Jalayagnam scam: Who gained from YSR’s largesse

Like many other states, Andhra Pradesh has always had its fair share of scams. But under the late YS Rajasekhara Reddy, the state embarked on one of the most ambitious water projects in the country called Jalayagnam with an initial estimated cost of Rs 1,10,000 crore. Of this, Rs 90,000 crore has already been disbursed. It turned out to be one big opportunity for politician-businessmen to divert business and money their way.

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 and dry land in the state could be irrigated – most of it in the parched regions of Rayalaseema and Telangana. Very little of the water actually got tapped, but politicians of various hues satiated their thirst for easy money, all right.

As Firstpost noted in the first part of its investigative report yesterday, 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. But one should not accuse YSR of only allowing his own party MPs to feather their nests.

One of the irrigation canals that is part of the Jalayagnam project. Raman Kirpal / Firstpost

One of the irrigation canals that is part of the Jalayagnam project. Raman Kirpal / Firstpost

Even TDP MPs - Modugula Venugopala Reddy, Nama Nageswara Rao and CM Ramesh – got a share of the contract booty. The list of other favoured politicians includes three Congress MLAs - Adala Prabhakar Reddy, Komatireddy Venkat Reddy and former State Minister Pileru Ramachandara Reddy.

Every law in the land was breached by some or all of the beneficiaries. Many had no clearances from the forest department; others did not have green signals from the environment department or even the Central Water Commission – both mandatory for large water projects. Some did not even have investment clearance. The state government broke its own laws, and was busy doling out not just contracts, but cash, to the contract awardees.

Even as most laws were ignored, YSR’s government was busy raising the number of projects from an initial 26 to 86. In the process, the cost escalated from Rs 1,10,000 crore to Rs 1.86 lakh crore – a sum approaching the 2G and Coalgate scams – but very little water has actually flowed from these investments.

In this second instalment of the story, Firstpost will detail who got what share of the cake, and how many of the politicians used their political clout to keep track of business opportunities by asking pointed questions in parliament.

Most of the MPs/MLAs linked to the Jalayagnam projects were (or are) contractors, founders and promoters of their respective infrastructure companies. When entering parliament or the legislative assembly, they step aside and hand over the reins of the business to sons, daughters, wives and brothers. Their companies then flourish.

Here are brief details of the MPs/MLAs and their companies.

*Kavuru Samba Siva Rao

Union Textiles Minister and Congress MP Kavuru Sambasiva Rao, a five-time Lok Sabha member since 1984, is the founder and leading light of Progressive Constructions. The company’s website reads: “Thanks to his (K Samba Siva Rao’s) bold vision and far sight, the company today has the means to undertake any type of civil engineering contracts of any magnitude.’’

Rao’s daughter Srivani Mullpudi now looks after Progressive Constructions. The company bagged eight Jalayagnam packages worth Rs 3,739.22 crore (More details in the next part).

Progressive Constructions secured all its projects between 2004 and 2009, when YS Rajasekhara Reddy was Chief Minister. Only one project work is nearing completion (15 percent work remaining) seven years after the lapse of its deadline (19 October 2006), while the rest are incomplete and have crossed their deadlines for various reasons as on 30 June 2013.

Here are a few samples of questions Samba Siva Rao asked in the Lok Sabha – many relating broadly to his businesses.

- Unstarred Question No 4722 dated 18 December 2010 to Minister of Planning: Whether the government has promoted private sector investments in basic infrastructural projects like roads, railways, power, etc, including consumer and social sector.

- Unstarred Question No 5860 dated 8 September 2011: Whether the government proposes to review the inter-linking of rivers project; whether the government has proposed to bring a new Act for the utilisation of waters of inter-state rivers and if so, the details thereof

* T Subbarami Reddy

Filmmaker and Congress MP T Subbarami Reddy had founded Gayatri Holidings, now known as Gayatri Group. His wife T Indira Subbarami Reddy took over as chairperson in 1995, when he entered politics and won a Lok Sabha seat on a Congress ticket in 1996. A two-time Lok Sabha MP, Subbarami Reddy has been a Rajya Sabha member for three consecutive terms since 2002.

In June 2012, he did contest for the Lok Sabha from Nellore constituency, which he lost to a YSR Congress candidate by a massive margin. Forbes magazine in 2011 had listed him as India’s 100th richest billionaire.

Subbarami Reddy’s Gayatri Group was awarded 14 packages worth Rs 4,798.76 crore under Jalayagnam. Only one of the 14 works was completed in Karimnagar district after a lapse of five deadlines.

He put up an unstarred question dated 5 March 2010 about seeking Central Water Commission (CWC) approval to the Indira Sagar Project across the Godavari river in Andhra Pradesh.

* Komtaireddy Rajgopal Reddy

Another Congress MP Komatireddy Rajgopal Reddy’s Sushee Group was awarded three packages worth Rs 2,618.39 crore. Rajgopal Reddy has listed bonds, debentures and shares worth Rs 2.93 crore with Sushee Hitech Construction P Ltd in the name of a Hindu Undivided Family (HUF). His wife K Laxmi Reddy is a director with Sushee Infra Ltd. All the projects are under progress, while the deadlines have lapsed.

A sample of the questions he asked in the Lok Sabha:

- Unstarred Question 596 dated 11 November 2010 to the Ministry of Railways. The details of works undertaken to repair old bridges of railways in the 11th Five-Year Plan, so far, zone-wise; the funds allocated and spent on them, zone-wise; whether any preference is being accorded to rural and backward areas, state-wise, including Andhra Pradesh; and the details of public-private partnership models adopted in such repairing of old bridges.

- Unstarred Question 2715 dated 10 August 2010 to Minister of Agriculture: Whether a large area of the country is under irrigation; if so, the details thereof, state-wise; whether a large cultivable area in the country having huge potential for agricultural output for coarse cereals, pulses and oilseeds continues to be dependent on rain; if so, the details thereof, state-wise; and the details of the steps taken to increase the irrigated area in the country?

* Rayapati Sambasiva Rao

Tobacco trader and five-term Congress MP Rayapati Sambasiva Rao is the latest addition to this list. He is a tobacco trader, but a sudden rush to infrastructure development projects gave birth to Transstroy India in 2001, perhaps named after a Russian company Transstroy Corporation. His relative (brother) M Sambasiva Rao is leading the company.

Chief Minister Kiran Kumar Reddy awarded Rs 4,054 crore worth of projects at Polavaram to Transstroy on 2 March 2013. It has listed a Russian Company UES as its joint venture partner.

Transstroy’s bid was the lowest at Rs 4,054 crore against the government base price of Rs 4,717 crore. It is, however, mired in court controversies and Transstroy is alleged to have submitted fake JV papers. Kiran Kumar sent a team of two engineers to Russia and China to check Transstroy’s claim, but the engineers cleared Transstroy and Kiran Kumar endorsed the Polavaram package despite the fact that the state government is yet to acquire prime land (35 acres) for this project.

Despite knowing that Transstroy can’t even begin work, the state government immediately released Rs 40.54 crore as mobilisation funds. Now, the new allegation against Transstroy is that the latter’s officials had accompanied the team of engineers sent to Russia and China.

Rayapati Sambasiva Rao asked the following questions in the Lok Sabha:

- Unstarred Question No 7 dated 22 November 2012 to the Ministry of Water Resources: Whether the European Union has extended its support to India for water project proposals; and if so, the details thereof and the conditions agreed with EU by the government?

- Starred Question No 146 dated 14 July 2009: Whether the NHAI has recently restructured 29 highway development projects by changing the scope of the project. If so, the details thereof.

- Unstarred question No 237 dated 3 July 2009: Whether the World Bank has offered a loan of Rs 25,000 crore for urban development, if so the details thereof, the projects identified, etc.

* Lagadapati Rajagopal

Another Congress MP Lagadapati Rajagopal retired from business to pursue politics in 2002 and his brother L Madhusudan Rao took over as chairman of the Lanco Group. A new holding corporate entity, Lanco Infratech Ltd, was created in 2006. On records, Lanco Infratech has three packages worth Rs 128.41 crore.

But, according to Andhra Pradesh irrigation department sources, Lanco is the vendor contractor for a Russian Company ZVS (Zarubezhvodstroy Corporation) in four projects and is handling Jalayagnam projects worth Rs 7,052 crore.

Firstpost emailed a questionnaire to Lanco, Congress MP Lagadapati Rajagopal and Parveen Nayyar, Indian representative of ZVS. Firstpost also sent SMSes and called up their offices to carry their version, but they have not responded yet.

*Modugula Venugopala Reddy

TDP MP Venugopala Reddy is the promoter of Ramky Infrastructures Ltd, where he still has stakes, and his brother Alla Ayodhya Rami Reddy is the majority stockholder. Ramky bagged 17 packages worth Rs 3,794.82 crore under Jalayagnam.

The state government has pre-closed one of the projects on Ramky’s request, while in another project, the state government has accused it of slow progress. Only three medium packages related to flood control work at East Godavari have been completed. And work on all other packages is in progress.

* Nama Nageswara Rao

The Madhucon Group belongs to the family of TDP MP Nama Nageswara Rao. He was director of Madhucon Infra Ltd as late as 2006. He was first elected to the Lok Sabha from Khammam constituency in 2009. The company’s name is now Madhucon Projects with his brother Seethaiah as director. Nageswara Rao’s son Nama Prithvi Teja is also part of the Madhucon Group of Companies.

Madhucon was awarded four packages worth Rs 1,644.15 crore. All the works were allotted during YSR’s tenure as chief minister. All the deadlines have lapsed and have been revised three-four times. No project is near completion.

A sample of questions he put up in the Lok Sabha:

- Unstarred question No. 5839 dated 2 May 2013, asking about inordinate delays in irrigation projects.

- Unstarred question No 6113 dated 3 May 2010, asking about infrastructure investment bottlenecks or whether the government proposes to consider huge investments in infrastructure sector and their details. Details of a recently held conference of state industry ministers and whether the matter relating to land acquisition for industrial development was discussed in the conference and their details.

Nama Nageswara Rao told Firstpost that he did not influence the state government for getting this project. He has resigned from all posts of the Madhucon Group of Industries. His family has a 51 percent stake in this listed company managed by professionals.

“Since I had contested on a TDP ticket and had won against Renuka Chaudhary, the Congress government in Andhra Pradesh had disqualified Madhucon for empanelment in Category I contractors. In fact, we went to court and only after the court’s intervention the state government held pre-qualifications of the companies again and Madhucon was then listed in Category I contractors,’’ Nama Nageshwara Rao told Firstpost.

Admitting that it is not ethical to be a politician and businessman at the same time, he claimed that he was using his rich experience to ask infrastructure-related questions in Parliament to make the legislators more sensitive towards development. “My business is 30 years old and I relinquished …all the posts after I joined politics,’’ says Nama Nageswara Rao.

Nama Nageswara Rao had joined politics in 2004 and had lost to the Congress candidate from Khammam Lok Sabha constituency. According to documents available with Firstpost, he held positions in the family company Madhucon in 2006 and even as late as 2008, when he won the elections.

*CM Ramesh

Another TDP MP, CM Ramesh, was the founder chairman of Rithwik Projects Pvt Ltd (RPPL), now managed by his son CM Rajesh. Rithwik got packages worth Rs 4,200 crore. All the works are pending.

Three Congress MLAs - Adala Prabhakar Reddy, Komatireddy Venkata Reddy and Pileru Ramachandra Reddy (former state minister, who have resigned on the Telangana issue) - have also got hundreds of crores worth projects under Jalayagnam.

In fact, Adala Prabhakar Reddy runs a company in his name APR Construction Ltd and has got three packages worth Rs 120 crore.

Pileru Ramachandra Reddy was the state minister for forests, environment, science and technology. He was first elected on a Congress ticket in 2004 and before this he was a contractor for irrigation projects, construction, real estate and mining. His company, PLR Projects, is part a joint venture which bagged several Jalayagnam projects worth Rs 1,400 crore.

Another Congress MLA Komatireddy Venkata Reddy reportedly has stakes in the Sriramsagar project (packages no 27 and 28) worth Rs 1,200 crore.

The individual stakes of these family companies of MPs/MLAs may be higher, because many of them are allegedly working as vendor contractors of foreign companies in the name of joint ventures.

Many foreign companies, like the Russian ZVS, Chinese companies Sino Hydro and CR18G, who are part of the joint ventures with these politician-contractors, are allegedly missing on the ground. Even the state government has conceded this point to the Comptroller and Auditor General (CAG) during the preparation of the audit performance report of Jalayagnam.

The CAG has raised doubts about the completion of the Jalayagnam project. It has, in fact, called the project infeasible, because Andhra Pradesh is a power-deficit state and it will require over Rs 5,000 crore per annum to energise the 31 lift irrigation plants planned under Jalayagnam.

"The Government is now saddled with a huge number of projects whose completion will take long, and the sustainability of many projects is becoming doubtful on account of inadequate availability of water and power. The financial burden of these incomplete projects (and associated contracts) on the state exchequer will be felt for a long time to come,’’ says the CAG report.

The state government, however, appears to be rather unapologetic, aggressive and optimistic on the Jalayagnam front!

Two main canals – right and left – are more or less ready, but the pump station is yet to be constructed to pump water into these canals. The state government is perhaps preparing to issue another tender for the maintenance of these unused canals!

In the third part of this investigation, we shall look at the progress made by some of the Jalayagnam projects bagged by Andhra’s enterprising politician-businessmen.

Read the first part of the Jalayagnam scam here.

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