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Horana tyre factory: Tycoon agrees to pay more
View(s):Controversial businessman Nandana Lokuwithana has agreed to pay a higher lease premium for the Horana land earmarked for his tyre factory, export more of his output and develop site infrastructure at his cost.
Mr. Lokuwithana consented to the new terms in negotiations with the Board of Investment (BOI), official sources told the Sunday Times. He will now deposit Rs 210 million upfront as lease premium as opposed to the Rs 170 million earlier pledged. He will allocate an additional Rs 350 million to develop the site infrastructure, a sum the BOI would earlier have had to spend.
The tycoon has also vowed to export a higher proportion of his output; the ratio was not immediately available. And it has been agreed that the staff quarters, which he initially wanted inside the BOI zone in contravention of usual procedure, would be located on the fringes of his property and accessed from outside. Discussions are ongoing.
The Dubai-based businessman, who bought the Ceylon Steel Corporation in 2009, proposes to set up the tyre factory in the BOI’s Wagawatte Industrial Zone in Horana. The foundation stone was laid in January in a plot of 100 acres identified for the project. But concerns soon arose regarding the original deal negotiated for him by the Ministry of Development Strategies.
Among other things, it envisaged granting him a 99-year lease at an annual rent of Rs 10,000 (roughly Rs 100 per acre). The BOI’s prevailing policy is to limit leases to 50 years.
The Cabinet Committee on Economic Management (CCEM) also sanctioned a massive discount on the lease premium; instead of paying the floor rates decided upon by the BOI, he was to have the land at rates calculated by the Government’s Valuation Department.
Work on the site was suspended on President Maithripala Sirisena’s instructions and the agreement was revisited. Among the concerns flagged was that the BOI would incur losses in leasing out the land at a fraction of the agency’s floor price.
But while the new agreed premium is Rs 40 million higher, it does not come close to the rates usually quoted by the BOI for property in the zone. The nominal annual rental also stays the same.
The BOI charges a premium of US$ 40,000 (Rs 6 million) an acre for a 50-year lease of WIZ land. The annual ground rent per acre at WIZ is US$ 3,850 (around Rs 578,000).