APIIC wants money back from Vasishta Wahan

Corporation has sent a note to the govt proposing to recover Rs 11 crore

The Andhra Pradesh chief minister and the Andhra Pradesh Industrial Infrastructure Corporation (APIIC)appear not to be in sync. While only on Tuesday, chief minister Y S Rajasekhara Reddy along with major industries minister B Satyanarayana ruled out any irregularities on part of government in the Volkswagen deal and clarified the same to the media, APIIC is learnt to have sent a note to the government the same day proposing to recover Rs 11 crore from Vasishta Wahan Private Limited, supposedly the Indian subsidiary of the German car major.

According to government sources, B P Acharya, vice-chairman and managing director of the state-owned APIIC, which deposited and subsequently released the money to Vasishta Wahan as an equity holder, wrote a note to the principal secretary of industries department suggesting to withdraw the amount given towards the first installment from the firm.

The stand taken by APIIC is a clear departure from what chief minister Y S Rajasekhara Reddy said on Tuesday. While the chief minister said that the question is not of Rs 11 crore but to ensure that the VW's car manufacturing plant comes up in the state, the talk of taking back the money by APIIC indicates that all is not well with the government.

The apparent unease over the 'hasty' decisions that followed, after the Government Order (GO) authorising APIIC to take a nominal equity in the VW's India project was issued, is clearly manifested in a series of meetings being held separately by the chief minister, finance minister, chief secretary and principal secretary -finance during the past 48 hours. According to sources, the finance department is convinced that there are clear deviations from the GO in the entire episode.

Sources suggested deviations on two important counts. While the GO directed that the money towards equity would be released by APIIC immediately after confirmation from Volkswagen AG of the structure of the project being incorporated, APIIC released the money even before that happened.

According to reports, India project head Helmuth Schuster wrote a letter to the state government on January 12, 2005, just two days after the GO was issued, terming Vasishta Wahan as the Volkswagen's nominee.

APIIC deposited the money into the account of Vasishta Wahan on January 13, a day after the government received Schuster's letter. By that time, Vasishta Wahan had not even completed the formalities required for incorporation, sources said.

This led to suspicion of conspiracy that some in the state government along with the promoters of Vasishta Wahan including Helmuth Schuster siphoned off the money, as is now being interpreted.

Secondly, when the money was to be released only against the issue of equity shares by the firm as per the GO, Rs 11 crore was released to the firm straight away. "The money was withdrawn from the escrow account within a matter of days after it was deposited in the said account in HSBC bank," officials admitted.

It is said that these lacunae led the APIIC to reconsider its position and it decided to play safe. Officials said that the government now is in two minds as to whether straight away recover the money from Vasishta Wahan before it is disowned by Volkswagen AG management or to ensure that the company takes up the responsibility for Schuster's actions in this regard and press for the project. The Government has sought legal opinion from the state advocate general in this regard, officials said.

Meanwhile, the opposition Telugu Desam party has demanded a CBI probe into the entire episode.