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French firm to pull out of Calcutta hotel deal

Krittivas Mukherjee in Calcutta

A French hospitality firm has virtually pulled out of a deal to acquire the city's oldest hotel because of persistent workers' opposition.

For the past four years the West Bengal government has been negotiating with Accor Asia Pacific of France for leasing out the state-run Great Eastern Hotel.

Several times it nearly finalised the deal, but dithered in the face of opposition from the hotel's employees against privatisation.

Now AAP appears to have run out of patience and has all but backed out.

The leasing out of GEH has become a major economic issue in Communist-ruled West Bengal as it is seen as a symbol of the government's attitudinal change towards private investment.

After initial indecision about the choice of company for GEH's lease, the state government finally short-listed AAP and talks with the company were in an advanced stage. But all through the hotel employees opposed the move.

According to tourism department sources, AAP has told the state government that it is no longer interested in acquiring GEH. The sources said they believed the French firm is unhappy with the government's "tardy" handling of the whole deal.

The government has failed to persuade the workers' union to accept AAP's package. Under the package, the company was ready to take the ailing hotel on a Rs 10.5 million lease for the first year.

The lease amount could go up in subsequent years proportionate to the rise in the price index. Alternatively, the government could be offered three percent of the total annual turnover of the hotel as lease money.

The lease period had been initially fixed for 30 years, which could be extended by another 30 years subject to fulfilment of additional clauses that the government may wish to incorporate at the end of the initial lease period.

AAP proposed to invest Rs 800 million to renovate and upgrade the hotel to a 200-room five star deluxe heritage facility.

The main point of contention was AAP's plans for the present employees of the hotel. The firm had made it clear that it would not be able to retain the entire bloated staff of 450.

The company proposed a Rs 150 million voluntary retirement scheme to shed most of the staff. While elderly employees would automatically be given the golden handshake, the younger staff would have to clear an interview to qualify for the retirement benefits.

AAP had also suggested that in order to retain as many present employees as possible, there had to be reallocation of duties and re-deployment of manpower.

The hotel's workers had been fighting tooth and nail against the decision to invite AAP as there was fear that a drastic job cut would be effected without suitable compensation.

The falling standards of the hotel, once considered the jewel in the city's hospitality crown, have resulted in the occupancy rate dropping to 10-20 per cent of the capacity.

The hotel has suffered huge operational losses. The accumulated loss is estimated to be around Rs 50 million annually. The hotel meets its day-to-day expenses from daily earning and loans raised against fixed deposits. The government pays the staff salary.

Official sources, however, said even if AAP pulled out of the GEH deal, the government would invite other private firms to take the hotel on lease.

Indo-Asian News Service

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