YSR model: “Doling out” state resources in lieu of 'investments' in own business empire
Moneylife Digital Team 09 June 2012

The CBI has quizzed N Srinivasan of India Cements who was also allegedly using the same model of quid pro quo
 

From the ongoing investigations against YSR Congress chief Jaganmohan Reddy in the disproportionate assets cases is emerging an interesting business model. Jagan Reddy apparently gave away scarce state resources like land and mines to businessmen if they invested in various Reddy companies.

The CBI (Central Bureau of Investigation), in its three charge-sheets filed against Jagan and others, has alleged that he and his father had hatched a conspiracy to defraud the Andhra Pradesh (AP) government with Jagan influencing Rajasekhara Reddy, the then chief minister, in doling out certain favours to various investors, who made investments in Jagan's businesses.

The latest corporate on CBI's radar is N Srinivasan, one of the most influential personalities in Indian industries as well as in the cricket world. He is chief of the Board of Control for Cricket in India (BCCI) and managing director of India Cements. According to a report from PTI, the sources from CBI had said that cement companies could be asked about water and limestone allocations made during the tenure of Rajashekhara Reddy as chief minister of Andhra Pradesh.
 

Mr Srinivasan, while speaking with a news channel, claimed that the company has not done anything wrong and that it is ready to cooperate with the investigating agency.

Accoording to a PTI report, he said, "The company has responded in detail to the CBI and whatever water rights were given within the industrial policy of Andhra Pradesh, all this has been explained to them. So therefore we are very confident that as far as India Cements is concerned, they have not done anything wrong and that will be proved,".

The CBI, which has so far arrested Jagan, his financial advisor V Vijay Sai Reddy (currently out on bail), former AP Minister Mopidevi Venkatramana Rao, industrialist Nimmagadda Prasad and senior bureaucrat KV Brahmananda Reddy, has also quizzed two other AP Ministers—Sabitha Indra Reddy and Dharmana Prasada Rao—over government orders (GOs) that allegedly benefited some companies.

Nimmagadda Prasad alias Matrix Prasad, touted as entrepreneur with a golden touch in the pharma industry, is also alleged to have followed the YSR/Jagan model of investing in their companies in return for getting access to various resources. Prasad has been charged with investing Rs100 crore in Jagati Publications that publishes Sakshi Telugu daily, besides putting in another Rs244 crore in Bharati Cements and Rs200 crore in Carmel Asia, all floated allegedly by Jagan.

In return, Jagan's father, late YS Rajasekhara Reddy, allegedly allotted 15,000 acres of land in Prakasam and Guntur districts to Matrix Enport, the company owned by Prasad, for development of the Vadarevu-Nizampatnam Port and Industrial Corridor. Till date the project, initiated in 2007, has not made any progress. (read more N Prasad of Matrix Lab arrested for sweetheart deal with Jagan Reddy)

Just on Thursday, the CBI grilled AP information technology minister Ponnala Lakshmaiah for over eight hours. The agency questioned the minister regarding GOs issued during 2004-09 by the irrigation department, when he was the major irrigation minister in the cabinet of late YS Rajasekhara Reddy, on supply of water to manufacturing plants of some cement firms. These firms allegedly made investments in Jagan's businesses, says the report from PTI.

Senior IAS officer Adityanath Das, who was the then principal secretary of irrigation, was also quizzed with regard to the GOs, sources said.

Even the Enforcement Directorate (ED) has registered separate cases against Jagan under the Prevention of Money Laundering Act (PMLA) and Foreign Exchange Management Act (FEMA). The ED is probing alleged contravention of foreign exchange rules in his financial transactions and investments.

According to media reports, the network and influence of Jagan and his father reached across states. Last week, the AP government cancelled its memorandum of understanding (MoU) signed with Karnataka's former minister Gali Janardhana Reddy owned Brahmani Industries. The MoU was signed by YS Rajsekhara Reddy in 2007. The AP government had allotted 5,666 hectares (ha) to the company for setting a steel plant with a capacity of 2 million tonnes per annum and a private airport. Brahmani Industries was also allowed to take 142 million cubic meter water from a nearest reservoir.

The Gali Reddy brothers of Bellary, especially Janardhana Reddy, were allegedly very close to YSR and the Jagan family. However, he was arrested last year by the CBI and is now in remand in a jail in Bengaluru. His company, Brahmani Industries, is among other companies named by the investigation agency in its first information report (FIR) against Jagan.

The Gali Reddy brothers of Bellary, who devastated parts of the Karnataka-Andhra Pradesh border region, have similarly been arrested after decades of amassing wealth (reportedly Rs50,000 crore). There are allegations of irregularities in the mining activities of Obalapuram Mining Co (OMC) which is owned by the brothers—G Karunakara Reddy, G Janardhana Reddy, G Somashekara Reddy, as well.

Even the Comptroller and Auditor General of India (CAG), in its report, said the land allotted to Brahmani Industries was in violation of rules and involved alienation of 273 ha of water bodies.

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