The Central Group is confident it can renew its lease with the State Railway of Thailand (SRT) for land in Bangkok's Lat Phrao district after the end of next year, despite the government's plan to terminate the contract.

The group insisted it had honoured the contract by paying the lease fee of Bt10 million a year.

The SRT is discussing with the Attorney-General's Office and the Council of State whether to terminate its 30-year lease with the Central Group by claiming that the group had not followed the agreement.

However, Central Pattana managing director Kobchai Chirathivat said the company had honoured the agreement and cited the ruling by the Council of State issued last year that SRT was obligated by the original lease contract to negotiate the lease extension with the Central Group in accordance with the Joint Venture Act.

"The Central Group wants to extend the contract for another 30 years with a return to the government based at the appropriate level and worth several hundreds of millions of baht. The new contract will cover both the land lease fee and the buildings thereon," he said.

The Central Group - via its retail-development arm, Central Pattana - leased 47-rai plot of land from the SRT in 1978, to operate a hotel and a department store. At that time, the value of the land was estimated at Bt80 million.

Since then, the Central Group has invested about Bt2 billion to develop the area. It estimates that over the term of the contract, building and land fees will reach Bt8 billion.

Kobchai said the Central Group had also increased the lease fee every year, from Bt3 million initially and rising 5 per cent each year from the fifth year onwards.

At present, the lease fee is Bt10.6 million a year. The total lease fee is about Bt300 million.

As per the terms of reference, the SRT required a minimum rental fee of Bt1.75 million per annum. But the Central Group offered to lease the plot at Bt3 billion from the beginning.

"The lease fee was already considered higher than was stipulated in the terms of reference. Thirty years ago, nobody expected that plot of land would become the golden area it is today," Kobchai said.

Kobchai said the Central Group was ready to negotiate the terms with an intention to provide a fair return. If the SRT hired qualified experts to evaluate the asset price, it would be acceptable to the Central Group.

But he said, "If the price is set too high, the negotiations may not be successful."

Kobchai refused to disclose how much the company received from retailers renting shops inside the arcade on the land.

Meanwhile, the National Legislative Assembly's Transport Committee, chaired by Bannavit Kengrien, is considering the contract between SRT and the Central Group.

Bannavit said the Transport Ministry would ask the SRT to explain the contract's details. The committee will also send a letter asking the Council of State whether the issue must proceed in accordance with the Joint Venture Act.

Watcharapong Thongrung

The Nation