unlikely to be completed in the current financial year.
The land parcels include a 6.3-acre plot, classified as spare land, that can be used for the development of serviced apartments or a hotel. The construction is proposed on the side facing the British High Commission.
Another 1.8-acre plot, one the same side, is being offered for commercial development with a higher floor area ratio.
The remaining land in the complex is proposed to be offered to potential bidders, which can be part of the main hotel complex so that there is a possible upside for the entity that bags the deal.
It will also help improve the realisation from the project, a source explained. Like other PPP projects, the land will come back to the government on expiry of the licence.
The winning bidder for the hotel can completely refurbish it but will not be allowed to make changes to the exterior of the property that came up in 1956 along with a large convention centre to host a conference by the UN.
An analysis by the tourism ministry, which is piloting the proposal, has suggested that there is vast commercial and revenue potential that has remained untapped. Against the permitted FAR of 3.25, just 1.3 has been utilised.
Similarly, just 23% the permitted 40% ground coverage has been utilised.
Besides, there are non-revenue aspects, such as common utilities, power sub-stations (for Hotel Ashok and Samrat) as well as large parcels being used for staff quarters that are proposed to be offered. Samrat Hotel has been kept out due to security considerations.
The hotel, with more than 500 rooms, was included in the ambitious asset monetization programme as its performance remains below par when compared with other five-star properties in Lutyen’s Delhi. Replacing worn-out carpets and poorly maintained furniture, along with renovation, is estimated to cost Rs 400-500 crore according to conservative government estimates.
In any case, the government believes that it should not be in the business of running hotels, an area where the private sector is much more efficient.