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Rs 9,300-cr Lafarge-Nirma deal may hit Jharkhand roadblock

india Updated: Jul 16, 2016 16:58 IST
Debashish Sarkar
Lafarge Holcim

Lafarge India operates three cement plants and two grinding stations with a total capacity of around 11 million tonnes.(Reuters File Photo)

France-based Lafarge Holcim announced a divestment deal to sell its five units in India, including the one at Jojobera in East Singhbhum district of Jharkhand, for an estimated enterprise value of $1.4 billion, or Rs 9,300 crore, to Nirma Limited.

But the deal may hit a roadblock if Lafarge fails to obtain approval of the state government for transfer of its Jojobera plant site land to Nirma, state officials said on Wednesday.

“It’s mandatory to seek state government’s prior approval for third-party transfer of leased land, in this case leased to Tata Steel. The district administration had informed this to the company, requesting it to seek government’s approval,” said KK Sone, the state land and revenue secretary.

“They have to comply with the administration’s notice. Any violation would draw administrative, civil as well as criminal actions.”

The East Singhbhum deputy commissioner, Amit Kumar, has been asked to calculate the revenue that the government stands to gain from such land transfer and its registry.

The district administration had served a notice on Lafarge on October 10 last year when Lafarge was in talks with Birla Corp for a similar deal, informing it of the necessity to obtain the state government’s prior approval before transfer of land on which the Jojobera plant stands.

The plant was built on government land leased to Tata Steel.

Copies of the notice were sent to Tata Steel and the state land and revenue department.

“We have not received any response from Lafarge nor any application from the company seeking the state government’s approval for transferring the Jojobera plant site, even after media reports of a deal to sell the Jojobera plant to Nirma,” said Sunil Kumar, Jamshedpur additional deputy collector (land and revenue).

Efforts to get Lafarge’s comments failed despite repeated calls, SMSes and emails.

Lafarege Holcim chief executive officer Eric Olsen announced the letter of agreement with Nirma Limited on Monday evening, saying the company would divest its three cement plants and two grinding units, including the one at Jojobera, to Nirma.

Olsen said the deal was subject to approval by the Competition Commission of India (CCI) and the process of takeover would start only after that.

The administration’s notice to Lafarge highlighted four major anomalies, including the term of lease agreement with Tata Steel that was renewed on August 20, 2005, after the steel major transferred its Jojobera cement plant to Lafarge in 1999.

“The steel major didn’t take any approval of the Bihar government for getting into a license agreement with Lafarge, permitting use of the Jojobera plant site. Moreover, there’s no provision of licensing right to the lessee in either the Bihar land reforms act or in the two Tata lease agreements, in 1985 and then in 2005,” an official said, quoting the notice.

Tata Steel had signed a business transfer agreement for its Jojobera plant with Lafarge India on March 9, 1999, after its board of directors decided to sell it in 1998. Subsequently, it got into a license agreement with Lafarge on November 1, 1999, allowing the latter the use of the Jojobera plant site for a license fee of Rs 200 an acre.

Lafarge India Employees Union president Rakeshwar Pandey said on Wednesday that the workers welcome the new management with Nirma. “We will talk with them to ensure that there is no retrenchment and all the facilities and salary to the employees is continued,” he said.