Jalayagnam: Ramalinga Raju's Maytas got huge YSR largesse

Satyam founder Ramalinga Raju got away with huge projects from YSR's Jalayagnam project through Maytas.

Raman Kirpal September 18, 2013 18:16:44 IST
Jalayagnam: Ramalinga Raju's Maytas got huge YSR largesse

Everyone knows that B Ramalinga Raju, promoter of Satyam Computer Services, defrauded investors by overstating profits and incomes. On 7 January 2009, he admitted it all in a letter to the stock exchanges and the company’s board.

However, the Satyam fraud may well have gone unnoticed if Raju had managed to pull off a bigger scam: merging his infrastructure company Maytas (the reverse of Satyam) into Satyam to hide the discrepancy. But Satyam investors cried foul in December 2008, and Raju was left with no figleaf to cover up.

Jalayagnam Ramalinga Rajus Maytas got huge YSR largesse

Ramalinga Raju. Reuters

Maytas, though, was at the centre of an even bigger scam – late Andhra Pradesh Chief Minister YS Rajasekhara Reddy’s (YSR's) Rs 1.86 lakh crore Jalayagnam irrigation project. The project was about lifting the flood waters of the Krishna and Godavari rivers to quench the thirst of two crore residents and provide irrigation to 100 lakh acres of arid and dry lands in the state, most of it in Rayalaseema and Telangana.

However, very little water has been lifted even now, but the fortunes of several Congress and some opposition politicians have certainly got a serious lift.

As Firstpost noted in its earlier three investigative reports on Jalayagnam (see below), companies belonging to the families of eight MPs, including a Union minister, and three state MLAs, cornered many of the dream Jalayagnam irrigation projects worth over Rs 25,000 crore. The total project cost is now Rs 1.86 lakh crore – which makes the size as big as the Coalgate loss indicated by the Comptroller and Auditor General (CAG).

Maytas Infrastructure of Ramalinga Raju was yet another beneficiary of YSR’s largesse. Maytas was launched a year before YSR came to power in 2004, but its golden years were between 2004 and 2009, before Raju confessed to the Satyam scam. Before the confession, YSR’s government had awarded irrigation projects under Jalayagnam worth Rs 23,186 crore to Maytas-led joint ventures.

After the Satyam scandal broke, the central government ordered a 'serious fraud' investigation into the nexus between Maytas Infra and Satyam Computer because the Satyam board had made a bid to acquire Maytas for US $300 million to hide its own fraud.

Maytas Infra was created largely to grab a share of YSR’s Jalayagnam pie. In 2004, it was empanelled in the contractors’ list for irrigation projects. The state government allowed some companies, including Maytas, to reduce their bid amounts to qualify for the tender. The tender rules had prescribed a ceiling of 5 percent above the IBM (initial benchmark, or indicative minimum price) for those whose bids were too high.

In the Polavaram project (package LMC 8), on 27 August 2005, according to a CAG report on Jalayagnam, the single qualified bidder (Maytas’ Ramalinga Raju) reduced his bid amount by Rs 4.88 crore (from Rs 118.26 crore to Rs 113.38 crore) after opening the bid. This brought down the tender premium from 9.49 percent to 4.97 per cent, that is, below five percent, to avoid rejection as per tender conditions.

“The bid evaluation report prepared on 30 August 2005 indicated that the (irrigation) department waited for four months for the receipt of the rebate by the single bidder,’’ says the CAG report.

After 2009 and Raju's confession, Maytas got no further irrigation projects from the state because it was acquired by IL&FS.

Maytas’ individual stakes in these irrigation joint ventures is not known. The state irrigation department refused to give details about individual stakes to CAG during the audit of the Jalayagnam scheme.

Said CAG: “The stake of individual firms could not be analysed, since the 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.”

Not only this. Maytas changed its joint venture partners several times to form new JVs to bag works in the “open category.” As per the law, no company was entitled to get more than three project works.

But Maytas, along with two other companies – MEIL and AAG - bagged contracts worth Rs 11,630.89 crore by forming JVs when these firms had other JV partners in other projects. Giving another instance, CAG says that in the Pranahita Chevella project, four firms – MEIL, Maytas, SEW and NCC - were involved in 15 contracts worth Rs 21,843 crore by forming JVs in 15 different combinations.

In all, Maytas got 28 project packages worth Rs 23,186 crore and it formed JVs with 17 companies. About 23 works are still pending on various accounts. This is despite that fact that the state government has released significant amounts of money in some projects.

For instance, a joint venture of Maytas-NCC (Nagarjuna Construction Company) was awarded package C1-3 of the Left Main Canal of the Polavaram Project worth Rs 213 crore on 19 March 2005. The state government has released Rs 159 crore (74 percent) and it was supposed to be completed in 2007. Still, 25 structures are yet to be constructed and four km of lining along the canal is yet to be executed.

In another work (package OC 38, Tadipudi Lift Irrigation Scheme) worth Rs 178 crore, awarded to Maytas alone on 1 October 2004, the state government has given Maytas Rs 173 crore (97 percent of the total value of the project) so far. Work on 306 distributaries is yet to be taken up. Only gravity canal work is more or less completed, while 48 structures are yet to be constructed.

Maytas-led joint ventures were also offered 10 percent of the total value of projects as ‘mobilisation funds’, which Raju had apparently availed himself of immediately after getting the projects.

It is, however, not known how much money the state government had released in irrigations projects awarded to Raju’s company. Only a criminal investigation can reveal this fact.

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 in the Jalayagnam project. But one should not accuse YSR or only allowing his own party MPs to feather their nests. TDP MPs - Modugula Venugopala Reddy, Nama Nageswara Rao and CM Ramesh – were also allegedly favoured. The list of favoured politicians includes three Congress MLAs - Adala Prabhakar Reddy, Komatireddy Venkat Reddy and former State Minister Pileru Ramachandara Reddy.

YSR launched Jalayagnam initially with 26 irrigation projects over the Krishna and the Godavari to harness their flood waters. But the number of projects kept increasing: first to 46, then 64, later 74 and finally to 86. Even the land for these projects had not been acquired, but politician-contractors were hurriedly awarded the projects.

CAG points out that some of the projects based on Krishna floodwater are technically not viable, as "the water that can be drawn in 30 flood days would be far less than the requirement of these projects." CAG arrived at this conclusion on the basis of the state government’s own expert committee report, which says the number of flood days on Krishna is only 30 and that too, at only 40 percent dependability.

(Read the earlier three parts of the Jalayagnam investigations by Firstpost here, here, and here.)

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