Posted by: John Elliott | February 14, 2014

‘Scam Andhra’ MPs cripple parliament to protect business deals

Unprecedented chaos and violence that closed India’s Lok Sabha parliamentary proceedings yesterday graphically demonstrates how respect for India’s most revered institutions is crumbling as greed and raw politics disrupt the functioning of government and the running of the country.

The protests were not even about the political issue being debated – a Bill was being tabled to split the southern state of Andhra Pradesh and create a new state of Telangana. They were primarily about protecting businessmen’s investments in Andhra’s capital of Hyderabad and elsewhere in the state, where crony capitalism and corruption ran rampant under a former chief minister, Y.S.Rajasekhara Reddy, who was killed in a helicopter crash in 2009. The businessmen who thrived under YSR’s rule and did deals with his  son Jagan (now facing corruption charges) originally came from other parts of the state and think they will lose their investments and political clout if Telangana is formed.

Rajagopal - exCong MP-002Among the MPs who were most at fault – using a pepper spray, smashing a glass table top and allegedly brandishing a knife – two have possibly vulnerable investments in the city and elsewhere.

The pepper spray was wielded by Lagadapati Rajagopal, (left) founder and chairman of the highly indebted Lanco infrastructure group, which is India’s biggest private sector power producer. Venugopal Reddy, (below) who smashed a microphone on a glass table top, heads the Ramky group that benefited under the YSR regime and is involved in the corruption charges.

But it is not only these MPs who are at fault. The crisis has been caused by the Congress Party led by Sonia Gandhi, which has gone ahead with the decades-old claim for Telangana – not for any good reason of governance, but because she believes it will could increase the number of seats her party wins in the coming general election.

My book IMPLOSION: India’s Tryst with Reality, which is being launched next week in Delhi by Harper Collins India (and is available here), has a chapter headed Scam Andhra. I describe the state as a microcosm of what is wrong in India because of “corruption and illicit links between companies and government that are now part of India’s political and business landscape”.

Implosion is defined as inward collapse when internal forces “gradually eat away at institutions, organizational procedures and the functioning of authority that are needed to run a country”.

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Here are extracts from the chapter:

“The city has become a symbol of what is wrong with India. It embraces dynastic political ambitions based on personal greed and the lauding of companies that have grown fat on fraudulent land and other deals, literally plundering the state’s wealth. The trend first became widely noticed in 2009, when the Hyderabad-based Satyam, India’s fourth largest software company, collapsed in a fraud scandal involving local politicians and a prominent business family….

“Satyam and its allied infrastructure company, Maytas (Satyam spelt in reverse), were just the tip of a vast iceberg that gradually became exposed after the state’s Congress chief minister, Y.S. Rajasekhara Reddy (YSR), was killed in a helicopter crash in September 2009. YSR’s death, just a few months after being re-elected for a second term, triggered a series of events that led to widespread police inquiries, court cases, and the jailing of businessmen and politicians.

“Businessmen involved in the state’s companies form a new entrepreneurial community that is significant in the same way as clans such as the Marwaris or the Chettiars….With easily identifiable names like Reddy, Raju and Rao, the Andhra businessmen travelled [across] Andhra, bearing farming wealth from the state’s flourishing coastal regions to Hyderabad…..There they worked with politicians, and together grew rich in real estate, land deals and infrastructure projects – and then became involved in politics themselves….

“Among the most powerful and vocal anti-Telangana politicians have been Lagadapati Rajagopal, founder of the once rapidly-growing but now heavily-indebted Lanco Infratech infrastructure, power and construction group…..he was one of the financiers of a padayatra in 2003 by YSR that helped to bring him to power.  Rajagopal’s development plans in and around Hyderabad could be hit hard if the state is split.…

“YSR proved himself to be one of India’s most skilful regional politicians, seemingly working for the good of the state and the rural poor, while building himself an unassailable Congress power base by providing the Gandhi family with strong loyalty and support. That won him a comfortable re-election victory five months before he was killed, despite reports of widespread corruption and corporate cronyism that had been circulating about him and his son Jagan for some time….

”YSR’s significance was demonstrated by the huge mass of mourners – from Sonia Gandhi and Manmohan Singh to the rural poor – who gathered to pay their last respects at his funeral….If YSR had lived, it is reasonable to assume that the projects, corruption, kickbacks and funding would still be continuing today, with grateful Congress party leaders in Delhi doting on their loyal and valuable friend….

“Sonia Gandhi and her fellow national party leaders appear to have done nothing during YSR’s rule to stop the corrupt deals, even though they would have been fully aware of them. There were reports that YSR was ‘sending huge sums of money for the Congress in Delhi every month in the name of ‘organisational expenses’….

“YSR came from a tough and feudal society background in Rayalaseema, which is frequently named for its ‘bad lands’, and his rise reflects how many of India’s regional politicians have grown rich and powerful from poor origins. His family mixed Christian missionary work with business in the rough mining industry and there is death and brutality in the family’s history…..

“While he was chief minister, YSR moved on from the usual pattern of corruption – politicians and bureaucrats taking bribes in return for favours – and secured the loyalty of his supporters by providing business opportunities for contractors in unregulated, over-priced and scam-ridden irrigation, highways and other projects. The contractors and developers showed their gratitude by taking stakes in companies run by Jagan, mainly in a media business called Sakshi, and politicians and others cronies invested in the development and real estate schemes. Instead of just taking kickbacks, YSR’s family and political associates became joint investors and stakeholders with their business contacts…..

Venugopal Reddy - TDP-001“Along with other key companies that he controlled with investments totalling Rs 797 crore, Jagati Publications became a focal point in 2012 and 2013 for investigations into money laundering by India’s Enforcement Directorate, and for separate corruption inquiries by the CBI into Jagan’s alleged ‘disproportionate assets’….

“Companies caught up in the assets case included Tamil Nadu-based India Cements, run by N. Srinivasan, who has been a dominant figure in the politics of Indian cricket as the chairman of the Board of Control for Cricket in India (BCCI) from 2011. He was also involved in the IPL championship controversies…. The allegations [included] companies such as …. Ramky Group…. listed as allegedly providing funds for Bharathi Cement, Jagati Publications, Carmel Asia Holdings and other businesses run by Jagan, and receiving favours in return…..

GMR, GVK, Lanco

A clutch of Andhra companies that thrived….. went on to run big projects in the rest of India and then abroad. They include names such as Satyam in software, and GMR, GVK and Lanco in infrastructure… Lanco, is the most politically high profile of the three companies, having been led initially by Lagadapati Rajagopal, the Congress MP and a key YSR supporter…. His brother L. Madhusudan Rao and brother-in-law G. Bhaskara Rao now run the group, which claims to be India’s largest private sector power producer and also has coal mining interests in Australia. To improve its image, Lanco moved its headquarters from Hyderabad to Gurgaon on the outskirts of Delhi but it became over-extended and lost large-scale projects for lack of funds, pulled out of others, dismissed a large number of employees, and formally announced a debt-restructuring process in 2013…..

“Some time in the future, Andhra’s years of fraud and deception will almost certainly be seen, in the traditions of early American business, as merely one of the stepping stones that a new economy takes when it suddenly enjoys unexpected riches, and the prospect of much more, if politicians are suborned, rules bent and the state cheated”.

For now though, India faces creeping implosion.

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Responses

  1. You did not care for me. I am not related to anyone mentioned in your article. I am an ordinary citizen with no financial interests in Hyderabad. It hurts deep in my heart when Sonia Gandhi divides us for her electoral benefits and takes this way. It hurts me badly when President of india dances to her tunes. It hurts when the honorable chairperson declares the bill introduced amid unprecedented chaos. It hurts when 4 or 5 outsiders (chidambarams, shindes) draw the dividing plans. It hurts when BJP which can play a responsible role in this drama, chooses to watch the drama and milk benefits when the drama matures. It hurts when the media (name whatever) chooses to ignore us all through out but publish few photos on its cover pages only when there is violence at Vijaynagaram or pepper sprayed in the parliament.

    Dear Mr. Elliott, If you have any clout in the political circles in Delhi, please recommend to them to expel us from india. We will deal with rajagopals and venugopals.

  2. It is neither Telengana nor Seemandhra, it is my invetsments honey in Hyderabad, which would be junked. Country be damned as long as I am good. Like PM like MPs, they are there not to serve people or communities, but themselves.


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