* CAG says Sripada Sagar irrigation project deal benefited contractors
* Rs 400 cr hike in internal benchmark value in two days
* Individual and institutional investors in CM’s son Jagan Mohan Reddy’s companies and newspaper rewarded with contracts for a SEZ, port development and land for infrastructure development
* Bidding rules overlooked to benefit Maytas
* Prime Waqf property grabbed and sold for a song to those close to Y.S.R. and Congress
* Jagan Mohan presided over major fraud in power sector

Andhra Pradesh Chief Minister Y.S. Rajasekhara Reddy has been presiding 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 have been cleverly exploited, with the Chief Minister’s son Y.S. Jagan Mohan Reddy and a clique of favoured industrialists emerging as major beneficiaries.

Covert has acquired documents to prove how insidious the entire operation is, with internal benchmarks of bids being changed to favour select companies, pre-bidding rules flouted for friends and relatives, Waqf properties sold for a song, and individuals and companies that invested in son Jagan Mohan Reddy’s huge media enterprise rewarded with other lucrative projects in Andhra Pradesh.

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”:


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, 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.


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.

Jagathi Publications Private Limited and Raghuram Cements are also the key compani  



Trending on this Site now