There are several similarities between the coal blocks allocation scandal (Coalgate) and the late YS Rajasekhara Reddy’s Jalayagnam irrigation “loot-for-everyone” scam in Andhra Pradesh. First, there is the similarity in numbers. The Comptroller and Auditor General (CAG) put the value of the Coalgate losses at Rs 1.86 lakh crore. This figure is also the latest estimate of the Jalayagnam project’s bloated costs. It started with Rs 1.1 lakh crore and is now at Rs 1.86 lakh crore, and could go even further as projects get unduly delayed.
The second coincidence is that CAG’s Jalayagnam report was one of the last papers signed by Vinod Rai signed before he retired as the Comptroller and Auditor General (CAG) in May. Rai can thus be seen as the common factor in the unveiling of several scams in the UPA regime, from 2G to CWG to Coalgate to Jalayagnam. The third point of congruence is the high influence politicians seem to have wielded in both the Coalgate and Jalayagnam scams. If several politicians, in the Congress – and even some opposition parties – played a crucial role in bagging coal blocks for free, in Jalayagnam politicians-cum-businessmen tilted the balance in the scheme towards skullduggery.
The fourth point of similarity is the dubious nature of the companies bagging the projects: in 2G and Coalgate, parties completely ineligible for the award of spectrum or coal mining got licences and blocks. In Jalayagnam, contracts were awarded to politician-contractors, some with phantom joint venture (JV) partners. The foreign partners existed more on paper than on the ground. Of which more later.
In this instalment of the Jalayagnam scam investigated by INN, we bring you not only the reality of phantom JV partners, but also the emergence of scamster B Ramalinga Raju (of Satyam infamy) as a key beneficiary of YSR’s contracts. Jalayagnam’s core idea was to lift the flood waters of the Krishna and Godavari rivers to reservoirs so that 100 lakh acres of arid land in the state could be irrigated – most of it in the parched regions of Rayalaseema and Telangana. Very little of the water has actually been tapped as yet, but politicians of various hues satiated their thirst for easy money, all right.
As discussed in our first report, Rs 25,000 worth of Jalayagnam projects went to companies owned by MPs and MLAs, most of them in the Congress party. Five Congress MPs – Union Textiles Minister Kavuru Samba Siva Rao, T Subbarami Reddy, Rayapati Sambasiva Rao, Lagadapati Rajagopal and Komatireddy Rajgopal Reddy – figure in this list of favoured politician-contractors. The list of politicians also includes three Congress MLAs – Adala Prabhakar Reddy, Komatireddy Venkat Reddy and former State Minister Pileru Ramachandara Reddy. But some opposition politicians also benefited. TDP MPs – Modugula Venugopala Reddy, Nama Nageswara Rao and CM Ramesh, among them.
However, in this segment of our investigations, we will focus on how nearly Rs 1 lakh crore worth of projects got allocated to only four joint ventures. This is the story of a scam within a scam. One of the JVs is MEIL (Megha Engineering & Infrastructure Ltd), which got 28 packages of work valued at Rs 36,916 crore. SEW (Southern Engineering Works) got Rs 25,369 crore worth of Jalayagnam projects. B Ramalinga Raju’s Maytas (which is the reverse of Satyam) got Rs 23,186 crore worth projects.
And a Russian Company called ZVS (Zarbezhvodstroy Corporation) bagged projects worth Rs 13,989 crore. But these joint ventures had stakeholders whose names CAG could not verify. “The stake of individual firms could not be analysed, since the (AP irrigation) department did not provide the details relating to their incorporation as JVs and the extent (percentage) of their interest in the particular contract in question, despite a specific request to this effect,’’ says the CAG report on Jalayagnam.
According to a decision of the state government, no company was entitled to get more than three projects. But these four companies made JVs with different companies to corner Rs 1 lakh crore worth of projects. CAG says that these companies even changed their partners in the JVs several times in different combinations to bag the projects.
MEIL does not even figure in the state government’s original empanelled list of contractors. Before 2003, the balance-sheet of MEIL shows that its worth was not even Rs 200 crore. But after 2004, the state government gave away Rs 36,916 crore worth of projects to MEIL-led joint ventures. MEIL formed JVs with 20 companies to bag these projects.
Overnight, MEIL, owned by PP Reddy, became a multi-million dollar company with a number of subsidiary companies, which came into existence only after 2004 – MEIL Holdings Ltd (2009), MEIL Pura Ltd (2011), MEIL Rusgaz Engineering Private Ltd (2010), MEIL India Ltd (2009), MEIL Green Pura Pvt Ltd (2013), MEIL Green Power Ltd (2011), MEIL Advanced Systems Ltd (2009) and MEIL Foundation (2012). MEIL had not even qualified for the empanelment, but it formed various JVs to fulfill the conditions of the bid. SEW, though an old company, too formed 20 joint ventures with different companies to bag 51 packages valued at Rs 25,369 crore. SEW’s director CL Rajam was instrumental in getting these JVs for SEW. SEW’s political links are evident in the recently launched Namaste Telangana, an online Telugu newspaper backed by several Telangana politicians.
B Ramalinga Raju’s Maytas Infrastructure was launched in 2003. One year later, it was empanelled in the contractors’ list for irrigation projects. And between 2004 and 2009, just before Ramalinga Raju admitted to committing a fraud with Satyam, YSR gave Maytas 28 packages worth Rs 23,186 crore. Maytas Infra was apparently created to get a huge share of the irrigation business in Andhra Pradesh. The state government even allowed Maytas to reduce its bid amounts to qualify for the tender! The tender rules had prescribed a ceiling of five percent above the IBM (initial benchmark) value for the award of tenders.
In the Polavaram project (package LMC 8), according to the CAG report, Maytas, the single qualified bidder, reduced its bid amount by Rs 4.88 crore (from Rs 118.26 crore to Rs 113.38 crore) after the bid was opened, which brought down the tender premium from 9.49 percent to 4.97 percent, that is, below five percent, to avoid rejection as per the tender conditions. Maytas had no special credentials to qualify for irrigation projects. So it formed JVs with 17 companies in different combinations. Twenty-three of the 28 works allotted to Maytas are still pending on various accounts, though the state government has released significant amounts of money in some projects.
No irrigation project, however, was allotted to Maytas Infra after August 2009, when IL&FS acquired the company soon after Raju’s confessions and replaced him as the promoter of Maytas Infra. IL&FS’s official spokesperson refused to comment on pre-2009 Maytas’ gains from Jalayagnam. Many AP politicians had roped in foreign firms to qualify on the experience criteria for obtaining projects under Jalayagnam. Russia’s ZVS is one of them. It figures in 11 JVs worth over Rs 11,000 crore in AP and is supposed to be the most prominent Russian company present in India.
But the Russian embassy has not listed ZVS in its list of 28 Russian companies present in India. It apparently has only a virtual existence. INN located its Indian representative Dr Parveen Nayyar and its Indian office address from the website. When INN visited the ZVS office at X-17, Hauz Khas, in South Delhi, the address had no nameplate with ZVS written on it. The address prominently displays the office of the South Delhi Urology Clinic. And there is a letterbox near the staircase, bearing the name of Parveen Nayyar of Sun Overseas Euro Sun (I) Pvt Ltd and Prerna Marketing Pvt Ltd. Parveen Nayyar and his office refused to speak on ZVS.
They didn’t respond to email, SMSes or even telephone calls. Field investigations by INN also reveal that ZVS is missing on the ground. Who is then executing Jalayagnam projects on behalf of ZVS? Sources in the AP irrigation department allege that Congress MP Lagadapati Rajagopal’s Lanco is a sub-contractor of ZVS.
INN wrote to him enquiring whether Lanco is a vendor contractor to ZVS. Rajagopal has not replied despite several reminders. ZVS has also paired with many other politicians’ companies, including Progressive Constructions belonging to Union Textiles Minister K Samba Siva Rao, and Congress MP Modugula Venugopala Reddy’s Ramky Infrastructures. CAG had taken two sample studies of foreign JVs to show that the foreign companies were missing in action.
TDP MP Nama Nageswara Rao’s Madhucon group had empanelled with a Chinese Company Sino-Hydro for two Jalayagnam projects worth Rs 747 crore. Sino-Hydro was found missing in action. Nama Nageswara Rao admitted this, but told INN that Sino-Hydro had sub-contracted field work to other local companies and not to Madhucon, though Sino-Hydro holds control over drawing, designs and supervision.
Similarly, another Chinese Company, CR18G, is said to be partnering with Hyderabad-based BSCPL (B Seenaiah and Company Projects Ltd), but is missing on the field. The works involved executing spillway and other packages in the Polavaram project.
“The experience certificates furnished by the foreign agencies pertain to their respective countries or elsewhere and not in India. As such, the experience certificates were not susceptible for verification by the AP government… During the exit conference (July 2012), the department (irrigation) accepted that this issue was yet to be addressed,’’ says the CAG report.
But the Andhra government has not learnt from past experience. The latest controversy is about Transstroy India, a family company of Congress MP Rayapati Sambasiva Rao, which has recently grabbed the Rs 4,054 crore Polavaram project on the strength of its tie-up with a Russian company UES.
Rival parties have taken this case to the court alleging that Transstroy India has submitted a fake JV certification. Chief Minister Kiran Kumar Reddy sent a team of engineers to Russia to solve this riddle and finally gave the go-ahead to Transstroy India. But the court is yet to decide on the case.
UES, for the record, does not figure in the list of Russian Companies in India as displayed on the Russian Embassy’s website!
Previous: Jalayagnam Scam - 2: Who Gained From YSR’s Largesse
Jalayagnam -1: YSR’s Rs.90,000 Crore Let’s-All-Loot Scam
