CBI registers case in defence land sale in Kashmir

More than 70 NOCs were issued to private parties to buy more than 200 acres of land near high-security military installations in Srinagar

New Delhi: The Central Bureau of Investigation (CBI) has registered a case against Defence Ministry officials and others as part of its probe into alleged irregularities in the sale of military land near the high-security Srinagar airport, reports PTI.

Immediately after registering the case, the agency carried out searches at various places in Jammu, Srinagar, Patna, Delhi and Chandigarh, official sources said.

The agency had registered a preliminary enquiry (PE) into the matter last year during which it claimed to have found evidences that no objection certificates (NOCs) were granted to private persons for this prime and strategic piece of land arbitrarily.

The CBI has named Ajay Chowdhary, a 1997-batch Defence Estates official, and others in the FIR registered under the IPC and Prevention of Corruption Act.

The agency had also conducted enquiry into the records of the Directorate General of Defence Estates and the local revenue, following a request from the Defence Ministry to probe the sanction of the NoC for sale of this land in Kashmir valley.

Defence Minister AK Antony had last year informed Parliament that on receipt of complaint, a preliminary enquiry was conducted during which it was found that prima-facie there have been irregularities in the issuance of NOCs which may have wider implications.

During the preliminary probe of the Defence Ministry, it was found that more than 70 NOCs were issued by the defence estates department in Srinagar during the last four years.

These NOCs were issued to private parties to buy more than 200 acres of land near high-security military installations in Srinagar.

According to the probe report of the Defence Ministry, some of the land belonging to defence remains in the name of private persons or state government in revenue records which is a cause of concern as a few persons may take advantage... and enter into fraudulent sale/purchase transaction.

The Directorate General of Defence Estates (DGDE) looks after the land for training, ranges, depots, airfields, quartering, camping and offices for military activities.

Ministry of Defence owns 17.53 lakh acres of land, out of which approximately 1.57 lakh acres is situated within the 62 notified cantonments and about 15.96 lakh acres is outside these cantonments.

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More Enrons in sight in India?

Casting aside the need for transparency and competition, the politicians and civil servants of both coal and environment ministries made hay while the sun was shining and merrily allotted around 200 coal blocks without auctions. Soon, the coal-power bubble will burst. A Coalgate and a multitude of Enrons will unfold, followed by unmanageable NPAs with the banks. After all, the people of India are always there to bear the burden of the sins of their political leaders

I came across an interesting article under the catchy heading, “10 Things We Didn’t Learn From Enron Scandal”. This was not about India, mind you. It was about how the US legal system dealt with the Enron culprits and how the American corporate world was yet to learn from it.

The article, authored by Susanna Kim, appeared in ABC News on 1 December 2011. The occasion was the completion of ten years since the giant energy company, Enron collapsed under the weight of fraud, deceit and over-leveraged financial dealings, robbing thousands of unsuspecting American investors of the precious savings they invested in the company. Enron’s shock could be felt beyond the shores of USA.

Jeffrey Skilling, the head of Enron was proceeded against promptly, pronounced guilty on 25 May 2006, well within five years of the Enron debacle, and sentenced to more than 24 years of imprisonment which he is presently serving, despite the litigation arising from his disallowed appeals. Kenneth Lay, Enron’s CEO was also found guilty along with Skilling and sentenced to imprisonment but he died one and a half months later, as a result of a massive heart attack.
Andrew Fastow, the financial wizard, who leveraged the accounts of the company beyond all reasonable limits, was sentenced to six years imprisonment on 26 September 2006. He has just been released after serving his prison term. He has even delivered an extraordinarily forthright lecture the other day to the students at his alma mater, Tufts University, on his own failings as the CFO of Enron and the deceitful ways in which Enron functioned.

Coming back to the lessons not learnt in USA, Susanna’s article referred to the conflict of interest that continued to exist in the corporate world in terms of the unholy nexus among the companies, the rating agencies, the banks, the insurers and the auditors. It referred to the Ponzi schemes that the companies still floated, the regulators that continued to fail in independent regulation, the lack of transparency in the way the companies continued to function, the way they were allowed to milk the public financial institutions without putting in their own equity, the excessive financial leverage they resorted to, the unethical managers that continued to run the affairs of the companies, suppressing the voices of the small investors and the way the government continued to treat the corporate heads as holy cows and allow them to bend the law of the land at their will.

Susanna’s complaint was that corporate America was slow in learning lessons from the Enron saga.

Does the article ring a bell for us in India? Have we learnt any lesson from our own Enron project in India?

The much hyped “economic reform” launched in 1991 opened the floodgates to foreign investment without adequate transparency, competition and regulation. As one among the eight “fast track” projects, a euphemism for lack of transparency and doling out political patronage, Enron was given the green signal to set up a 740MW base load power project in Maharashtra, at an exorbitant capital cost, using overpriced LNG from Qatar as its fuel. When there was widespread public criticism against the cost of the project, the government asked an expert group to review it. Ironically, for reasons best known to it, the expert group recommended further expanding the project capacity to 2,184MW, without any commensurate benefit to the public, thus making it not only a fait accompli but also converting it into a heavier millstone around the neck of the state. The project’s capital structure was heavily structured in favour of debt, almost entirely financed by the government-owned financial institutions which were also forced to take a heavy exposure to guarantees for the project. The project location was at Dabhol, in the lush green Konkan area, known for its rich biodiversity. In the name of promoting FDI (foreign direct investment), the environment laws of the country were allowed to be blatantly compromised. Under intense political pressure, the Maharashtra State Electricity Board (MSEB) signed a one-sided Power Purchase Agreement (PPA) with Enron. The PPA imposed an unusually heavy cost burden on the people. Even as per that PPA, Enron was required to install a machinery that could readily ramp up its capacity within a short time to be able to meet the spurts in demand but it failed to do so, as the machinery was not up to it. Still, irrespective of their individual political denominations, the state’s politicians, for their personal gains, forced the taxpayers and electricity consumers to pay a heavy price for the electricity generated by Dabhol.

The fact that Enron’s executives spent crores of rupees to ‘educate’ the Indian politicians would never have come into public knowledge but for the evidence elicited from the company by the US legislators and its disclosure to the American public through the Freedom of Information Act of that country!

When Enron collapsed in the US, the Dabhol project also came to a standstill, denting the Indian financial institutions to the tune of more than Rs6,000 crore. A review committee set up under the chairmanship of Dr Madhav Godbole traced the misdeeds of the politicians and the civil servants and recommended a formal judicial enquiry to enable the government to nail the culprits and abrogate the PPA. Though a judicial enquiry was instituted, the changes in the political set up of the state resulted in the enquiry being shelved. 
What happened to the Enron accomplices in India?

They have become richer, more influential than ever, expanding their ill-gotten empires more and more, having a greater say in ruling the lives of the ordinary Indians. They have risen in stature and political influence. If “conflict of interest” is a bad word in the US, “convergence of interest” seems to be the motto of our political leaders in their effort to plunder the state in every possible manner.
When the Enron mess had to be cleaned up in India, it is the same politicians that benefitted from it earlier, were the ones who called the shots once again to cause further losses to the public exchequer.

In the Indian context, the saying that “privatise profits; socialise losses” seems to have a universal validity. That is what has happened to the Dabhol project. It was the Indian politicians who initially benefitted from the largesse showered by Enron. When Enron went into oblivion and the Dabhol project became dysfunctional, these very same politicians conveniently shifted the losses to two premier PSUs, NTPC and GAIL. Ultimately, it is the people of Maharashtra who would bear the brunt of the politicians’ sins! 

There were no Skillings, Lays and Fastows in India who were ever brought to book.

Is it the end of the Enron story in India? Certainly not, as many more Enrons are once again in sight. This time, it has something to do with their coal-based counterparts.

During the first five years of UPA rule, the environment ministry cleared 1,92,913MW of new thermal power projects. It was already in the process of clearing another 5,09,000MW of thermal projects, mostly coal-based. The total additional coal-based generation capacity thus considered would be six times the existing capacity and three times the capacity projected by Planning Commission till 2031! The environment ministry had no compunction in allowing the power project developers to destroy wetlands, water bodies, irrigated lands, coastal stretches, etc, and displace thousands of poor families permanently, all in the name of promoting development.

One-third of the coal needed for these power projects was expected to come from coal blocks overseas. It is rumoured that the kickbacks from the liberalised mining activity in the country have found their way into coal and other mineral franchises clandestinely procured abroad!

Still, the remaining two-thirds of the coal needs to come from indigenous sources. Since the coal PSUs could not have mustered enough resources to cope up with this unprecedented “coal rush”, the power companies, mostly private, sought allotment of captive blocks.

In the laissez faire environment that the present government has unleashed in the name of ‘reform’, prudence has been the first victim. Neither the power ministry nor the coal ministry thought it fit to oversee the unusual spurt in demand for power and coal.

Casting aside the need for transparency and competition, in a free-for-all situation, the politicians and the civil servants of both coal and environment ministries made hay while the sun was shining and merrily allotted around 200 coal blocks without auctions. A few influential private players laid siege to a large number of coal blocks to their advantage. The PSU banks did not lag behind, as they too were under pressure. They gave dubious loan assistance to both the private power producers and the private coal developers. Words of caution from the concerned citizens fell on deaf ears. Even reports of the CAG (Comptroller and Auditor General) were mocked at. Such has been the pressure of greed and deceit. Soon, the coal-power bubble will burst. A Coalgate and a multitude of Enrons will unfold, followed by unmanageable NPAs with the banks. After all, the people of India are always there to bear the burden of the sins of their political leaders. 

In a landmark interpretation of Article 19 of the Constitution, the apex court of India stipulated that all those who seek public offices through elections should disclose their financial and criminal background to the public. The same Article paved the way for the far reaching Right to Information Act (RTA) that empowered the citizens to demand and know the way the public authorities functioned. Still, our politicians and the bureaucracy continue to defy the need for transparency. The recent 2G (second generation) spectrum scandal, the S-Band controversy, the numerous mining scams, the defence purchase scandals and so on, have dispirited the helpless citizen. But for the investigative journalism and the judicial activism that exist in our system, the public would never have come to know of the implications of these scams.

Anna Hazare’s prescription for an all powerful Lokpal may sound utopian to his detractors, but looking at the numerous unfolding Enrons in the Indian context, he will surely prove right in the final analysis.

(Dr EAS Sarma, IAS, is a post-graduate in Nuclear Physics (Andhra University) and in Public Administration (Harvard University) and a PhD from IIT, Delhi. As a Union Secretary he has held the portfolios of Power, Economic Affairs and Expenditure. He quit the government in 2000 over differences regarding policy issues with the National Democratic Alliance government. He is the convener of Forum for Better Visakha (FBV), a civil society group set up in 2004. Dr Sarma was also a member of Godbole Committee appointed by the then Maharashtra government)

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COMMENTS

A kumar

5 years ago

A very interesting summary of the situation in the sector. It would have been beneficial to have mentioned the fate of the projects which have, after all obstacles completed their power plants and are now ready for commissioning them. These include some very reputable names.

It is also interesting to note the cost of power which will be produced after the plants start production. In most cases, it will exceed Rs 6 per unit at today's prices which makes them unviable.
Moreover they are depending upon the Electricity boards to buy power from them to meet the peak demand. Unfortunately these Boards are in a shamble due to various reasons including free power they supply and transmission losses they incur.
What happens when the rupee slides against the dollar and the prices of power produced rise exponentially ?
These are policy issues on which everyone has been silent, but there will be a major hue and cry when the "power shock" hits the consumers in terms of price increases. This day is not far.

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