How A Pricing Error Cost Bengal Rs 12.86 Crore In Flipkart Land Deal

The Comptroller and Auditor General (CAG) has flagged a loss of Rs 12.86 crore to the West Bengal Industrial Development Corporation Limited (WBIDCL) over the allotment of land to Flipkart's logistics arm, Instakart Services, at the Haringhata Industrial Park in Nadia district.

The audit report, according to a PTI report, said the loss occurred because WBIDCL fixed the land price without excluding large water bodies from the total project area. This, the CAG noted, was contrary to the corporation's own pricing policy.

The findings are part of the CAG's 2024 report on Public Sector Undertakings for the period ending March 31, 2023. The report was tabled in the West Bengal Assembly on Friday. Notably, CAG reports for the previous four financial years had not been tabled by the erstwhile Trinamool Congress government.

The Haringhata Industrial Park is home to Flipkart's biggest fulfilment centre in the country. The facility, inaugurated in 2022, has a storage capacity of 50 lakh cubic feet spread across six mezzanine levels and serves as a key logistics hub for the e-commerce giant.

What Does The Audit Report Say

According to the audit report, the West Bengal government decided in August 2017 to transfer 1,326.93 acres to WBIDCL for industrial development. Of this, 358.19 acres were acquired for the Haringhata project at a cost of Rs 206.73 crore. WBIDCL took possession of the land in October 2018.

The corporation later invited investors, fixing a base price of Rs 63.49 lakh per acre for a 99-year lease on an "as-is-where-is" basis.

Instakart applied for 107.35 acres in September 2018 to build a regional distribution centre with a proposed investment of Rs 991 crore. The proposal received approvals from the WBIDCL board and the state Cabinet's Standing Committee on Industry before the land was allotted in January 2019. Another 1.77 acres were allotted in 2020, taking the total leased area to 109.12 acres.

However, during an audit in December 2022, the CAG found that the industrial park's layout included 55.89 acres of water bodies, which cannot be used for industrial development.

This reduced the actual allocable land to 302.299 acres, far lower than the 358.19 acres used by WBIDCL to calculate the base price.

The auditor pointed out that the corporation's own pricing policy requires the base price to be calculated by dividing the acquisition cost, along with a 10 per cent administrative charge, by the actual allocable land.

Had this formula been followed, the base price would have been Rs 75.23 lakh per acre, instead of Rs 63.49 lakh per acre, the report said.

Based on this calculation, Instakart should have paid a lease premium of Rs 82.09 crore for 109.12 acres. Instead, WBIDCL collected Rs 69.23 crore, resulting in a shortfall of Rs 12.86 crore, according to the CAG.

West Bengal's Response

The state government, in its response submitted in May 2023, said the WBIDCL board had approved the base price after detailed discussions in July 2018 and that the Cabinet had also cleared the allotment on the same basis.

The CAG rejected the explanation, saying the government failed to justify why the corporation's own pricing policy was not followed. It reiterated that the 55.89 acres of water bodies could not have been treated as allocable land for industrial use.

The auditor also referred to the West Bengal Inland Fisheries (Amendment) Act, 1993, which prohibits filling water bodies for construction without prior state approval, as well as a 2019 Supreme Court order stressing the protection of local water bodies.

The report concluded that by calculating the land price without excluding the non-developable area, WBIDCL suffered a loss of Rs 12.86 crore in the allotment to Instakart.