Beyond The Green Lines

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[<p><p align="justify"><span class='dropthecap'>T</span>he Lavasa Hill Township and its holding company HCC are caught in a legal logjam. Following the 25 November show-cause notice and stop-work order from the environment ministry (MoEF), work at the township site near Pune has come to a halt. According to the company, 10,000 workmen are sitting idle. Though the Bombay High Court on 6 December stayed the MoEF notice till the ministry passes a final order, Lavasa committed not to go on with the work till the next 16 December hearing. On that date, the bench pleaded with MoEF to "partially allow" some work to go on. Counsel for the ministry Darius Khambatta has promised to seek advice and revert back to the court. <br /><br />Meanwhile, Lavasa has filed its reply against MoEF's show-cause notice and the ministry is expected to deliver its final order by 31 December. Seeing the tenor of MoEF's interim order, it is unlikely the final order will be any different. Lavasa will then have to challenge the order afresh. Meanwhile, the permission given to Lavasa by the Maharashtra government has been challenged by Medha Patkar's National Alliance of People's Movements (NAPM). Lavasa has a long and serious legal battle on hand. <br /><br />More serious is the financial heat. The hill township is a humungous 25,000-acre project straddling 18 hills and covering an area of 100 sq. km. Kicked off in 2001, the project cost is estimated at close to Rs 40,000 crore. By the beginning of this year, HCC had pumped in Rs 2,000 crore — Rs 800 crore as equity and Rs 1,200 crore as debt. HCC had also done a QIP last year raising Rs 1,500 crore, most of which will find its way into Lavasa.<br /><br />Where do the remaining funds come from? Lavasa was planning a Rs 1,500-crore IPO last year that had to be held back because of the recession. MoEF's action has again put the IPO on the backburner. Secondly, the accruals from advance sales have been crippled. Rajgopal Nogia, president of HCC Real Estate, had told BW in an earlier interview that sale of 6-8 million sq. ft of realty stock in Lavasa was expected to yield Rs 2,000-3,000 crore over two-three years after the company opened sales for its second phase. For realty projects, continuing cash flow from advance sales is crucial. So, till the legal issues with MoEF are resolved, it is unlikely that any buyer will put his money into Lavasa. With advance sales blocked, the ability for Lavasa to raise debt will also be dented.<br /><br />The foundation of the challenge to Lavasa is based on failure of the company to take statutory clearance from the Union environment ministry as required under the Environment Impact Assessment notification of 1994. Lavasa, on the other hand, has questioned the delayed action. The company has argued that it does not need the Union ministry's permission since it had been given environment clearance on 18 March 2004 by the Maharashtra government for 2,000 hectares.<br /></p><div align="justify">Counsel for NAPM, Y.P. Singh, told BW he plans to enlarge the scope of the challenge to include seeking criminal action against those officials and politicians who have indulged in corruption. "There is no way they can avoid clearance from MoEF, and that means there will have to be a public hearing. They (Lavasa Corp.) will see the resistance at that stage," he says. This is going to be a battle to watch.  <br /><br /></div> <script type="text/javascript"> var intro = jQuery.trim(jQuery('#commenth4').text()) var page = jQuery.trim(jQuery('#storyPage').text()) if (page.indexOf(intro) < 0) { jQuery('#commenth4').attr('style', 'display:block;') } </script> (This story was published in Businessworld Issue Dated 27-12-2010)