Implosion (49 page)

78.
‘Govt issues blacklist of 118 defence suppliers’,
Indian Express
, 8 June 2006,
http://www.indianexpress.com/news/govt-issues-blacklist-of-118-defence-suppliers/6000/0#sthash.xA4I0TVC.dpuf

79.
‘Reports of violating VVIP copter contract premature: AgustaWestland – Says legal processes looking into this matter have not been completed, after reports that Antony called the chopper maker guilty’,
Business Standard
, 1 November 2013
http://www.business-standard.com/article/current-affairs/agustawestland-bares-fangs-to-mod-in-vvip-helicopter-cancellation-113103101005_1.html

80.
‘Bribe charges in another copter deal’,
The Times of India
, 3 April 2013,
http://articles.timesofindia.indiatimes.com/2013-04-03/india/38247493_1_vvip-helicopter-deal-agustawestland-guido-haschke

18
Scam Andhra

Jawaharlal Nehru once described Hyderabad as a microcosm of Indian culture. He was praising it for its blending of culture and religion. Today it can still be seen as a microcosm of the country’s culture – for the negative reason that the good India’s first prime minister saw at the time of independence has been squandered by the corruption and illicit links between companies and government that are now part of India’s political and business landscape.

A decade or so ago, Hyderabad – and the state of Andhra Pradesh whose capital it is – was a focal point in southern India of a booming information technology industry. It had become an international symbol of a country that saw itself growing into a world superpower alongside China. Bill Clinton visited it in 2000 when he was US President, marking Hyderabad’s emergence as India’s second high-technology centre after Bengaluru. Bill Gates of Microsoft, which set up its main India research facility in a new software zone along with Google, was not far behind, plus many others.

Now the city has become a symbol of what is wrong with India. It embraces dynastic political ambitions based on personal greed and the lauding of companies that have grown fat on fraudulent land and other deals, literally plundering the state’s wealth. The trend first became widely noticed in 2009, when the Hyderabad-based Satyam, India’s fourth largest software company, collapsed in a fraud scandal involving local politicians and a prominent business family
¹
. The Indian government rallied round with top businessmen to rescue Satyam (it is now part of the Mumbai-based Mahindra Group) so as to prevent it harming the country’s then buoyant image, but they could not save Hyderabad’s deteriorating reputation.

Indian and international investors had until then paid little attention to the political-business linkages and scams. That was no longer possible from 2009 because it soon became clear that Satyam and its allied infrastructure company, Maytas (Satyam spelt in reverse), were just the tip of a vast iceberg that gradually became exposed after the state’s Congress chief minister, Y.S. Rajasekhara Reddy (YSR), was killed in a helicopter crash in September 2009.
²
YSR’s death, just a few months after being re-elected for a second term, triggered a series of events that led to widespread police inquiries, court cases, and the jailing of businessmen and politicians.

A frantic campaign was launched within hours of the crash for Jagan (YSJ or Jagan as he was known to differentiate him from his father, YSR) to succeed him as chief minister.
³
This was despite the fact that Y.S. Jagan had virtually no political experience – he had become a member of parliament just five months earlier. Jagan’s supporters were not, however, trying to ensure that Andhra had a strong and reputable leader in charge: in fact, rather the opposite. They wanted the dynastic succession to continue so that they and their business contacts could continue with the contracts, deals and favours that YSR and Jagan had set up during the father’s five years in office. So avaricious was their greed that they openly campaigned and shouted slogans during the memorial and other functions that followed YSR’s death, turning what should have been respectful and sombre occasions into a political jamboree. Sonia Gandhi received Jagan’s claim when she arrived with Manmohan Singh for YSR’s funeral, but she resisted the proposal, understandably thinking that Jagan, aged 36, was not the right candidate so early in his political career.

Businessmen involved in the state’s companies form a new entrepreneurial community
⁴
that is significant in the same way as clans such as the Marwaris or the Chettiars. The Marwaris moved from their desert home state of Rajasthan to serve and make money, first with Mughal rulers in Delhi and then with the British in Calcutta.

The Chettiars, based in Tamil Nadu, migrated as traders and bankers to nearby countries. With easily identifiable names like Reddy, Raju and Rao, the Andhra businessmen travelled much smaller distances within Andhra, bearing farming wealth from the state’s ? ourishing coastal regions to Hyderabad, especially when the city began to grow in the 1990s with the growth of information technology. There they worked with politicians, and together grew rich in real estate, land deals and infrastructure projects – and then became involved in politics themselves. Some have now expanded their businesses across India and abroad with power ventures, highways and airports. The most ambitious, however have become over-extended and faced financial problems.

The growth of Hyderabad’s wealth has exacerbated a decades-old claim for the creation of a separate state of Telangana, centred on the city – one of several demands across India for the creation of new states. The claim has varied in intensity since 1956, when Hyderabad was merged into the newly formed state of Andhra Pradesh, and has frequently been mishandled by the central government, especially since 2009. It is only now being implemented.

Andhra Pradesh is rich in farmlands along its coastal regions, with a port and industrial city at Visakhapatnam (Vizag), and with a capital city, Hyderabad, that is built on a spectacular landscape of ancient rock formations, hills and lakes. It became prosperous and important because of its software and allied IT businesses. Now those advantages have been damaged by greed and corruption. This is not unique, of course. Corruption cases linking government, political dynasties, ministers, bureaucrats and business have emerged on a massive scale in many states, notably Maharashtra with irrigation and other scandals, Karnataka (mining and land), Tamil Nadu (national telecoms), Jharkhand (mining), Orissa (mining), Uttar Pradesh (land and infrastructure), and Delhi (Commonwealth Games).

Andhra Pradesh, however, is worth special study because, as a microcosm, it shows how a city and a region have been corrupted by a newly rich community impatient to boost its wealth and power. People who have known Hyderabad for decades talk about how old traditions and attitudes have been swept aside in the rush for instant riches. ‘I find today’s new Hyderabad vulgar, obsessed with money and without any social conscience,’ says Anvar Alikhan, a senior advertising/business executive, who lives there.
⁵
‘The amount of money sloshing around is astonishing. At a business meeting where we were discussing socio-economic segments, a client told me, quite straight-facedly, “Upper Income Group means someone with a net asset value of Rs 100 crore. Anything less than that is just middle class.” A banker said that his wealth management department in the city was being shut down because of a lack of business opportunities. “Sure, there’s lots of money, it’s just that none of it is available for investment in things like shares, bonds and mutual funds, because it’s all in cash”.’

Irrigation in the 1800s

The story begins long before India’s independence, with a British irrigation engineer, Sir Arthur Thomas Cotton, who wrote himself into the region’s history in 1844 so memorably that there is a Cottonreddypalem village, plus many statues, and a Cotton Museum that was opened as recently as 1988 by the then Andhra chief minister, N.T. Rama Rao. Cotton’s contribution was to produce a report in 1844 that led to giant barrages being built across the state’s massive Godavari and Krishna rivers, plus other irrigation works. Together these projects turned the coastal delta region into the grain bowl of Andhra, which it remains today.

The main beneficiaries, as Harish Damodaran, a journalist, recounts in a well-researched book
India’s New Capitalists
,
⁶
were the local Kamma peasantry, who later became the leading businessmen in Hyderabad. The Kammas, writes Damodaran, had a ‘pronounced commercial bent’ and cashed in not only as farmers but became canny traders, hoarding stock and watching market prices to decide when to sell, moving on later to run small rice and oil mills and rural money-lending. ‘By the early decades of the twentieth century a stratum of agriculturalists had emerged who were looking at new avenues for investing savings accumulated from intensive farming of paddy and high value cash crops such as Virginia tobacco, turmeric and chilli.’

This created considerable wealth and also bred a generation of contractors who became accustomed to doing deals with politicians and government officials – a skill that would later yield fortunes in the days of YSR. They started with small irrigation projects and gradually evolved as large-scale civil engineering and construction contractors.

Telangana

While the coastal regions boomed, the Telangana region, with Hyderabad as the capital of one of India’s 500 ‘princely states’, lagged behind for over 200 years under the thumb of the hereditary ruler, the all-powerful Nizam of Hyderabad. Nehru wrote in 1946 that it was ‘a typical feudal regime supported by an almost complete denial of civil liberties’.
⁷
The Nizam was eventually ejected from his throne by the Nehru government in September 1948 in what may have been the bloodiest of all India’s mass killings, with reports of 50,000 Muslims killed and maybe many more
⁸
.

The Telangana people’s demand for some sort of constitutional identity began in 1956 when the coastal regions were merged with the Nizam’s old Hyderabad state to form a Telugu-speaking Andhra Pradesh. A few years later, in the 1960s, the Telangana movement developed into a bid to resist domination by bureaucrats and others from the coast who, through hard work and long hours that contrasted with the typical Hyderabadi’s laid-back approach, had aggressively cornered high government positions. The demand for a Telangana identity was then fudged and rebuffed by successive Indian governments.

When Hyderabad started to grow rapidly in the 1990s, the wealthy from the coastal regions helped to finance the state’s politicians, grabbing land for construction projects together with licences and contracts in the city and the rest of the state. The new wealth was displayed in the shiny office blocks and shopping malls that came up across the city, along with palatial houses that have gradually destroyed the city’s Deccan Plateau rock landscape. Geologists say these rocks are 2,500 million years old, making them among the oldest – and hardest – in the world. ‘Uncontrolled quarrying and destruction for the sake of building material and more building space threatens to make these rocks a thing of the past,’ says a local conservation organisation.
⁹

By the time YSR died, the wealth and development of the city and its surroundings far surpassed the coastal regions.
¹⁰
The inflow of wealth and power gave fresh impetus to the Telangana cause in the 2000s because of local resentment at what was widely seen as a takeover of the city,
¹¹
with local people suffering discrimination when it came to jobs, government services and education.

Unlike most other state bifurcation claims, the Telangana cause had by this time become primarily focused on wealth and business interests, not the more usual motivations of language and ethnic divisions (although there are cultural and dialectic differences – Urdu was the official language under the Nizam). The Telangana activists wanted to keep Hyderabad as their capital (the first time such a claim had been proposed by a potential breakaway state), which led to strong opposition from the powerful and rich newcomers from the coastal regions, who feared that their investments and prospects in the city would be hit. They feared a crash in real estate values, together with a cutback on infrastructure projects and other deals, and even thought they might be driven out by the new Telangana rulers. This led many of them to favour a compromise, with the city becoming a self-contained Union Territory – a sort of mini city-state – independent of both Andhra and the new Telangana.

Among the most powerful and vocal anti-Telangana politicians have been Lagadapati Rajagopal, founder of the once rapidly-growing but now heavily-indebted Lanco Infratech infrastructure, power and construction group. A Congress MP, he was one of the financiers of a padayatra in 2003 by YSR that helped to bring him to power. Rajagopal’s development plans in and around Hyderabad could be hit hard if the state is split. Another Congress MP with powerful Delhi connections is T. Subbarami Reddy, whose Gayatri group has many infrastructure projects. Also facing possible losses from a split would be Andhra-born G. Mallikarjuna Rao, founder-chairman of the Bengaluru-based GMR group that built Hyderabad airport and controversially has a massive 5,400 acres of land around the site, with the right to develop it. National and local politicians are widely believed to have invested anonymously in similar companies through proxy names and other routes though that may never be proved.

In December 2009, the Congress-led central government was faced with a long fast by a leading local politician, K. Chandrasekhar Rao, leader of the Telangana Rashtra Samithi. He appeared to be endangering his life to revive his crumbling political image as the head of the Telangana movement. The government gave way and agreed to create a new state,
¹²
but that impulsive and humane decision led to violent demonstrations, as well as resignation threats by about half the members of the state’s legislative assembly, and a revolt by businessmen who felt threatened. This paralyzed the state government (and sparked follow-on bifurcation claims from other states), though it did succeed in enabling KCR to end his fast. Predictably, once the fast was over, the central government backed off and hoped to indefinitely stall the Telangana claim.