Andhra govt favoured Satyam, Maytas: CAG

Andhra govt favoured Satyam, Maytas: CAG
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First Published: Tue, Mar 30 2010. 11 55 PM IST

Receiving end: B Ramalinga Raju. Bharath Sai / Mint
Receiving end: B Ramalinga Raju. Bharath Sai / Mint
Updated: Tue, Mar 30 2010. 11 55 PM IST
Hyderabad: The Comptroller and Auditor General of India (CAG) has indicted Andhra Pradesh’s (AP) previous Congress government for doling out what it said were favours to Satyam Computer Services Ltd and Maytas Infra Ltd.
Receiving end: B Ramalinga Raju. Bharath Sai / Mint
In a report for fiscal 2009, released on Tuesday, CAG has given details of favours by the AP government under former chief minister Y.S. Rajasekhara Reddy to the software services outsourcer, which was acquired in April last year by Tech Mahindra Ltd, and the infrastructure firm, which was taken over by IL&FS Ltd.
Both Satyam and Maytas were promoted by B. Ramalinga Raju, who was jailed last January after he admitted to a multi-crore accounting fraud at the software firm. Reddy died in a helicopter crash in September.
The present state government is also run by the Congress.
CAG is mandated to conduct independent audits of government accounts.
The apex audit body has found fault with the previous AP government for the manner in which it allotted 50 acres of prime land in Visakhapatnam to Satyam at a huge discount.
It also said the auction for the land had not been given enough publicity and the previous state government did not select the allottees in a fair manner from the applications it had received.
As against an entitlement of a Rs5 crore rebate or 7.5 acres of land at a concessional price of Rs10 lakh an acre, and collecting market value for the remaining land as per guidelines, the previous state government had allotted Satyam 50 acres in Visakhapatnam at Rs10 lakh an acre.
The entitlement was meant for IT companies setting up units in government-specified areas with an aim to generate employment in those places.
Satyam paid just Rs4.25 crore for the remaining 42.5 acres when it should have paid Rs170 crore under the prevailing market value then, resulting in an “undue benefit of Rs165.75 crore to the company”, CAG said in its report.
The Andhra Pradesh government had no immediate comment on the report. “The government will furnish a detailed answer to the queries raised by the CAG in due course,” said principal secretary (information technology), Ratna Prabha.
The CAG observations would not impact Satyam, its spokesperson Sridhar Maturi said. The company handed over the 50 acres of land in Visakhapatnam back to the state government as the Navy found that piece of land suitable for its operations, he said.
“We are in fact awaiting alternate land allotment by the government,” Maturi said.
On Maytas, CAG detailed deficiencies in the award of a Machilipatnam port project to a consortium led by the infrastructure firm. It said the project had been given to Maytas though it did not initially submit its bid at the location.
Mint could not immediately reach Maytas on Tuesday evening.
Noting that the Maytas-led consortium was the lone bidder for the Machilipatnam port project, CAG said in its report, “Participation of only a single party has gone against the very basic principle of participation of sufficient number of parties and competitive bidding.”
CAG said the previous state government had fixed a short duration for submission of bids for the port project and gave piecemeal extensions of short durations, which deterred potential bidders from submitting bids.
It also said that as the Maytas-led consortium had failed to achieve financial closure within the stipulated period, the government should have called for fresh bids.
Further, CAG said the agreement clauses for the project facilitated the Maytas-led consortium to raise loans not based on their financial capability but by mortgaging government land and future revenue streams from the port activities.
“This was tantamount to government standing guarantee for loans raised by a private party as government land has been mortgaged. The contractual provision is beset with the risk of the party diverting the funds raised by mortgaging government assets.” said CAG.
The Maytas-led consortium had sought and received a payment of Rs335 crore from the government for changing the location of the port project to Gilakaladinne from Gogileru on representations from the public. CAG said the payment of Rs335 crore to Maytas violated the terms of the project.
c.sukumar@livemint.com
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First Published: Tue, Mar 30 2010. 11 55 PM IST