"Administration degenerates," C.M. Chang wrote in 1936, ''into mere correspondence. The result is that politics too often ends where it should begin, with the assertion of intentions. A clever magistrate is one who engages a good secretary who has at his command an excellent literary style which, like charity, covers a multitude of sins.... An old hand at the game knows that since the orders are so numerous, no one is expected to take them seriously.'' Hsu Dau-lin recalled that ''Party resolutions were treated in the same way that government officials treated government documents: everything was done on paper only, and as soon as it was on paper it was forgotten."...

Unaccountable to forces outside the government, the officials tended to be concerned less with administrative goals than with bureaucratic means. "The Kuomintang,'' wrote Searle Bates in 1932, ''seems to use most of its income and energy in making its own wheels go round, with little benefit in public service. "....

"In China," Chiang Kai-shek remarked in 1932, "when something arrives at a government office, it is yamenised-all reform projects are handled lackadaisically, negligently and inefficiently.'' Scathingly he told the officials that they were ruining the nation with their refusal to shih-kan-that is, to act so that there are real results. "Our work, " he declared, "consists almost solely of the passing back and forth of documents. Stated simply, the documents sound good, but they are written negligently without regard for the true facts of the situation. With regard to practical work, Chinese either do not know how, or-if they know-they are slow in the extreme. It is not simply a matter of not completing today's work, but of putting off this week's work until next week, and indeed of putting off this month's public affairs until next month, and even of not doing this year's work until next year. This matter of amassing and delaying documents in this way can procrastinatingly ruin everything, causing deadly suffering for the common people."....

Nanking remained a Kafkaesque world of documents. Hsu Dau-lin, who knew the bureaucracy intimately from the inside, recalled that a document arriving at a provincial governmental office was transmitted through 37 steps, each of which consumed from a few hours to a few days. As a consequence, ''A reply after a half year's time was a surprise to no one. Not a few documents perished on their long and weary journey, buried alive in somebody's desk drawer. But just because of this lengthy processing procedure, mountains of documents were to be seen in every government agency."....

Perhaps the most characteristic aspect of yamenisation was the tendency of officials to produce documents of all kinds-plans, regulations, laws-that had little relation to reality and that had virtually no possibility of reaching the stage of implementation....
Lloyd E. Eastman,The Abortive Revolution, Harvard University Press, 1974

The Government's Advisors in the disinvestment of ITDC hotels-Lazard-were scheduled to visit Delhi's Samrat Hotel on February 3, 2001. Bidders naturally want to see the enterprise they are bidding for. The Advisors are to provide them every detail about the enterprise and its operations. They have, therefore, to make a thorough study of records. They have to inspect the site, the assets. This visit had itself been long delayed: it was taking place four and a half years after the process of disengaging the Government from hotels had commenced. The Advisors were in a restaurant of the hotel. Employees gathered. They started protesting, shouting, intimidating. This continued for half an hour. The Advisors could neither continue to sit because of the situation that had been created, nor could they leave as the entrance was blocked. Eventually they were escorted out through the kitchen of the restaurant. The site visit had to be aborted. The management personnel who were with them explained to them, ever so helpfully, that such protests were likely to spread to all the other hotels in Delhi.

Bidders and the Lazard people were next scheduled to visit Ashok Hotel-on March 6, 2001. At the penultimate hour the visit had to be postponed: on March 5, the employees of the hotel-a hotel that was losing Rs 9 crore that year-gave the fullest evidence possible that they would ''deal with'' the visitors should they dare to enter the hotel compound the next day. The visit was rescheduled for March 16. ITDC management was requested to make all arrangements to ensure that the bidders would not be scared away from the process. Nevertheless, disturbances were repeated that day. The visit had to be rescheduled once again-to March 26.

The Advisors were compelled to inform ITDC that in view of the incidents that were taking place, they would need to be guided as to what should be done about inspecting other properties that were coming up for privatisation, and that ''In view of such incidents, it will not be appropriate to conduct the exercise until stringent police security is provided for the safety of our team as well as the bidders.''

The results were not long in hitting back.

Just two weeks later, on April 19, 2001, Advisors were shooed away from Ranjit Hotel in Delhi by the Union employees. On July 25, as the Asset Valuers reached Qutab Hotel, the Union leaders and their cohorts came out to intimidate and threaten them. The Asset Valuers had to leave the premises without completing the physical inspection.

On August 9, the Advisors escorted prospective bidders to inspect the Janpath Hotel. Employees surrounded the room in which the meeting was taking place. They insisted that the Lazard staff leave the premises forthwith. They threatened them with dire consequences should they return to any ITDC property henceforth. They hurled threats at the hotel's executives-and threatened them against providing any information to Lazard or to bidders.

At the other end of the country, on March 26, 2002, bidders reached Kovalam Hotel in Kerala-a hotel that, in spite of its excellent location, lost Rs 3.5 crore that year, a hotel whose occupancy rate was a mere 24 per cent. While they were going round the property, they were attacked by a group. The Advisors immediately informed ITDC management about what had happened, and how the bidders had barely escaped physical harm. We will get back to you within half an hour, they were told. They heard nothing in the days that followed. On the eve of the next scheduled visit-on April 4-the Advisors did not just alert the ITDC management in advance as they did in each case. With the experience of the previous visit ringing in their ears, they alerted the management twice, and requested it to seek the help of police or whoever could take charge of security at the site. The only thing that happened as a consequence was that the bidders and Advisors were physically assaulted at the site-by a posse of persons that included employees of the hotel. The visit had to be abandoned.

At each turn, in spite of specific requests to the contrary, senior personnel of ITDC broadcast to prospective bidders who had not been present that day information about the disturbances that employees had caused.

Talk of value-depletors!

That employees of a Government undertaking could disrupt a decision of Government with such impunity was bad enough in itself. But, as we shall see, intimidation and disruptions were the least of the obstacles that the privatisation process encountered.

The first, most elementary ingredient...

The process of privatising ITDC hotels commenced in September 1996-that is when ITDC was referred to the Disinvestment Commission. The Commission submitted its report on the Corporation in February 1997.

The recommendations of the Commission were then referred to the Committee of Secretaries, headed by the Cabinet Secretary. This group cleared the basic proposal in July 1997.

The proposal was now fit enough to be submitted to the Cabinet Committee on Disinvestment (CCD)-the Committee is headed by the Prime Minister. The CCD cleared the proposal on September 16, 1997.

One full year had already gone by in reaching this stage, that is the approval in principle to begin the process. At last we were ready to begin. But not quite. First we had to appoint the Advisor for the transactions. To do so, we had to float an international tender. To do that, we had to first issue advertisements requesting interested parties to file their Expressions of Interest. The applications had to be assessed first by the Inter-ministerial Group. Their recommendation about which of the parties should be selected as the Advisor had to be put to the Committee of Secretaries, headed by the Cabinet Secretary. The recommendation of the Committee of Secretaries had to be put to the CCD, headed by the Prime Minister.

The Advisor's appointment was eventually approved on July 18, 2000. Lazard, the well-known international consultants, were selected. At last we were ready to begin the transaction-you might think. But not quite. First we had to get together the basic facts, the elementary records of things about the hotels that prospective buyers would need to know.

The first meeting of the Advisors with ITDC management was held in the first week of August 2000. We had counselled the Advisors that at this meeting they must submit a list of the data that would be needed. They did so. It was agreed on all hands that the information would be submitted by the ITDC management by the third week of September.

On the September 1, I received a communication from Lazard informing me that till then just about 10 to 15 per cent of the information had been received from ITDC. My colleagues and I got on the telephones, we held meetings. Fervent promises were made.

It didn't require much insight to glean the objective behind this foot-dragging. Nor to foresee the certain consequence: by delays of this kind, the entire privatisation process could be easily killed. Towards the end of September, therefore, we decided that we would not wait for information about all the 31 properties to become available. We would privatise in tranches: the hotels for which information was available, the ones which were less entangled in disputes about land, municipal taxes etc would be privatised first.

Feet continued to be dragged-in slow motion.

Even the most elementary information-capital expenditure, title documents, etc-was not received till the Inter-ministerial Group meeting on October 9, 2000.

Visits to all properties had to be completed by November 2000. In fact, only the eight properties that were per force earmarked for being privatised in the first round could be visited-and that too with incidents of the kind I have listed above.

Information, which was to have been provided by September 2000, continued to trickle in till December.

But by now, the Advisors and we learnt of the many disputes that ITDC had with state governments, with authorities like the Land and Development Office in Delhi, the New Delhi Municipal Committee, and the Delhi Municipal Corporation. To say nothing of these issues being resolved, even information about these disputes, and that too relating only to the eight hotels that had been selected for being privatised in the first tranche continued to trickle in till February 2001.

Information-basic, elementary information-about hotels that were selected for the second tranche was not complete till June 2001.

"Information"

To say that information arrived by February or June is of course misleading. For "information" may be said to have arrived. But even the most cursory scrutiny showed that it was contradictory, it was incomplete, in instances it was illegible. Documents made available to C.B. Richard Ellis (CBRE), the consortium partners of the Advisors, showed that the total built up area at the Temple Bay Hotel in Mamallapuram was 6,585 sq. m. But in correspondence with Lazard, the Advisors, this area was put at 3,526 sq. m. The plans that were made available to CBRE showed that the total land area of Hotel Ashok Hassan was 3.34 acres. Communications from ITDC, however, put this figure at 2.69 acres. One set of documents that reached the Advisors put the built up area of Bangalore Ashok at 13,521 sq. m. Another set put it at 12,905 sq. m. The built up area of the Ashok Hotel at Madurai was put at 4,212 sq. m. in one set of documents and at 3,871 sq. m. in another. One set of documents set the built-up area of the Lakshmi Vilas Palace Hotel of Udaipur at 11,000 sq. m.; another put this at 7,135 sq. m. The list that was given to the Advisors regarding Qutab Hotel indicated clearly that the tennis courts of the Hotel and the area and buildings of the Management Development Centre attached to it were part of the assets to be disinvested. Suddenly, a communication arrived declaring that these would not be part of the property to be disinvested-predictably that raised another issue: the Centre had no independent access, and the lease agreement contained a clause that prohibited the lessee from creating any easement on the leased premises!

Ownership of the land on which the hotels stood, the terms and conditions of lease, liabilities-on each of these elementary matters the information that was provided was incomplete, contradictory, plain wrong.

"In A Meeting'', ''On Leave''

In the Ministry of Disinvestment, every few days we would receive the copy of yet another distressing communication that the Advisors had been compelled to send ITDC management.

''Dear Mr....," began a typical letter, "This refers to the decision taken during the review meeting taken by Minister, Disinvestment, on October 4, whereby ITDC were to approach Airports Authority of India (AAI) to seek their consent to transfer the lease of the airport restaurant to the party selected for Hotel Ashok, Bangalore, under the disinvestment process and that the outstanding amounts due to AAI from ITDC would be paid by the new party. I regret that despite being aware of the importance and urgency of the entire matter, ITDC's officials have not followed up the matter aggressively with AAI. As mentioned to you over the phone, I met Mr..., along with Mr..., ITDC last week on the matter to explain the need for immediate action by AAI. I also sent a letter (copy enclosed) providing the details of the proposed arrangement and the provisions incorporated in the transaction documents to safeguard the interests of AAI to Mr... immediately after our meeting. I have since been trying to reach Mr... and even left messages for him with Mr... However, I have not received any reply from him.''

And again, "Re. ITDC-building plans for Lodhi, Ranjit, Janpath and Qutab. Dear Mr..., This refers to my fax dated July 2 to Mr... (V. P.) and our discussions on the above subject. We have been repeatedly requesting you that the building plans for the four properties are required as part of the data room documents for the due diligence of the properties by the bidders. As you are aware, the due diligence for Lodhi Hotel has started today. However, we have not yet received the building plans....''

And yet again, "Dear Mr..., I refer to my earlier fax of 23rd December on our discussions with officials of Ashok Hotel, Delhi in relation to fixing meetings with them and discussing some key issues which are to be incorporated in the Information Memorandum. I must bring to your notice that despite our repeated reminders over the telephone, and a detailed questionnaire having been sent to your colleagues, we have not received any information, neither have you responded to our office for setting up these crucial meetings. The certain change of stance in meeting your officials at Ashok Hotel hinders our process and therefore delays all our deadlines. My colleague, ...., has been trying to reach your office over the phone for the past few days without any luck and I tried both your offices today but was told that you were out of the office and busy. Could you please treat this matter as very, very urgent and respond to us immediately to enable us to complete our work within the deadlines set....''

And yet again, "Dear Mr..., This has reference to Lazard team's scheduled meeting with G.M. (Accounts) of Ashok Delhi on December 20. During the meeting the team was informed that the unit's heads of departments had received direction from their senior that they are not to interact with the Advisor's team directly. They were also told that any further information with regard to Delhi Ashok will henceforth be provided only through written communication through V.P. (Hotels). I understand that my colleague, ...., spoke with you on this mater and you confirmed the same to him. As you may appreciate that while significant information asked for can be compiled through written communication, nevertheless discussions and meetings with Heads of Departments are of utmost importance to understand the current and potential business of the hotels...."

On September 17, 2001, the Advisors were again writing to ITDC management: ''We have not yet received the annual accounts for the first tranche of ITDC properties for the year ending March 31, 2001, and assets and liabilities pertaining to these units but not yet reflected in the books of the units. I would like to reiterate that this information is required for valuation of the hotel properties and replying to the bidders' queries. Please treat this as urgent...."

On October 12, 2001: "This has reference to my telecon with you and my fax dated October 10, 2001, whereby I had requested you to urgently provide us the status on the dues payable to various regulatory authorities by the properties included in the first tranche. However, in spite of repeatedly calling you and leaving messages with your office we have not been able to contact you. We would request you to treat this as extremely urgent...."

On October 22, 2001: "Several pages of the audited balance sheet of the Hassan unit that we have received from you are not readable...." November 19: a reminder listing the properties in regard to which queries had been sent, the dates on which they had been sent, the dates by which the data was to be received, and what the status was on November 19-Samrat: "Not received''; Kanishka: "Not received''; Indraprastha: "Received''; Qutab: "Not received''; Janpath: "Not received''; Ranjit: "Not received''; Lodhi: "Not received''; Udaipur: "Received; only queries to be answered by the unit. Queries addressed to corporate office unanswered''; Varanasi: "Received only queries to be answered by the unit. Queries addressed to corporate office unanswered".

May 27, 2002: even elementary questions remain unclear. The Provident Fund Commissioner has filed a case against ITDC for not making any provision for Provident Fund during 1982-87: what would be the contingent liability on this count? Hotel Indraprastha has been demarcated: what are the outstanding liabilities to the Land and Development Office and other authorities? The 15th floor of Hotel Kanishka houses certain offices of Parliament Security. Will these be vacated after privatisation?....

May 28, 2002: "During the due diligence of Hotel Indraprastha, it was discovered that certain essential plans like ground floor plan and floor level plans had not been included as part of Data Room documents. These are essential for any bidder to make his estimate about the property. Accordingly, on the last date of Due Diligence, i.e. May 18, 2002, we had asked the Unit's Engineering Team to prepare sets of copies of the floor plans for the qualified bidders. However, one week has passed by and the plans have still not been photocopied. Bidders have been calling us frantically since their queries and technical evaluation of the property will depend on the availability of these plans. We have been following up this issue with the unit, but till today morning the photocopies had not been made.... Some of the bidders for Hotel Indraprastha are also interested in meeting Mr..., the General Manager of the Kanishka Shopping Plaza for specific questions relating to the Shopping Plaza. During the period of Due Diligence, the bidders could not meet him as we were given to understand that he was on leave....''

Sent Up And Down The Official Ladder

At every turn Advisors had to run up and down the official ladder. And as they were put off, my colleagues, and on occasion I had to do the running. To continue the instance I have reported earlier, not one of the hotels in Delhi had a Completion Certificate. To get the Completion Certificate ''with retrospective effect'', so to say, we were told to produce the Completion Plans. These too were not available. Therefore, they too had to be manufactured ''with retrospective effect''. But to do that, we were told, we must produce Completion Drawings. These too were not available. We were told that the way out was to prepare ''as is drawings''. But to prepare these, two architects had to be appointed. Fine, said both ITDC and the Central Public Works Department, but who shall pay for the architects? CPWD, said ITDC. ITDC, said CPWD. Each had its reasons: the hotels are in fact owned by CPWD, ITDC pointed out; but they are on long-term lease to ITDC, CPWD pointed out. But then what is to be done?, the Advisors and we inquired in exasperation. The matter may be referred to the Secretary, Ministry of Urban Development, said both....

In accordance with the recommendations of the Disinvestment Commission, Government had decided that the Ashok Hotel in Bangalore would not be sold outright, that along with Ashok, Delhi and the Lalita Mahal Palace, Mysore, it would be given on long-term lease. The Bangalore Ashok had been constructed in 1972, and a part in 1974. But the sale deed of the land on which it stood had not been concluded. To proceed with the hotel's disinvestment, this document was needed. The Information and Tourism Department of the state government was contacted. A draft sale deed was prepared. That had to be vetted by the Legal Department. The vetted draft was then sent to the state Public Works Department. From there it would go eventually to the Sub-Registrar, Bangalore, for execution and registration. Our Ministry had been after ITDC to have this process completed. The Company Secretary was in Bangalore for the purpose. He went to the Secretary, PWD's office. The Secretary was on leave. So, he was directed to the Acting-Secretary. From there he was directed to the Deputy Secretary-the officer who was dealing with the case. All issues have been resolved in regard to the sale deed, he was kind enough to say. In that case, can the deed be issued while I am here in Bangalore?, the Company Secretary inquired. It will take at least a week to issue the authorisation letter, he was informed....

But that was just one of myriad issues to be sorted out in one of 24 cases. The Bangalore hotel ran a restaurant at the city's airport. That restaurant had been taken on lease by ITDC from the Airports Authority of India. To transfer the lease to whoever would win the disinvestment bid required the consent of the latter authority. But formalities relating to the original agreement, it turned out, had not been completed: these included the minor point that the advance license fee and security deposit had not been deposited. ITDC owed about Rs 60 lakh to the AAI for this restaurant. AAI maintained that they would not be able to give their consent to the lease being transferred to any other party till ITDC paid these dues. ITDC maintained that it did not have the money to discharge the dues! Government decided that the dues would be paid by the successful bidder.

But for Government to decide is one thing, getting its employees to implement the decision is another. "This refers to the decision taken during the review meeting taken by Minister, Disinvestment, on October 4,'' began a communication of the Advisors to ITDC management three weeks after the meeting, ''whereby ITDC was to approach AAI to seek their consent to the transfer of the lease of the airport restaurant to the party selected for Hotel Ashok, Bangalore, under the disinvestment process and that the outstanding amounts due to AAI from ITDC would be paid by the new party. I regret that despite being aware of the importance and urgency of the entire matter, ITDC 's officials have not followed up the matter aggressively with AAI. As mentioned to you over the phone, I met Mr..., Executive Director (Commercial), AAI, along with Mr..., Area Vice President, ITDC, last week to explain the need for immediate action by AAI. I also sent a letter (copy enclosed) providing the details of the proposed arrangement and the provisions incorporated in the transaction documents to safeguard the interest of AAI to Mr...(the AAI official) immediately after our meeting. I have since been trying to meet Mr ... (the Area Vice President, ITDC) and even left messages for him with Mr... (an ITDC official). However, I have not had any reply from him...."

ITDC affirmed that they had indeed been "rigorously pursuing'' the matter. But the result could hardly reassure the Advisors, much less us in the Ministry. ''The undersigned,'' wrote the ITDC official, "after rigorously persuing (sic.) the Airport Authority and (sic.) was able to speak to gm (Commercial) of AAI Mr... and conveyed to him the urgency for communicating their decision on the matter of ITDC urgently. Shri.... acknowledged that they have received the letter from ITDC yet AAI would be in a position to communicate their decision only after the legal opinion is obtained from their legal department. He also showed his inability to communicate anything in writing to ITDC till the matter is decided at their end. However Mr.... did mention that under the circumstances AAI may not agree for the same terms and conditions to be followed in case of change of ownership after disinvestment in the instant case.''

Even as we were wading through this matter of the lease documents, the Advisors learnt that ITDC was about to enter into a contract with Indian Airlines to supply 40-odd rooms for two years to the airline at a rate one-third less than what was being realised. The contract was already in the draft stage, they learnt. That would certainly depress the valuation even further. Everyone had to give up everything else and first prevent such an obvious value-depletor....

The second and concluding part of this article will appear in the issue of BT dated September 29, 2002.