Cement companies took the centre stage in the ongoing CBI investigation into the alleged quid pro quo deals involving Kadapa MP YS Jagan Mohan Reddy with the investigative agency specifically mentioning the investments made into his firms by Chennai-based India Cements Limited and Hyderabad-based Penna Cement Industries Private Limited (PCIL) in its remand report filed before the court yesterday.
The two companies are a part of the long list figured in the FIR filed in August last year, which also includes the names of other cement players such as Dalmia Cements and Bharathi Cements, the one promoted by Jagan himself. This comes in the backdrop of Andhra Pradesh being the topmost state in the country in terms of the installed capacity, which is at 48 million tonne per annum (mtpa).
“The investigation revealed that as a quid pro quo M/s India Cements Limited had invested an amount of Rs 40 crore in Jagathi Publications and an amount of Rs 100.32 crore in other group of companies of YS Jagan Mohan Reddy, the accused No 1,” the CBI stated in the report.
To substantiate the contention that these investments were made in exchange for favours received from the state government headed by the then chief minister and Jagan’s father YS Rajasekhara Reddy, the investigative agency cited two instances.
According to the CBI, the state government had, in 2008, accorded permission to India Cements to draw 1 million gallons of water per day, including 300,000 gallons of water already permitted from Krishna River. In another instance, the company was granted extension of lease of land for a further period of 25 years from July 2003 to June 2028. The second reference was related to a 2.6-acre land, which was given to the company to construct an infiltration well with a pump house for pumping out water to the cement plant for a period of 20 years that expired in 2003.
However, the company strongly denied the CBI charges. "There was absolutely no quid pro quo at all. Water allocation towards expansion of our plants was perfectly in line with the AP Industrial Policy to promote industrial development in the state," said Raghupathy, executive president of India cements, in response to a query on Tuesday.
India Cements has been the largest cement player in terms of the installed capacity in the state (seven mtpa) and also in south India (12.95 mtpa). It commands around 15 million tonne capacity when its North Indian plant is taken into consideration.
But when it comes to the size of the alleged quid pro quo benefits, India Cements comes no where near Penna Cements, the AP-based cement company which has an installed capacity of 6.5 mtpa next to India Cements in the state.The company's promoter P Pratap Reddy, according to the CBI, was a close confident and industrialist friend of the then chief minister YS Rajasekhara Reddy.
While Pioneer Infrastructure Holding Limited, represented by P Pratap Reddy, its director, had invested Rs 23 crore in Carmel Asia Holdings Private Limited and Rs 45 crore in Jagathi Publications Private Limited (both are Jagan firms), the Penna group had received an allotment of government land, fresh limestone mining leases and transfer of the existing mining leases to the extent of close to 3,000 acre through various government orders among other benefits, according to the CBI. Efforts to contact Pratap Reddy over phone for his response on these charges did not yield results.
Tip of an iceberg?
Industry sources, however, say that the instances quoted by the CBI is just a tip of an iceberg when it comes to the arbitrary approach adopted by the government of that time with regard to the cement sector.
While AP's installed capacity had nearly doubled in a short span after the Congress came to power in 2004, on the back of the infrastructure boom and helped by the availability of abundant limestone reserves in the state, the favourable decisions made by the government, including the allocation of natural resources for companies, had not been done equitably or transparently, according to an industry analyst.
“For example, the CBI can as well check as to how many applications for either fresh mining leases or transfer of existing leases filed by companies and individuals, other than the favoured ones, were cleared by the government after December, 2007. Practically none,” a top official of a company, who did not want to be named, told Business Standard.
Close to half a dozen companies and a host of others, who are into the business of supplying limestone to non-cement industries, had returned empty handed after their applications were kept in the cold storage for years together, the official pointed out.
Meanwhile, a team of officials from the Enforcement Directorate(ED) on Tuesday arrived here from Delhi to question Jagan, who is in judicial custody, in the alleged instances of money laundering involving the flow of investments into his firms, even as the courts are going to decide on the bail and custody petitions filed by the accused and the CBI respectively in the next couple of days.
The ED officials in Hyderabad had already received the updates in this case from CBI apart from following the leads of alleged FEMA violations parallelly. As the case reached a critical stage, culminating into the arrest of Jagan a couple of days ago, the ED is directly entering into the picture to question the accused to verify the information already gathered, reports suggested.
