Implosion (51 page)

I echoed that in my blog: ‘Such are the ways of politics and corruption in India that those who stay loyal to their political chiefs and allies rarely go to prison, whereas trouble makers suddenly find their misdeeds, that had been condoned in the past, being splashed across the newspapers and the police knocking on their door’.
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But the tactic misfired. Jagan was seen as a martyr and the Congress did appallingly in the by-elections
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– albeit after voters had reportedly been bribed with massive amounts of cash, gold, jewellery and other gifts
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that helped swell the turnout to an astonishingly high total of around 80 per cent.
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Missionary in Mining Ganglands

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. YSR’s grandfather had converted to Christianity in the 1920s to escape poverty. His father, Raja Reddy, had started as a construction contractor on missionary projects and sent YSR first to missionary school and then to medical college in nearby Karnataka. YSR then returned home and began working in a missionary hospital.

This was explained in media reports (
Economic and Political Weekly
, 12 June 2004 and
The Times of India
Crest edition, 11 December 2010) that criticized YSR’s record before he became chief minister, and said his political rise had been ‘accompanied by more bloodshed than that of any other politician in this state – not bloodshed for some avowed “higher cause”, but bloodshed for the narrowest possible cause: the rise of one individual to political power and prominence’. His father had ‘made a name for himself as a rough and violent man with whom one had better not get into a quarrel’. He had ‘become richer and “very ruthless” – his name evoked considerable fear in Cuddapah’, a district in Rayalaseema now called Kadapa (and sometimes YSR Kadapa), where Jagan became the MP.

Raja Reddy started mining barytes, a mineral whose price increased sharply in the mid-1970s when it began to be used in petroleum. ‘The mines in Mangampeta were owned by one Venkatasubbaiah, but Raja was quickly able to cajole the mine owner into becoming his junior partner,’ reported
The Times
. ‘A few years later, or so the story goes, Raja wanted to buy the mines and, when Venkatasubbaiah refused, the latter was mysteriously found murdered. Who murdered him was a question that was debated for long, but Raja went on to take full control of the mines. Raja then convinced YSR to help him out in his business.’ An elderly villager who went to court in 1992 to stop his nephew’s 1.8 acre mineral-rich land being mined by YSR ‘had his hands and legs broken,’ reported the
EPW
. ‘With the money flowing from the barytes mines in his pockets, YSR was in a position to undertake the transformation of “village factions” into full-fledged instruments of political and economic domination at the highest level’. Raja Reddy was killed in a bomb attack on his car in 1998 that was allegedly carried out by political and business rivals. His death led to riots and one of his attackers was hacked to death.
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YSR answered the
EPW
article with an extraordinary letter that spent more time paraphrasing the accusations than rebutting them. It started by saying that the article had depicted him as ‘a man who created terror and involved in bloodshed for the narrowest possible cause for rising in public life and gaining prominence and political power’, and ‘as one person who is up to any crooked enactment in gaining political benefits with an ultimate goal of gaining power in the state and as one of the pioneers of creating a nexus between politics, crime and money.’
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He wrote that ‘all the allegations and imputations made against me are totally false.’

Father, Son and Cronies

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.

‘He converted his key supporters into businessmen, industrialists, contractors and realtors,’ wrote Bharat Bhushan, then the editor of India’s
Mail Today
, in an article titled ‘Money backs “Son-rise” in Andhra’
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in September 2009. Their loyalty to the party or the leader was based on pure economic interest, and the loyalty of a majority of the 156 Congress MLAs who had just been elected was secured through similar largesse. Others benefited through smooth approvals of business ventures.

To expedite such deals, a chief minister would staff his office with selected bureaucrats, who would do his bidding and were skilful at writing carefully worded tenders and other official documents that favoured certain businesses. They would also steer project approvals through government departments and, local sources allege, ensure that owners of land wanted by YSR and Jagan did not succeed if they complained to the police and other authorities.
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Naidu’s Deals

These activities escalated a style of operating that had been used to a far lesser degree in some other states, and by YSR’s predecessor as chief minister, Chandrababu Naidu, whose friends and relatives benefited from projects. ‘Bureaucrats and their business friends explained to politicians the potential of this sort of public-private partnership (PPP) that led to a flurry of investment projects,’ says a local journalist. Projects in Naidu’s tenure included the internationally famous Hi-Tec City. Well-known companies such as Microsoft, Infosys and Wipro were given generous terms to build facilities, and local real estate companies were encouraged to make parallel investments on the basis of advance inside information. Another project initiated by Naidu was the Hyderabad international airport, developed by a consortium led by GMR. The deal was completed during YSR’s time and the consortium was given a large land allocation of 5,400 acres that triggered a property bubble in the nearby area of Shamshabad.

Relatively few formal allegations of corrupt deals came to light during Naidu’s time as chief minister, despite his real estate links. Observers were surprised that the YSR government did not build up formal inquires and court cases against his predecessor, as often happens when state governments change. Only in two cases was any action initiated. One involved suggestions that the state government took bribes on alcohol sales from 1999 to 2003 (after a period of prohibition from 1995 to 1997), with AP Beverages Corporation, the government-run (and sole) liquor agency in the state, buying from distilleries at a large premium. A Congress supporter went to court with the allegations, but investigations were stopped on an appeal from Naidu, then the chief minister. When YSR came to power, there was talk of reviving the case, but nothing was done.

The other case arose in 2004 when Naidu, who was acting as caretaker chief minister in the run-up to elections, approved the allocation of 850 acres in two locations at a throwaway price of Rs 50,000 per acre to IMG Bharata for a sporting academy, along with other sports management activities. In preparation, Naidu created a sporting image for the state by hosting India’s National Games in 2002 and the Afro-Asian Games in 2003. It was alleged that P. Ahobala ‘Billy’ Rao, who ran the company in an arrangement with IMG, a US-based international sports and events management agency, was acting in a benami role for Naidu. In 2005, the YSR government stopped the deal and cancelled the allocation of a 400acre site.
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It asked the CBI to investigate, but the agency did not do so, claiming a lack of available personnel. The case was later reopened on the basis of two private petitions and remains a subject of political controversy.
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Looking back, it may seem surprising that there was not more opposition to what YSR and Jagan were doing, and that Chandrababu Naidu’s Telugu Desam Party (TDP) did not pro-actively do more to build up a political campaign against them. One of the reasons may be Naidu’s poor political standing following his massive defeat in 2004. He had lost his credibility and was widely criticized by farmers who had suffered four years of devastating droughts. He was probably also constrained by the fact that his regime had run its own corrupt deals, so he did not want to provoke the government into ordering tit-for-tat police inquiries. Also, politicians and officials did not think it was in their interest to rock the boat and challenge such a determined minister as YSR, and most of the media played its accustomed pliant role. YSR built a climate of euphoria among the people about welfare projects that Naidu could not challenge. ‘See, I brought you rain,’ YSR said, when his election was followed by good monsoon rains, building an image that helped him five years later in the 2009 election.

YSR’s 15–20 per cent Corruption

The level of corruption under YSR was described in 2007 as ‘an open secret’ and ‘beyond the pale’ even for India by David Hopper, then the US consul general for southern India. ‘We thought Naidu was bad, but that was child’s play compared with what is happening now,’ he wrote in a cable to the US State Department that was published by WikiLeaks in September 2011.
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‘Typically, five to seven per cent is lost to corruption, but in Reddy’s irrigation programme that figure is more than 15 to 20 per cent,’ said the cable. ‘The sheer size of Reddy’s signature programmes, with literally billions of dollars at play every year, leaves much room for “leakage” to Congress party officials and their allies.’ The cable also pointed out that the chief minister and his party took a bigger cut from promoters wanting to put up multi-crore projects in the state.

YSR linked politicians, businessmen and bureaucrats by selling government-owned land around key centres such as Hyderabad, the industrial and port city of Vizag, and the temple town of Tirupati to raise money for infrastructure projects, notably a mega-irrigation scheme called Jalayagnam. He gave government funds as ‘mobilization advances’ to private sector contractors for the projects, many of which made little progress. ‘Many of the contractors were cronies and they parked the money in real estate, and YSR added to the hype to it by announcing the new projects, many of which were located at places where the cronies had already bought land,’ says a local journalist.

Politicians whose real-estate businesses thrived during the YSR years included Lagadapati Rajagopal and his Lanco group, whose family businesses include power projects, real estate, infrastructure and one of the country’s biggest real estate mixed-development projects costing $1.5bn and covering 108 acres.
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Congress politicians who were reported to have been awarded irrigation contracts during the YSR regime included three more MPs – T. Subbarami Reddy, Kavuri Sambasiva Rao and Rayapati Sambasiva Rao. Irrigation projects of various sizes and associated road works contracts also went to state ministers and other MLAs. Andhra Congress MLAs’ real estate business also thrived. Other Congress leaders benefited from a Rs 3,000 crore Hyderabad outer ring road project and won other contracts for roads and building works.

State-owned sites were auctioned at extraordinarily high prices, triggering a real estate frenzy and enabling what one source calls ‘influential people’, who had already bought nearby land at low prices from mostly poor private owners, to sell at massive prices. In July 2006, for example, an auction of undeveloped land at the Golden Mile project in Kokapet, near Hyderabad’s financial district, yielded Rs 14 crore per acre, which matched prices in the city’s long-established prime central district of Jubilee Hills.
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Many of these land deals are now in litigation. The government started an astronomically high number of 103 special economic zones that drove up real estate values.
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A project called Fab City in Maheshwaram near Hyderabad was given a high-profile launch in 2005 as a centre for international semi-conductor companies, which led to land being bought at inflated prices. The lead company in this project, SemIndia, was to have brought in $3bn to make this a hub of microchip manufacturing, but after all the hype, the project was gradually watered down.

A month after he came to power, YSR flagged off his regime with a project called Jalayagnam (
jal
meaning water, and
yagnam
being an offering to the gods), which was exceptionally large-scale and ambitious with an estimated cost of some Rs 46,000 crore.
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It included constructing dams, canals, water supply systems, power plants and lift irrigation schemes to pump river water from the Krishna and Godavari rivers up gradients and irrigate seven million acres of dry land in the state, mostly in the Rayalaseema and Telangana areas.

YSR, in effect, had planned Jalayagnam both to boost his populist image as a chief minister who cared for the rural poor by building long-delayed irrigation schemes promised in his election manifesto, and as a sop to contractors who were part of broader schemes with his son Jagan. Many of the projects had not received environmental clearances, and some were subject to disputes with neighbouring states over sharing river waters. Tens of thousands of people were to be displaced. Financing was helped by allocations from the central government, plus state funds from real estate auctions around big cities.