CAG exposes land scam in Andhra

Government largesse to private enterprises and individuals cost exchequer Rs 1,784 crore

By M Suchitra
Published: Friday 30 March 2012


The Comptroller and Auditor General (CAG) of India has indicted the Andhra Pradesh government for giving away large tracts of government land to private parties without safeguarding the interests of the state. According to the CAG report for the year ending March 31, 2011 the state exchequer suffered a revenue loss of  Rs 1,784 crore on account of allotment  of government land to private investors at abysmally low rates. The report was tabled in the state Assembly on March 29, the last day of the budget session. This is the first comprehensive CAG audit report regarding land allotments in the state.

The CAG report details the land allotments between 2006 and 2011; the late Y S Rajasekhara Reddy was the chief minister of the state for most of this period.  A total of 35,811 ha was allotted to 1,027 beneficiaries in an ad hoc and arbitrary manner during this period for various purposes, including industrial development, ports and housing.  These allotments were made under the recommendations of the concerned district collector or the empowered committee headed by the chief commissioner of land administration. The report has come down heavily on the state government and pointed out that “in many cases of land allotment, the state government ignored the prescribed procedures and disregarded canons of financial propriety".

The audit sampled 11 districts where 459 allotments were made, involving 20,350 ha of land. Of these, 409 cases were scrutinised in the audit, which found that most of the land allotments were in violation of rules. In almost all cases allotments were made after cursorily scanning proposals; promises on investment and job opportunities were hyped up; land parcels were allotted way below the market rate; project delays and change of land use were tolerated; and finally,  shortfalls in job and investment targets were totally ignored.

Airport land gifted to Bellary baron

Among the irregularities and discrepancies highlighted by the CAG report are allotment of thousands of hectares of land to the tainted former Karnataka minister, Gali Janardhana Reddy, for his  business ventures, the proposed Lepakshi Knowledge Hub in Anantapur district, Vanpic Port Project and Aurobindo Pharma, which are already under the Central Bureau of Investigation scanner in connection with the disproportionate assets case against  Y S Jaganmohan Reddy, member of Parliament from Kadapa, who is late Rajasekhara Reddy's son.

“An extent of 1,261 ha in Jammalamadugu mandal in Kadapa district was allotted to Brahmani Industries Ltd (owned by Janardhana Reddy) for setting up a commercial airport and flying academy, in violation of Government of India’s policy on setting up of commercial airports, and without verifying the suitability of the site and viability of the project. It overlooked the fact that the Kadapa airport was just 50 km away,” the CAG report pointed out.

CAG also indicted the Andhra Pradesh Industrial Infrastructure Corporation (APIIC) for allotting over 13,759 ha of government land for industrial development. The report says APIIC entered into development agreements which allowed private developers to use government land to further their real estate business. The APICC did not protect public interest by permitting these firms to mortgage or sell project land, thereby causing huge losses to the government, the report said.

Job promises not kept

Although large land parcels were transferred for developing special economic zones (SEZ) and, IT and industrial parks, the objectives of these allotments remained unachieved. Against a total targeted 593,000  jobs, four SEZs have generated zero employment opportunities and seven SEZs only about 26,000 jobs.

The CAG report refers to the state government as a mute spectator when it came to encroachment of its land. No mechanism was ever instituted to prevent and detect illegal encroachments, and subsequently deal with them swiftly; the encroachments were given a boost when 14,878 instances of encroachment were regularised. The audit found that land allotments for commercial purposes were not made in a fair, consistent and transparent manner so as to serve public interest. In 60 cases, alienation of land cost amounting to Rs 2,559 crore was not collected by the district collectors from institutions allotted land.

“The Comptroller and Auditor General has been pointing out, in his audit reports, year after year, several irregularities relating to allotment of land. The state government, however, is yet to take corrective measures in this regard and prepare a comprehensive policy relating to alienation/allotment of land,” the report says. The government had also not formulated any land use policy, defining its sector-wise priorities in utilisation/allotment of land for the present and future needs for socio-economic development of the state, the report observes.

Report highlights
•  During 2006-11, the state government allotted 35,811 ha of land to 1,027 beneficiaries. In the 11 sampled districts, 459 allotments were made, involving 20,350 hectares (ha) of land. Out of these, 409 cases were scrutinised in the audit. It found that undue benefit of Rs 1,784 crore was given to various entities and persons

•  1,261 ha in Jammalamadugu Mandal in YSR district was allotted to Brahmani Industries Limited (owned by former Karnataka minister Gali Janardhana Reddy) for setting up a commercial airport and flying academy, in violation of Centre's policy on setting up of commercial airports, and without verifying the suitability of the site and viability of the project. It overlooked the fact that the Kadapa airport is just about 50 km away

•  4,355 ha of land in the same mandal was allotted to Brahmani Industries for establishing a green field integrated steel plant. This involved illegal alienation of 273 ha of water bodies and allocation of water from the Gandikota reservoir, without environmental clearance or independent examination of the project report

•  The Andhra Pradesh Industrial Infrastructure Corporation (APIIC) executed a sale deed for 3,579 ha of land in Anantapur district in favour of Lepakshi Knowledge Hub (LKH) even before creation of infrastructure by the developer. LKH did not establish any industry or create any employment, but mortgaged 1,779 ha of allotted land for obtaining bank loans worth Rs 790 crore

•  The request of Obulapuram Mining Company (OMC), which had unauthorisedly occupied government land, for grant of lease of 168 ha of land was turned down by the collector of Anantapur in August 2008. The decision was reversed within a month. The collector who, at the request of APIIC, recommended alienation of 123 ha land to APIIC (for transfer to OMC) for establishment of industrial park. The reasons for reconsidering the lease or alienating the land were not recorded

•  Government lost revenue of Rs 874.03 crore by alienating 357 ha in Mamidipally Village, Ranga Reddy district to APIIC at a meagre cost. APIIC, in turn, allotted 202.3 ha of this land at very low rates to Indu Tech Zone and Brahmani Infra Tech even before orders of alienation were issued

•  APIIC entered into an arrangement with K Raheja IT Park Pvt Ltd. (KRITPL), the terms of which, enabled the latter to sell/ mortgage government land of 44.5 ha. The agreement also exposed government to financial risk

•  The government of Andhra Pradesh allotted 101 ha of land to Georgia Institute of Technology (GIT) based on the orders of the then chief minister at Rs 1.50 lakh per acre (0.4 ha) against the prevailing market value of Rs 18 lakh per acre which gave an undue benefit of Rs 41.25 crore to the institute. GIT is yet to pay the cost of the land

•  The government allotted 216.5 ha in Ranga Reddy district to Emaar Properties PJSC, based in Dubai, through APIIC for establishing a convention centre, a star hotel, golf course and multi-use developmental township. However, the special purpose vehicle set up in terms of the MoU with Emaar re-assigned the rights of development of the project to its sister concerns. This process diluted the financial stake of APIIC and diluted its control over a developmental initiative in which it had invested substantial equity

•  Revenue of Rs 72.07 crore and Rs 39.60 crore respectively were foregone by government, through allotment of land in Chillakur mandal of SPS Nellore district (through APIIC) at very low rates for establishment of an industrial park by Simhapuri Energy Pvt Ltd/ Vikas Power Ltd and setting up of two power projects by Simhapuri Energy Pvt Ltd/ Meenakshi Energy Pvt Ltd

•  Instead of taking action for unauthorized occupation of 8 ha by Bellary Iron Ore Ltd (BIOL), the district collector of Anantapur accepted an amount of Rs 0.63 crore in respect of an application for an additional 20.51 ha by BIOL and disbursed awards to the assignees for resumed land, even before approval of government

•  In 60 cases, alienation cost amounting to Rs 2,559 crore was not collected by the district collectors from the institutions to which land was allotted between 2003-04 and 2010-11

•  Government allotted over 13,759 ha to APIIC for industrial development in the state during 2006-11. APIIC allowed private developers to utilise government land for furthering their real estate business

•  11 SEZs/ IT parks had not generated the expected employment. Against the total contemplated 593,000 jobs, four SEZs had generated zero employment opportunities and seven SEZs violate environmental regulations

•  Government violated the directions of the Supreme Court and its own orders, in alienating 394 ha of water body in Sompeta mandal in Srikakulam district to Nagarjuna Construction Company Infrastructure Holdings

•  Temporary mine leases were irregularly granted in Qutbullapur mandal, Ranga Reddy district in areas allotted for non-polluting industries

Read also: CAG blows lid off land grab in Odisha


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