Andhra Pradesh Chief Minister Y.S. Rajasekhara Reddy had presided over large-scale corruption in the State, with huge amounts of money being made and squandered by a small group of influential politicians and their friends and relatives. Loopholes in the rulebook had been cleverly exploited, with the Chief Minister’s son Y.S. Jagan Mohan Reddy and a clique of favoured industrialists emerging as major beneficiaries.
It is not usual even for corrupt Governments to float tenders, open the bids, and then cancel the internal benchmark value and upload a new value higher than the first figures by nearly Rs 400 crores. The Y.S.R. Government in Andhra Pradesh set a record of sorts when it did exactly that for the prestigious Sripada Sagar irrigation project in 2005. The tender process for the project for lifting water from the Godavari River for the irrigation of two lakh acres in the State, was openly rigged, and despite strong political protests the Reddy Government continued to defend the blatant violation of rules.
The Government floated a tender for the project through an advertisement in newspapers in January 2005. The bids were opened in March of the same year, after which Rs 1,344 crores was uploaded on the internet as the internal benchmark on 15 March 2005 as the lowest bid. Two days later, it is learnt, the chief engineer issued telephonic instructions to the executive engineer, and the very next day the Rs 1,344 benchmark was cancelled and Rs 1,725 crores was uploaded on the internet as the new internal benchmark value. The tender acceptance letter was issued by the Principal Secretary, Irrigation Department to the consortium IVRCL SEW Navayuga.
Opposition parties noticed the change in the benchmark and went to town protesting what they alleged was open corruption. A short duration discussion was also held in the State Assembly, but the Government refused to budge. The Opposition alleged that the Government had tampered with the files. The Telugu Desam Party wrote to Prime Minister Manmohan Singh asking him to intervene to stem what they claimed was “large scale and brazen corruption being indulged in, under cover of irrigation projections by Dr Y.S.R. Reddy, Chief Minister of Andhra Pradesh”. The letter also pointed out that there was no change in the area of ayacut, number of tanks, pipeline, designs etc., and the hike in figure was totally ad hoc. The Prime Minister did not respond.
In 2007, a CAG report took a serious view of the corruption in irrigation, and said clearly that the estimates prepared by the contractors were at variance with each other. Despite this the consultants had not been made responsible for any of the deviations. The CAG report said that the procedure, through which the work was allotted, gave undue benefit to the contractors, and budget estimates had been inflated by Rs 349.85 crores. This also did not elicit any action by the State Government.
The corruption was visible from the preliminary stage. Documents with Covert prove that rules were flouted even at the pre-bidding stage to favour two companies that finally got the contract. A pre-qualification for participating in the bidding as advertised by the Government on 27-06-04 and 19-11-04 was that a company should have a consistent Rs 400-crore turnover for at least five years. For the consortium it was clarified that the lead company should meet this requirement, while the others should have a Rs 100-crore turnover for the same period of time. Despite this, a consortium of at least five companies that did not meet this requirement was given the contract.
The figures for the consortium below for the two previous years before they bid for the contract tells the story of rules being overturned to favour “favourites”:
THE STINK OF CEMENT
Covert has documents to prove that there are links between many other projects and companies floated by the Chief Minister’s son Y.S. Jagan Mohan Reddy. A copy of the resolution passed at the board meeting of the directors of M/s Raghuram Cements Limited (Now called Bharati Cements and sold to Vicat Group of France) , held at the registered office in Sagar Society, Road No. 2, Banjara Hills, Hyderabad on 25 January 2007 at 10 a.m. resolved that the company “do allot 4,20,10,000 equity shares of Rs 10/ each” to:
Y.S. Jagan Mohan Reddy 3,00,00,000
M/s Silicon Bulders 1,20,00,000
D. Prabhakar Reddy 2,000
Jella Jagan Mohan Reddy 2,000
G. Murali 2,000
B.M. Prabhakar 2,000
Ms Elizabeth George 2,000
Covert has a copy of several Board resolutions of this company, confirming that Jagan Mohan Reddy is the director of Raghuram Cements and fully authorised to deal with the financial transactions. It is learnt that India Cements, Dalmia Cements and G2 Corporate Services invested in the company, before it had even started production. Dalmia Cements bought the shares on two occasions, 29-03-07 and 26-02-08, first time by investing Rs 8 crores on purchase of 1,666,600 shares at a premium of Rs 110 per share, and on the second time, Rs 19.86 crores for 137,931 shares at Rs 1,440 premium per share, totalling Rs 27.9 crores.
Former Home Minister in a Congress Government and now Rajya Sabha member with the TDP, Mysoora Reddy told this correspondent, “Even before Raghuram Cements started construction, these companies bought their shares at an inflated premium and in return benefited in other ways from Y.S.R. Reddy and his Government.” Mr Reddy said that Dalmia Cements got licences for mining and construction in Cudappah district from the Chief Minister, who also used his influence in Delhi as a “Sonia Gandhi favourite” to get railway tracks laid for facilitating the movement of goods.
SAKSHI: INVESTMENTS AND REWARDS
The Chief Minister’s son, Y.S. Jagan Mohan Reddy is emerging as a major business figure in Andhra Pradesh. He has also set up the huge Jagathi Publications Pvt. Ltd. that runs a Telugu newspaper, Sakshi. Senior politicians in Hyderabad are surprised at the “financial progress” made by Jagan Mohan in just a matter of years. Congress MP V. Hanumantha Rao told Covert, “This boy was nothing in 2004 [when Y.S.R. came to power] and now he has a lot of businesses, two or three companies can be understood, but so many…” Congress members are particularly worried that on the eve of the Lok Sabha and Assembly elections, the Opposition will be able to get sufficient mileage from the commercial deals of the top Reddy family.
Documents with Covert show that 32 companies have invested in Sakshi, with the share capital of each running into several crores. Gilchrist Investments Private Limited, with Nimmagadda Prakash, brother of Nimmagadda Prasad, as managing director, has a share capital in Sakshi of nearly Rs 40 crores. Nimmagadda Prasad is an individual investor along with India Cements, Dalmia Cements and G2 Corporate Services in Raghuram Cements. Prasad bought the Rs 10 face value shares at a premium of Rs 175, totalling Rs 8.5 crores, like others, before the production started. He was allotted 459,459 shares.
Gilchrist Investments is registered in Chennai, but Nimmagadda Prakash has given his address in the records as Plot 376, Defence Colony, Sainikpuri, Secunderabad. The other managing director of the company listed in the records is Nimmagadda Vijayasaradhi, also a resident of Plot 376 with the same address.
Another company investing in Sakshi, Carmel Asia Holdings Private Limited has the Chief Minister’s son Y.S. Jagan Mohan Reddy as the director, with a total investment in Sakshi of Rs 50 crores. He bought the shares in his own company for Rs 10, while most of the other companies investing in Sakshi paid a premium of Rs 350 per share. Yet another company, Alpha Villas Pvt. Ltd. that has invested in Sakshi, is part of Jagan Mohan Reddy’s circle of friends and family. Its MD is Nimmagadda Vijayasaradhi, with the same registered address of Plot 376, Defence Colony, Sainikpuri, Secunderabad. The directors, Brahamadi Maheshwar Reddy and Ghanta Sunitha Rani have not given their full addresses but listed these as Sainikpuri, Secunderabad.
Sources said that several of the companies investing in Jagan Mohan Reddy’s pet Sakshi project have been rewarded with other projects. For instance, Hetero Limited that has invested nearly Rs 4 crores in Sakshi, has been allocated a pharmaceutical SEZ at Polyppaly. The CAG, in its report, had pulled up the Government for non-compliance of Government of India guidelines. The CAG has criticised the allotment of 75 acres each to Aurobindo Pharma and Hetero Drugs Pvt. Ltd. on lease basis. The CAG report raises questions about what the critics of the project were alleging: the leniency of the terms on which the land was allotted. The lease premium was a nominal Rs 7 lakhs per acre and an annual rental of just 1% on lease premium, i.e., Rs. 7,000 per acre for 25 years. The CAG had also rejected the Government rebuttal to its report that claims adherence to Government of India guidelines.
THE VANPIC link
Jagathi Publications Private Limited and Raghuram Cements are also the key companies behind the huge Vanpic Project. The State Government has exploited every loophole to seal this Rs 5,000-crore project that involves the acquisition of 25,000 acres of land in the State. The Andhra Pradesh Government, to avoid floating global tenders, entered into a direct memorandum of understanding with the Government of Ras Al Khaimah [RAK] in March 2008 to develop an integrated port, and port-based industries consisting of a port for handling bulk cargo, liquid cargo terminal, ship building industry requirements, container terminal etc., all collectively referred to as the VANPIC project. The MoU provided very clearly for an Indian partner, and this was finally extended to include Matrix Enport Holdings Pvt. Ltd., Vanpic Ports Pvt. Ltd. and Genex Structural Projects Pvt. Ltd. Sources said that these companies were incorporated by Nimmagadda Prasad and his brother N. Prakash who are, as pointed out earlier, individual investors in their close friend Jagan Mohan Reddy’s ventures. Under the agreement, RAK holds 51% of the stakes and the remaining 49% is with the associates of Matrix Enport.
It is common knowledge in Hyderabad that Vanpic is being run by Nimmagadda Prasad and Prakash through their nominees and relatives. Directors at one point included C.H. Ravi Reddy who is also the director of Alpha Avenues that had invested in Sakshi; and K. Venkateshwarag Reddy also with Gilchrist Investments that has major shares in Sakshi. The links between the Chief Minister, his son, their relatives and friends are well established through these mega projects cleared by the State Government. Only recently Y.S.R. Reddy directed the companies and Government officials to expedite the land acquisition for VANPIC, and given the fact that Andhra Pradesh is going for elections now, expressed his worry that the project was behind schedule.
MAYTAS, SATYAM AND METRO
No rules apply in Andhra Pradesh under Chief Minister Reddy, who wilfully orders officials to clear deals and projects in violation of all laws. The link between the Congress and Satyam’s Ramalinga Raju, who is now under arrest for a major corporate scam, is established through the manner in which the bid for the multi-crore Hyderabad Metro Rail project was finalised, and the rules totally violated with full connivance of the Reddy Government. The financial bids for the rail project were opened on 23 July 2008 by a three-member committee comprising the principal secretary of the Finance Department, the MD of Metro Rail and the MD of the Water Board. Instead of being recorded immediately, the minutes of the meeting were entered two days later on 25 July after the bids were opened. The official announcement was made on 28 July. The committee finalised the bid for the Navbharat-led consortium including Maytas, IL&FS; and ItalThai. Of these the last had technical expertise having major construction experience in Thailand. Centre for Economic and Social Studies researcher C. Ramchandraiah, who has been closely following this case, told Covert in Hyderabad that on 25 July 2008 itself, Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia wrote to the Prime Minister, citing the bid in Hyderabad, to state that “we are engaged in pushing for a similar effort for other metropolitan cities”. Mr Ramachandraiah said it was strange that Dr Ahluwalia was aware of the outcome of the bid in Hyderabad even before it had been publicly announced.
The minutes of the meeting spoke of the “Navabharat-led consortium”, indicating that Navabharat was the lead company in the group. The financial bid of the consortium was also presented on the letterhead of Navabharat Ventures Limited by its director [finance and corporate affairs] G.R.K. Prasad. Maytas was not the lead member of this consortium at any stage. But when it came to the construction and operation of the Hyderabad Metro Rail, a new company, Maytas Metro Private Limited suddenly appeared and was registered on 9 September 2008 under the Companies Act. The Government did not react and this was then changed to Maytas Metro Limited [MML] on 17 September. The MML finally signed the concession agreement with the Andhra Pradesh Government on 19 September 2008 in total violation of all rules of bidding. The State Government did not object even once, and the composition of the newly formed MML reveals it to be a family concern of Ramalinga Raju, of Satyam fame.
Documents with Covert give the list of six persons who were allotted equity shares under Maytas Metro Private Limited. Directors include B. Nandini Raju, wife of Ramalinga Raju [Satyam] and B. Teja Raju [son of Ramalinga Raju]. Incidentally, Ramalinga Raju is currently getting VIP treatment in Hyderabad jail, with access to good food, television, books and cigars.
WAQF LAND SOLD ILLEGALLY
Chief Minister Y.S.R. Reddy is also presiding over what sources describe as the completely illegal selling off of Waqf property in the State. There is a long list of cases where prime Waqf land has been sold for a pittance, with others getting the bulk of the money. In what is a classic case reflecting rampant corruption, 100 acres of Waqf property at Manakonda village was acquired by the State Government and sold to an infrastructure firm Lanco at throwaway prices. Earlier, a single bench of the Andra Pradesh High Court declared the land to be Waqf property and in an interim order later stopped construction. The State Government went in appeal and this order was stayed.
The editor of Siyasat, the Hyderabad-based Urdu daily, Zaheeruddin Ali Khan told Covert that Lanco made a profit of Rs 10,000 crores on this property that was acquired from the Wakf Board at a price of just Rs 60 crores. The land was initially acquired for an IT park but it has since been changed to a residential area costing Rs 13,500 crores, while just Rs 427 crores were paid officially for the land, according to Mr Khan. Interestingly, the Chief Secretary of Andhra Pradesh, J. Hari Narayan, in an affidavit filed on behalf of the State Government before the High Court stated that in an earlier Ayodhya-Babri Masjid Land Acquisition case “the Hon’ble Supreme Court held that even a mosque can be subject to land acquisition. So there is no immunity to either a Dargah or to a Waqf land being acquired by the state. So the concept ‘once a waqf always a waqf’ has no legal basis.”
Individuals, delegations, Opposition parties have all taken up the acquisition and sale of prime Waqf property, but the Chief Minister has refused to look into this. Lanco is owned by Congress MP L. Rajagopal, who is close to Y.S.R. Congress MP V. Hanumantha Rao, who has been vocal against the State Government on this issue, told Covert, “Once a Waqf property it is always a Waqf property and no one can acquire or sell it. Unfortunately, the TDP started the sale of Waqf land, but now the present Government is continuing with the same policy. It is regrettable that we in the Opposition were critical of the sale, but are doing the same now.” Mr Rao said that the Minority Affairs Minister Mohammad Shabir Ali is equally responsible for the sale of prime Waqf land. He further said that a parliamentary committee under Deputy Chairman of the Rajya Sabha, Rehman Khan, was convinced that Lanco had acquired Waqf land and urged the State Government to revoke the deal. But the Chief Minister has taken no remedial action.
POWER FRAUD
In yet another major fraud, shares for a power company bought by Jagan Mohan Reddy [the Chief Minister’s son], were sold for a premium of Rs 61 to two Mauritius based companies within the first year of production. The total came to Rs 124 crores. The companies are 2i Capital PCC and Pluri Emerging Companies PCC. There are allegations of financial irregularities against the second company. The two Mauritius companies, significantly, appointed V.S. Reddy as their nominee on the board of Sandur Power Company Limited. Reddy has been the family auditor of Chief Minister Y.S.R. Reddy for 20 years. The Chief Minister has also appointed Reddy as a member of the Tirumala Tirupati Devasthanam Board that boasts a multi-crore revenue. V.S. Reddy was also appointed director of the Oriental Bank of Commerce.
Jagan Mohan Reddy, according to documents with Covert, holds 16,958,580 shares that equal 31.69% of the capital. The shareholders include two other companies, Kealawn Technologies [P] Ltd., Chennai and Saraswathi Power and Industries Pvt. Ltd., and of both these Jagan Mohan Reddy is the Managing Director. This brings in control of roughly 50% of the total shares of the Sandur Power Company [¼]
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