Corporate Cronyism in ‘Vibrant Gujarat’

If Narendra Modi is the ‘Poster Boy’ of corporates, here are the reasons why
M Mehta Delhi/Ahmedabad 

India has the fifth largest concentration of dollar billionaires in the world, 49 of them — after the US, Russia, China and Germany. It has the third largest middle class — 250-300 million — after China and the US. It also has the largest concentration of the poor. While the neo-rich and middle class consume, entrepreneurs invest and reap the rewards. Such an economy invariably attracts international attention. Foreign capital scripted the India growth story from $100-$150 million in 1991 to $25-$30 billion in recent years.

The flip side of this coin was the inevitable rise in corruption in links with the government which virtually controlled the land, natural resources and airwaves that business depended on. This resulted in collusion benefitting politicians, bureaucrats and businessmen. Small manipulations in regulatory or licensing rules in these sectors can create multi-millionaires overnight.

This preamble will render the so-called ‘Gujarat Growth Story’ more believable. Currently, with India’s growth graph heading south and over-cautious bureaucrats disinclined to put pen to paper on any project, how will Gujarat fare? Ultimately, it’s the people who suffer as a fallout of this problem, women, children, farmers, landless labourers, on the human development front.

Gujarat’s indices on human development, growth, FDI inflow, and the like are nowhere near the upper percentile of other states, notwithstanding boasts by Narendra Modi and the handful of industrialists who praise him sky-high. They persist with it in order to benefit themselves. Recent RTI enquiries have established that only 23.52 per cent of MoUs signed during ‘Vibrant Gujarat’ summits are under implementation.

So who benefits from this myth called ‘Vibrant Gujarat’ and how inclusive is it? After all, MoUs don’t roar; people do!

Is Modi aiming only for assembly elections this year-end to add to his previous electoral victories? To top it off with Lok Sabha elections due by 2014 for his dream run to be PM, backed by certain corporates? Will his party leaders let him get that far or will his soiled record hold back the electorate’s hand in fulfilling his over-ambitious reach?

So let’s get a measure of the man. How does he stack up on the ‘record’ front, facts and figures-wise, and sans the usual bluff and bluster that he dishes out on his self-promotion drives. A quick reality check should settle that score.

 

Reportedly, 9,829 workers, 5,447 farmers and 919 labourers have committed suicide in Gujarat during Modi’s tenure. Over 3.98 lakh farmers do not have electricity connections. Gujarat has the highest poverty rate in the country, according to the Suresh P Tendulkar Committee appointed by the Planning Commission. The state debt has steadily increased every financial year from Rs 87,010 crore in 2008-09 to Rs 98,528 crore in 2009-10 and Rs 1,12,462 crore in 2010-11.

Not a very glowing picture so far. And there is more dismal data.

During the recent Gujarat Day celebrations, when Modi launched water projects for drinking, irrigation and sewage systems, he apparently boasted about “opponents celebrating a decade of lies” while Gujarat celebrates another “development festival” with ground-breaking announcements for over 500 projects worth Rs 903 crore in central Gujarat. Reports came in about over-zealous police preventing Dahod MP Prabha Taviyad and local Congress leaders from attending the event. Taviyad complained in Parliament about being manhandled and showed scars, much to the consternation of parliamentarians. She likened this to Modi’s “fascist’’ rule under which the opposition isn’t allowed to even attend state government-organised events.

An RTI enquiry brings to mind the Rs1,700 crore Sujalam Sufalam Yojana (SSY) scheme (or scam?) of 2009. In 2003, Modi had announced that Rs 6,237.33 crore would be provided for irrigation and water supply in north Gujarat. The work component of Rs 2,063 crore was awarded to the state-owned Gujarat Water Resources Development Corporation Ltd for completion by December 2005, thereby avoiding an open competitive bid and CAG audit. Till 2008, expenditure of Rs 1,127.64 crore was incurred. While the Public Accounts Committee (PAC) report highlighted a ‘scam’ of Rs 500 crore plus, the state government disallowed tabling of the report. The CAG’s report also elaborated various financial irregularities, leading to a public uproar, which promptly resulted in the transfer of the secretary, water resources, and appointment of a committee of three secretaries to investigate the scam. The report is still awaited. 

For each Nano car produced in Sanand, the Gujarat government’s contribution is more than Rs 60,000; for every car produced, the tax payer loses Rs 60,000. So how transparent is this deal? 

Meanwhile, the SSY scheme, due to be completed by 2005, is still nowhere near done. Will the Dahod commitments made by Modi with the usual fanfare meet the same fate? Indeed, in 2010, the fisheries minister awarded contracts for fishing in 58 reservoirs across the state. The irregularity allegedly cost the state exchequer Rs 600 crore. So, if Modi is considered the ‘Poster Boy’ of corporate groups, here are some of the reasons why. 

The Gujarat chief minister’s ability to allot ‘instant land’ for industrial projects is legendary. Enough to have the corporates lined up in anticipation of getting a sweetheart of a deal. Instead of auctioning prime land in major cities, Modi reportedly allots land to some industries and industrialists who signed MoUs in the ‘Vibrant Gujarat Investors’ Summit’ editions. Here we have the ever-ubiquitous ‘Vibrant Gujarat’ development model again, a recurring feature when it comes to transacting business with Modi, with no new ideas on the horizon.

Here are some prime examples.

Take the illustrious IIM-Ahmedabad Board, chaired by AM Naik, chairman and managing director of Larsen & Toubro (L&T), known to be close to Modi. L&T was allotted 8,00,000 sq m of prime land in the industrial zone of Hazira, Surat, without auction, at the rate of Re 1 per sq m.  Simultaneously, others were allotted 2,57,867 sq m of land at Rs 700 (or Rs 1,000) per sq m on survey No. 446/A of Suvali, Hazira, while the price fixed by the land committee was Rs 950 per sqr m. Even taking the rates between Rs 700 and Rs 1,000 per sq mtr, giving prime industrial zone land in Hazira is practically gifting it to the company for only Rs 80 lakh, thereby costing the state exchequer a few hundred crore rupees.

Why were such favours shown to some industrialists by the chief minister?

There’s the famous Singur to Sanand odyssey by Tata Motors when Modi rolled out the red carpet to welcome Ratan Tata after the group’s unfortunate foray in West Bengal. ‘Apro Ratan’ was amazed that it took only a couple of days to get the land allotment. As a favoured industrialist, Tata Motors got a Rs 33,000 crore concession for its Nano car project in Sanand, Gujarat, for 1,100 acres of land allegedly sold at Rs 900 per sq m, while its market rate was around Rs 10,000 per sq m, thereby giving Tata Motors a massive monetary benefit.

And that’s not all. For a total project cost of Rs 2,200 crore which shifted out of Singur to Sanand, the cost of relocation was Rs 700 crore. The total project cost including shipping, was projected at Rs 2,900 crore. There’s more to it than meets the eye. The cost of land recovered was Rs 400 crore whereas apparently the market rate of land is about Rs 10,000 per sq m. The Tatas were given facility of payment through instalments of Rs 50 crore each at six-month intervals. The land originally belongs to the government of Gujarat and was reserved for a veterinary university. But with the stroke of a pen, it was de-reserved and allotted to Tata Motors without following any due process and with no transparency.

Modi’s ability to allot ‘instant land’ for industrial projects is legendary. Enough to have the corporates lined up in anticipation of getting a sweetheart of a deal 

Tata got a loan of Rs 9,570 crore at 0.10 per cent interest with a moratorium of 20 years. No financial institution would grant more than 100 per cent of the total project cost as, normally, 70 to 80 per cent would be financed based on the client’s credit-worthiness. But this is Tata after all, that swung a deal that is 4.25 times more, at concessional rates and with exemption from payment of stamp duty, registration charges on conveyance or transfer of land, and given free two to four roads providing connectivity from the state highway to the project site.

And there’s more. The state government has promised acquisition of land for rail connectivity up to DMIC to Tata Motors and agreed to provide land for ancillary industries, establishing infrastructure for electric power, including installation of 20 KV power supply through Double Circuited Feeder, while Tata Motors is exempted from payment of electricity duty. The deal goes on to provide 1,400 cubic liters of water per day to the project site with permission to draw ground water for immediate need. The project is located in a Dark Zone, where even farmers are not given fresh electric connections to draw sub-soil water.

The Gujarat government also agreed to provide facilities for disposal of hazardous waste with permission for disposal of treated waste water and agreed to develop a Transport Nagar on the principle of PPP (Public Private Participation). It proposed to acquire 100 acres of land for a township for Tata Motors with facilities to lay a natural gas pipeline from the point of supply till the site.

And how does the Gujarat government state exchequer fare in this deal? Reportedly, it suffered a loss of Rs 33,000 crore. For each Nano car produced in Sanand, the state government’s contribution is more than Rs 60,000; for every car produced at the Tata Motors plant, the Gujarat tax-payer loses Rs 60,000, which is a continuous loss. So just how transparent is this deal and how does it benefit Gujaratis?

When the Who’s Who of industry line up to sing Modi’s praises, and proclaim their faith in Gujarat as a wholesome place for investment, neither India nor the rest of the world can afford to be in denial

All details were kept under wraps during the inauguration of the project by Modi in the presence of Ratan Tata and Nira Radia — who allegedly played a crucial role in clinching the deal. Only an RTI application disclosed certain facts but full facts are still not forthcoming. The deal calls for an investigation.

Another of Modi’s most favoured corporates is Adani. The group got a land allotment for the Mundra Port and the Mundra Special Economic Zone. Large tracts of land were taken from farmers and sold to corporate houses, that, in turn, chose to resell it to others, earning massive profits. With corporate groups signing hefty MoUs worth crores of rupees (which hardly materialise), while financing jamborees like the Kite Festival, Navratri Garba Mahotsav and so on, to enhance Modi’s image, who will these melas benefit?

Take the case of the Essar Group, another Modi favourite, apparently allotted 2.08 lakh sq m of disputed land for a steel plant on the CRZ (Coastal Regulation  Zone) and forest land that can’t be allotted as per Supreme Court guidelines. When this land was allotted, the deputy conservator of forests, Vyara, reportedly recorded a Forest Offence CR-11 No. 2 of 2006, punishable under the Indian Forest Act, 1927. Four different offences have been recorded and settled by imposing fines of Rs 20 lakh. Illegal constructions carried out on this forest land has been directed to be removed or demolished, and land directed to be restored to the forest department. The occupier is unauthorised but no action has been taken by the state machinery, while Essar peacefully enjoys this encroached upon land. The market rate of this land is more than Rs 3,000 per sq m. The total cost of land at this rate works out to Rs 6,228 crore. This is a massive loss to the government over and above the loss to the environment.

Many of these allegations have already been made public. The Gujarat Congress has cited many of these glaring irregularities and brazen cases of favouritism in its memorandum submitted to President Pratibha Patil last year. (See Sweetheart Deals? October 2011, Hardnews.
http://www.hardnewsmedia.com/2011/10/4151?page=2)

Is this then the ‘Gujarat Miracle’? It’s not that all MoUs signed at the fifth Vibrant Gujarat Summit will be translated into reality. Many will remain paper commitments. But when the Who’s Who of Indian industry line up to sing Modi’s praises, and proclaim their faith in Gujarat as a wholesome place for investment, having already put their money where their mouth is, neither India nor the rest of the world can afford to be in denial. 

This story is from the print issue of Hardnews: JULY 2012