Gali Janardhan Reddy's Brahmani steel project scrapped

Andhra Pradesh government to take back over 5,000 ha allotted to the company

By M Suchitra
Published: Saturday 04 July 2015

The Andhra Pradesh government has scrapped the memorandum of understanding (MoU) it had signed with mining baron and former Karnataka minister Gali Janardhan Reddy’s Brahmani Industries Limited (BIL). The state government issued an order on May 31, through the industries department, cancelling the project and all the concessions and incentives given to the company.

The MoU was signed by late chief minister Y S Rajasekhara Reddy in 2007 for setting up a mega steel plant with an investment of Rs 4,430 crore at Jammalamadugu in Kadapa district. The plant targeted to produce two million tonnes of steel a year and aimed to take its full production capacity to 10 million tonnes by 2017. The government allotted 5,666 ha to BIL to set up the plant and a private airport. The company was also allowed to take 142 million cubic metre water from a reservoir. The plant was supposed to give employment to 10,000 people directly and 100,000 people indirectly.

The land was allotted on the grounds that BIL obtained leases for mining iron ore from Anantapur district through Obulapuram Mining Company (OMC), promoted by none other than Janardhan Reddy. The leases were for captive mining—the ore mined in that region was to be used in the local steel plant and not was to be exported.

Though iron ore was mined by OMC, the steel plant, which was to start operations by December 2009, remained a non-starter. The mined ore was exported by the management, taking advantage of the fact that the government order, while granting mining leases, did not specify that the ore should be used only by BIL. This had helped OMC export the ore and pocket huge profits.

Allotted land pledged for loan

Later, it was found out that BIL had pledged 4,358 ha in its possession to Axis Bank for a loan of Rs 350 crore. As per the direction of the district collector, police registered a case against the company. When show-cause notice was served for failure to implement the project, the company said it had already spent Rs 1,350 crore out of the Rs 4,430 crore proposed investment. But the actual amount spent was a mere Rs 170 crore, points out the May 31 order. The government will take back the land allotted to BIL.

The scrapping of the project is seen as a desperate move by the Congress government in the state, led by chief minister N Kiran Kumar Reddy, to distance itself from the controversial projects signed by YSR. Many of those projects are at present under the Central Bureau of Investigation (CBI) scanner. Janardhan Reddy, who was close to the YSR family, was arrested last year by CBI, and is now in remand in a jail in Bengaluru. The investigating agency had also arrested Y Srilakshmi, the then industries secretary, and V D Rajagopal, former director of mines department a few months back. The investigating agency which arrested Y S Jaganmohan Reddy in connection with a disproportionate assets case, has named BIL among many other companies, in the First Information Report for getting favours from the YSR government as a quid pro quo for their investments in Jagan’s companies.

Two months ago, the Comptroller and Auditor General of India (CAG) had indicted the Andhra Pradesh government for giving away large tracts of government land to private parties without safeguarding the interests of the state. In its report placed in the state assembly on March 29, Brahmani steel project had come under severe criticism. The CAG report had pointed out that the land allotment to BIL was in violation of rules, and it involved alienation of 273 ha of water bodies.

The Supreme Court in March has sent notices to six ministers and eight bureaucrats seeking explanation about their alleged roles in issuing 26 controversial government orders issued during 2004-2009 while YSR was the chief minister. Most of them are related to land allotment.

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