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YSR and the CAG rap

The nation\'s auditor finds that YSR\'s regime had ladled out more than 88,000 acres of land for a song to private firms.

Published: 01st April 2012 11:29 PM  |   Last Updated: 16th May 2012 07:15 PM   |  A+A-

YSR-L

HYDERABAD: The style of governance of Y S Rajasekhara Reddy during his regime (2004-2009) has come in for sharp scrutiny with the Comptroller and Auditor-General of India (CAG) tabling a damning report on land allotments during the years 2006-11 in the State Assembly.

The report laid bare the gifting away of 88,492 acres of land to private companies and individual on the basis of a process devoid of due diligence and full of loopholes. It found the allotments short of soundness on just about all parameters: job creation, investment, timely execution, profit to state or even fidelity to due process.

Almost all the land allotments studied by the audit were found to have made by bypassing standing rules, officials’ recommendations and basic business sense. Such were the decisions made that in one instance, officials did not even have the address of a promoter, Georgia Tech University, who secured allotment of 250 acres on the outskirts of Hyderabad for less than a tenth of the market value and did not put a single brick in place.

During the period of audit, the state government of Y S Rajasekhara Reddy alienated or allotted 88,492 acres of land to 1,027 beneficiaries. The audit sampled 11 of the state’s 23 district, covering 409 land allotments amounting to 50,285.9 acres.

In sum, the CAG concluded that “most of the land allotments were in violation of the rules”. In almost all cases, the trajectory of the deals was:

(1) conduct no more than a cursory scan of the proposal;

(2) be seduced by hyped-up promises of investment and jobs;

(3) alienate land at way below the market rate;

(4) tolerate project delays and change of land use; and

(5) ignore shortfalls in job and investment targets.

Almost all the projects fell far short of the fancy job creation promises they held out before cornering public land. The biggest culprits were the special economic zone (SEZ) projects. The auditor said 11 SEZs/IT parks in the state had promised to create 5.93 lakh jobs but the number achieved in five years was a laughable 26,000. Four of the SEZs generated zero jobs.

In many of the cases, the allotted land still lies idle with the promoters. For instance, for the Health City project in Visakhapatnam, APIIC gave land to 10 hospitals with the stipulation that they build the project within two years and treat at least 10 per cent of the outpatients free and provide free healthcare to students of government residential schools. None of the hospitals is up yet.

In another instance, 615 acres of land were allotted to 58 units in the Hardware Park at Maheshwaram in Rangareddy district but 36 of the firms have not implemented their projects. Moreover, some 11.97 acres of the land was allowed to be diverted to five units for commercial purposes such as hotels, petrol bunks and offices. No less than 25 cases of non-utilisation of 5520.28 acres of land were detected in the audit.

Many of the allotments were made to friends of the then regime, and some of the deals are at the centre of scams being investigated by the CBI: these include the Emaar Properties scam in which the AP Industrial Investment Corporation (APIIC) went way beyond its mandate of industrial infrastructure creation to build a fancy golf course and villa housing in partnership with Emaar Properties of Dubai. The joint venture partner subsequently sub-contracted the deal to a subsidiary and shut APIIC out of the profits after cornered prime land at deeply discounted prices.

Similarly, several of the promoters who received land allotments are subject of investigation by the CBI into the investments raised by Rajasekhara Reddy’s son Jagan Mohan Reddy, who is alleged to have received quid pro quo investments from companies doled out favours by his father’s

government.

The Auditors’ Dirty Dozen

1. Brahmani Steel Plant

In June 2007, the YSR government alienated 10,760.66 acres at Vemuguntapalli village in Jammalamadugu mandal in Kadapa district to Brahmani Industries Ltd (BIL) to build a greenfield steel plant. As per the MoU, the project needed 8,000 acres but the then Kadapa district collector recommended alienation of a 10,760 acres because BIL ‘requested’ it.

The company had to invest Rs 4,500 crore in the first phase by February 2009 for a two million tonne capacity plant. In the second phase, Rs 7,500 crore ought to have been invested by December 2011 to raise the capacity to four million tonnes. As of December 2011, only a bare-bones structure stands at the site. And in a violation of Supreme Court orders, the project was allotted 674 acres of land belonging to a water body. Even the barest due diligence was not done, such as financial feasibility, certification of land requirement, assessment of availability of raw material, technical expertise and transportation facilities.

2. Brahmani Airport

In 2008, Brahmani was favoured with an allotment of 3,115 acres in Y S Rajasekhara Reddy’s native district of Kadapa district to build a commercial airport and a flying academy at Jammalamadugu. A pittance of `25,000 per acre was paid for the land. CAG said the deal was gone through although it was known that the central government would not permit a commercial airports under a private management. No geo-contour studies were conducted for the orientation of the runway. The land was wrested from Scheduled Tribe cultivators and handed over to Brahmani, whose competence for the project was not assessed. And then, there was no justification for an airport at Jammalamadugu because there is one just 50 km away. Officials’ red flags were ignored.

3. Brahmani Infratech

In May 2006, the YSR government handed out 250 acres of land to Brahmani Infratech at Raviryal and Mamidipally on the fringes of Hyderabad for a throwaway rate of Rs 20 lakh per acre. The ostensible purpose: an IT/ITES SEZ. As per the MoU, Brahmani Infratech was to construct a minimum of 4.5 million sq ft of IT/ITES space in five years—2 million sq ft within three years and the rest in two years thereafter. Not less than 45,000 jobs were to be created. Work done in five years: No office space built, no jobs created.

4. Georgia Tech

Based on a proposal from the then chief minister, the YSR government allotted 250 acres at Mucherala village near Hyderabad to Georgia Institute of Technology (GIT), USA, for establishing a campus. Although the empowered committee recommended allotment of only 50 acres at the prevailing market rate of Rs 18 lakh per acre, the state government allotted 250 acres at Rs 1.5 lakh per acre, giving an undue benefit of Rs 41.25 crore to the institute. The university had not paid the Rs 2.75 crore due for the land as of November 2011 nor had it utilised it for the envisaged purpose. In fact, officials did not even have the address of GIT to pursue the matter.

5. Lepakshi Hub

APIIC irregularly executed a sale deed for 8,844 acres in Anantapur district in favour of Lepakshi Knowledge Hub (LKH) Ltd even before creation of any infrastructure by the developer. LKH set up nothing and created no jobs but used 4,397 acres of the land to raise loans of `790 crore from banks.

6. Obulapuram About-Turn

The Obulapuram Mining Company, despite having already occupied government land, requested a lease of 413.8 acres. It was turned down by the collector of Anantapur district in August 2008. However, within a month thereafter, this position was reversed by the collector who, at the request of APIIC, recommended alienation of 304.66 acres to APIIC (for transfer to OMC) for establishment of an industrial park. The reasons? Not recorded.

7. Two Gifts from APIIC

The government lost revenue of Rs 874 crore by alienating 881 acres in Mamidipally village on the outskirts of Hyderabad to APIIC at a meagre cost. APIIC in turn allotted 500 acres at very low rates to Indu Tech Zone and Brahmani Infratech even before orders of alienation were issued.

8. Vanpic Project

The process of agreement with VANPIC and alienation of land lacked any legitimacy and transparency, according to CAG. The terms of the agreements were loaded heavily in favour of VANPIC without leaving any elbow room for the government to amend the agreement, it had serious financial and legal implications for the government.

9. Raheja IT Park

APIIC entered into an agreement with R K Raheja IT Parks Pvt Ltd the terms of which enabled the latter to sell and mortgage 110 acres of government land apart form exposing the government to financial risk.

10. The Emaar Project

Ignoring its mandate of building industrial infrastructure, APIIC allotted 535 acres on the fringe of Hyderabad to Emaar Properties of Dubai to build a convention centre, a plush hotel, a golf course and high-end villas. However, its joint venture partner Emaar exploited the terms of the MoU to bring in a sister concern to execute the project, thereby diluting APIIC’s financial stake without its consent. APIIC lost control of the development initiative in which it had invested substantial equity.

11. Simhapuri Park

The government lost revenue of Rs 72.07 crore and Rs 39.60 crore respectively through allotment of land in Chillakur mandal in Nellore district at very low rates for establishment of an industrial park by Simhapuri Energy Pvt Ltd/Vikas Power Ltd and setting up of two power projects by Simhapuri Energy Pvt Ltd/Meenakshi Energy Pvt ltd.

12. Bellary Iron Ore

Instead of taking action for unauthorised occupation of 20.06 acres land by Bellary Iron Ore ltd, the Anantapur district collector accepted an amount of Rs 0.63 crore for an additional 50.69 acres of land by Bellary Iron Ore Ltd even before approval by the government.



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