Senior Congress leader Ahmed Patel's son Faisal Patel reached the Enforcement Directorate office for questioning here on Thursday in the alleged case of multi-crore bank fraud and money-laundering by the Gujarat-based Sterling Biotech.
On Wednesday, the ED had summoned Congress Treasurer Ahmed Patel's son Faisal in its probe in the case. Patel will be questioned for his purported links with the Sandesara brothers (Chetan Jayantilal Sandesara and Nitin Jayantilal Sandesara), the owners and promoters of the Vadodara-based pharmaceutical firm and his statement recorded under the sections of the money laundering act.
On July 30, the financial probe agency had also grilled Ahmed Patel's son-in-law and advocate Irfan Siddiqui in connection with the probe. According to ED officials, Sunil Yadav, an employee of the Sandesara group, has alleged that Siddiqui and Faisal Patel were allegedly given code names by Chetan Sandesara.
"Chetan and Gagan referred to Siddiqui as Irfan Bhai. Irfan's code name was 'i2' and Faisal was given code name 'i1'," Yadav had said in his statement to the agency. He also said that Faisal Patel used to take his friends to Puspanjali Farms to party and all the expenses were borne by Chetan Sandesara.
The ED registered a money laundering case against the Sandesara brothers and others in August 2017 after a case of alleged bank fraud of Rs 5,700 crore was filed against them by the Central Bureau of Investigation (CBI).
Investigation by the ED revealed that the Sandesara brothers and others hatched a criminal conspiracy to cheat banks by manipulating figures in the balance sheets of their flagship companies to induce banks to sanction higher loans.
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
A lot can happen in a week and the stock market reflected all of it. Indices dived in deep depression at the government’s failure to recognise the economic and financial distress, compounded by harassment over tax systems.
Finance minister (FM) Nirmala Sitharaman’s mini Budget, tax rollbacks, liquidity for banks and housing finance companies, along with an assurance to release tax refunds and reduce harassment, led to a sudden surge in optimism.
However, by 27th August, the optimism was quickly eroded after the government took away Rs1.76 lakh crore of Reserve Bank of India (RBI) reserves, especially when Ms Sitharaman said, “I cannot comment on what the funds transferred by RBI will be used for.”
After all, there is a massive shortfall in government tax revenues (coincidence or not, estimated at around Rs170,000 crore) and a hidden fiscal deficit estimated by experts at Rs176,000 crore. Then there are massive holes outside Central government finances too, such as Food Corporation of India, power distribution companies, and the vast debt and contingent liabilities accumulated by the National Highway Authority of India (NHAI).
Almost exactly a year after the giant Infrastructure Leasing & Financial Services (IL&FS) had began to default on its debt of nearly Rs100,000 crore, the FM, Ms Sitharaman has announced plans for a new organisation “to provide credit enhancement for infrastructure and housing projects with an aim to enhance fund flows towards such projects.”
Remember, this has been planned even as the failed IL&FS is nowhere near resolution. Technically, a few of the 347 companies (the existence of half of these was unknown to all government regulators and auditors until after the board was sacked) have been shut down; but not a single sale has been fully completed as yet.
Meanwhile, NHAI’s gigantic debt, contingent liabilities, stalled projects and web of litigation across the country, are turning into the biggest roadblock to infrastructure development. Union minister Nitin Gadkari has ignored this for five years, even as he criss-crossed the country announcing mega projects with massive outlays. Reports that the prime minister’s office (PMO) has rapped the ministry for extensive and ‘reckless’ highway expansion, finally, led to a much-needed public discussion last week.
NHAI has reportedly been asked to discontinue construction of roads and monetise assets; this has happened only after NHAI’s debt soared from Rs40,000 crore in 2014 to an unsustainable Rs1.78 lakh crore in 2019 under Mr Gadkari’s watch.
The rating agency, ICRA Ltd, attributes this to the increased cost of land acquisition and has reaffirmed NHAI’s high ratings confident that “support from the Government of India (both financially and operationally) would be crucial for maintaining the credit profile of NHAI.” But ICRA’s rating rationale of May 2019 is oblivious about the extent of NHAI’s contingent liabilities. The rating agency has a number of Rs63,000 crore, which it considers ‘sizeable’, when the real figure may be five times larger!
In an interview to CNBC-TV, Brijeshwar Singh, former NHAI chairman, said that the contingent liability could be in excess of Rs3 lakh crore! According to an industry veteran, “Most highway companies are listed and rated. All of them have claims against NHAI in their books. Even if you discount these claims to 70%, the contingent liability would add up to over Rs3 lakh crore.”
This source tells me that this huge liability is because NHAI is not in the habit of releasing payments to contractors and concessionaires easily. It has thousands of disputes under arbitration, conciliation and litigation pending with most major contractors across India.
Way back in 2014, a top audit firm had pointed out that NHAI is one of the biggest litigants in Indian courts. At that time, it had over 5,000 cases pending in various courts and another 200 in the Supreme Court. The number may have easily doubled.
Most disputes are over cost overruns, usually caused by long delays in land acquisition and obtaining various approvals and clearances which, often, turned projects unviable even before construction commenced.
This has made many companies wary about dealing with NHAI; some private operators have found ways to ensure that costs are inflated or their contracts include dubious clauses, that allow them to even change the scope of the projects on ‘mutually accepted basis’. Eventually, India pays the price in terms of high infrastructure costs.
Disputes with NHAI are also a hurdle in the resolution of IL&FS. The government is understood to have set up a committee to look into these issues. While the IL&FS group debt is nearly Rs100,000 crore, the previous management had claimed that Rs17,000 crore was due from NHAI.
IL&FS’s new management is also struggling to reconcile the vast gap between the erstwhile management’s claims against NHAI and MoRTH (ministry of road transport and highways) and arrive at a smaller, but realistic estimate.
I learn that, unless IL&FS can resolve the legal tangles with NHAI, it will struggle to find buyers for several of the road projects. This means that NHAI, a government entity, is now a stumbling block to resolution.
With funds having dried up, the infrastructure industry is worried about NHAI being able to generate enough cash to service interest payments without constant government support. Its participation in the over-ambitious Bharatmala Pariyojana project, involving a phase-1 project outlay of Rs5.35 lakh crore, may also be canned. Of this, 19,800km of roads were to be built by the public sector giant.
NHAI, set up to implement the golden quadrilateral project under Atal Bihari Vajpayee government, has steadily become a dysfunctional and corrupt organisation. Part of the problem may also be that NHAI’s powers have been steadily diluted, affecting decision-making. Failure to fulfil its responsibility of ensuring timely land acquisition, shifting of utilities, environment and forest clearances, along with flawed processes led to disputes that ended up in a legal quagmire.
In 2015, Union minister Nitin Gadkari set up a committee for revamping NHAI. The committee’s main recommendations were to empower the board, change the method of awarding contracts (moving away from the least-cost model to the average-bid principle using standard deviation), find ways to revive stalled projects, set up a dispute resolution board to resolve issues faster, and streamline its project evaluation and project financing practices. A simultaneous study was commissioned on setting up an Expressway Development Board of India and for taking up construction work abroad.
None of the recommendations of this committee has seen the light of day. That Mr Gadkari was blissfully unaware of the looming crisis is evident from NHAI’s spending spree and spiralling debt. Mr Gadkari has continued to announce new projects that were unviable from the word go due to high land acquisition costs.
In 2017, speaking at an event, he said the government was planning Rs8 lakh crore investment in 30 rural connectivity projects of which five were set to begin. “I have no problem of money… if banks take too much time in granting approvals, we will offer them as EPC (engineering-procurement-construction mode) projects, he said.
He also announced plans to build an additional lane on national highways every three years entailing an investment of Rs80,000 crore to cater to ‘ever increasing’ traffic load.
Mr Gadkari was making these statements even when it was clear that bank funds for infrastructure were drying up; we now know that IL&FS was groaning under a massive debt taken for unviable projects and already resorting to financial jugglery.
The minister had no such worries. He said NHAI would make an IPO (initial public offering) to raise funds and bragged that it could raise Rs10 lakh crore. Although there was no IPO, in July this year, LIC was asked to provide Rs30,000 crore to NHAI by subscribing to bonds. Meanwhile, in the same month, Mr Gadkari told the Rajya Sabha that he planned to create a separate finance arm for the NHAI for which he would seek the finance ministry’s permission.
In fact, this was part of the recommendations made by a committee in February 2016; but, surely, that ship had sailed after the IL&FS crisis. Mr Gadkari neither knew nor cared. He hasn’t had a word to say on the entire IL&FS imbroglio, although his ministry worked closely with the cabal that drove that hydra-headed giant monster into a debt trap.
What is the solution to this mammoth financial muddle at NHAI? One silver lining is that the PMO seems aware of this problem with principal secretary Nipendra Mishra holding multiple meetings to sort out NHAI’s issues -- something that ought to have been Mr Gadkari’s responsibility.
NHAI is running out of options. Hopefully, the deep crisis, and the PM’s dreams of infrastructure development, will finally force a real clean-up. The question is: Will the PMO be able to find a solution that does not involve taxing the people further?
Even as the prime minister's office (PMO) has reportedly suggested to the National Highways Authority of India (NHAI) that it should discontinue constructing roads and monetise assets, Brijeshwar Singh, former chairman of the Authority told a news channel that NHAI is piling a huge debt of Rs1.78 lakh crore by 2019, up from Rs40,000 crore in 2014.
LiveMint, quoting from a letter sent by Nripendra Misra, principal secretary to the prime minister, to Sanjeev Ranjan, secretary, ministry of road transport and highways, says, "NHAI was 'totally logjammed by an unplanned and excessive expansion of roads and it is mandated to pay much higher costs for land acquisition and construction'."
“Road infrastructure has become financially unviable; private investors and construction companies are withdrawing from green-field projects," the letter says.
To solve this, the newspaper report says, the PMO has suggested that NHAI aggressively monetise its existing assets – either through the toll-operate-transfer model, where long-term concessions for collecting toll revenues are auctioned to the highest bidder, or through an infrastructure investment trust (InvIT).
"The PMO has also suggested that the NHAI can consider becoming a road asset management company and can create a blueprint for the national highway grid to see which roads need to built by 2030. To make projects commercially viable, the PMO has suggested that NHAI should take a critical look at reasons for financial unsustainability and the government can prove viability gap funding if required," the report says.
Meanwhile speaking with CNBC TV18, Mr Singh, the former chairman of NHAI had said that contingent liabilities of the Authority are worrisome and could be double of the balance sheet liabilities. "NHAI has been over generous at estimating traffic growth," he told the channel.
This interview with former NHAI Chmn was revealing. NHAI's debt up from 40000 cr in 2014 to Rs 1.78 lk cr by 2019. The contingent liabilities may be double that. Land acquisition costs have gone thru the roof due to the new law...Looks like road sector headed for a slowdown https://t.co/ujNWfvO7CZ
Industry sources tell us that the situation is rather grim and the issue had been flagged by the PMO last year. However, in the run up to the election, it was allowed to be buried. The source says, Mr Mishra, Principal Secretary has held over six meetings to discuss NHAI’s debt since September last year. According to this source, the contingent liabilities figure quoted by the former NHAI chairman is also considered conservative and could be higher than Rs3 lakh crore that he suggests.
All this paints a sorry picture of how infrastructure is being built in the country, even as Union minister Nitin Gadkari continues to announce ambitious new projects and programmes. It is also important to realise that the NHAI issue has a bearing on the resolution of the Infrastructure Leasing & Financial Services (IL&FS) debacle, because it also owes the beleaguered infrastructure company a substantial sum of money.
Renowned investor Prof Sanjay Bakshi has also highlighted rising debt of NHAI in a series of tweets. "NHAI's unsustainable debt, which I had written about in January was estimated to be about Rs1,48,276 crore as of 30 September 2018. Just six months later, by end of March 2019, it had soared to Rs1,78,000 crore," he says.