Have Andhra companies cornered contracts in Telangana’s largest irrigation project?

One of the major promises that Kalvakuntla Chandrashekhar Rao made while contesting the first election of Telangana in May 2014 was “100% irrigation”. He claimed this would help revitalise the rural economy of a region that felt historically neglected as part of undivided Andhra Pradesh. Riding on the back of a popular statehood movement, Rao’s Telangana Rashtra Samithi won the election and he became the chief minister of India’s newest state.

Four years later, as Telangana prepares to vote again, one of the biggest controversies facing his government is about irrigation.

The ambitious Kaleshwaram lift irrigation project that the state is building is touted to be India’s largest. It proposes to irrigate 18.75 lakh acres of farmland by diverting about 5 billion cubic metres of water from the river Godavari. Since the river flows at a lower altitude, the water has to be stopped using barrages, stored in reservoirs and lifted using pumps before it can be channeled to fields through canals. The cost of construction is estimated at Rs 80,500 crore.

But the Telangana Joint Action Committee, which was at the forefront of the statehood movement, has criticised the project. Experts say the government has underplayed its long-term costs and exaggerated its benefits. (More on this on the second part of this series)

The most politically explosive accusation, however, comes from opposition Congress party, which has alleged the Telangana Rashtra Samithi government has favoured contractors from Andhra Pradesh. Since the statehood movement was propelled by resentment over economic opportunities being cornered by people from other regions of Andhra Pradesh, this charge has invited strong denials from the government. The TRS has described the opposition to the Kaleshwaram project as “a conspiracy against Telangana” and labelled critics as agents of the Andhra Pradesh government.

TRS leaders have also hit back at the Congress by reminding the party of the irregularities found by the Comptroller and Auditor General of India in irrigation projects implemented by its government in undivided Andhra Pradesh.

In fact, the Kaleshwaram project is a redesigned and more expensive version of a Congress-era project called the Dr BR Ambedkar Pranahita-Chevella Sujala Sravanthi project. The TRS government has retained 23 contract packages signed under this project by the previous government in 2008 and 2009. In some cases, it has revised the amounts upwards, which it claims has been done to accommodate the new design. But the Telangana Joint Action Committee alleges this is a ploy to earn fresh commissions from old contracts.

In addition to 23 old contract packages, the TRS government has also issued six fresh contracts.

Scroll.in has reviewed information relating to 28 of the 29 contracts – accessed using the Right to Information Act. The revelations show businessmen with roots in Andhra Pradesh continue to flourish in Telangana.

First, some essential background to the project.

Joint ventures route

In 2004, YS Rajasekhara Reddy, the Congressman who was then chief minister of undivided Andhra Pradesh, launched the ambitious Jalayagnam irrigation scheme, with multiple projects, worth Rs 1.23 lakh crore.

Every large irrigation project is broken up into sub-components like barrages, reservoirs, canals. A package is a combination of sub-components, for which the government floats a tender to award contracts.

For instance, all the projects under the Jalayagnam scheme together had 649 packages. One of the projects under Jalayagnam was the Pranahita-Chevella project, which was made up of 28 packages.

In 2012, the Comptroller and Auditor General of India reviewed the contracts signed under the Jalayagnam scheme. It raised specific concerns about the manner in which joint ventures were used by companies to bag contracts.

Ordinarily, only companies which have been vetted by the government for financial and technical abilities – a process called empanelment – can bid for contracts. However, in Pranhita-Chevella, the largest value of contracts went to a non-empanelled company, Megha Engineering and Infrastructure Limited.

How did this happen?

When bids were first invited for Jalayagnam, the number of contracts one company could bid for was capped at three. After the first round of contracts were awarded, the government redesigned the projects and added new contracts. By then, the empanelled companies had already bagged three projects each. So, many companies formed new entities by entering into joint ventures, and the government eased the process further by floating contracts in the open category, for which empanelment was not required.

As a result, in the Pranahita-Chevella project, six of the 28 contracts, worth Rs 16,525 crore, went to joint ventures or consortium that included Megha Engineering and Infrastructure Limited. While a consortium is a contract entered into by companies delineating rights and obligations of each member in the contract, a joint venture is a separate entity formed by two or more companies to execute a contract.

As the CAG report notes: “The empanelled joint venture (JV) firms changed their partners several times during 2004-12 to form new JV firms to bag works in ‘open category’. For instance, in Pranahita Chevella project, four firms were involved in 15 contracts worth Rs 21,843 crore by forming JVs in 15 different combinations.”

The companies are Megha, SEW Infrastructure, Maytas Limited and Nagarjuna Construction Company.

In response to queries by the CAG, the Andhra Pradesh government said the amounts mentioned against each of the companies represented the total value of the works, and not their individual stakes in those packages. However, the government did not respond to requests by the CAG for information on the specific stakes of each company.

Old project, new avataar

After the bifurcation of Andhra Pradesh in 2014, the newly-elected Telangana Rashtra Samithi government redesigned the Pranahita-Chevella project as the Kaleshwaram project. The irrigation department claimed this redesign was necessitated primarily because of inter-state issues with Maharashtra, which had raised concerns about the possibility of about 3,200 acres of land in its territory getting submerged under the original design.

In the redesigned project, according to a former senior official in the irrigation department, five of the 28 packages were dropped from the ambit of Kaleshwaram. The remaining 23 were retained with changes. Over and above these, the TRS government added six new projects, taking the total to 29.

Who got the new contracts?

Scroll.in has reviewed information on 28 of these 29 contracts, obtained by trade unions using the Right to Information Act. Information on one revised package was not available.

By 2017, the value of the 22 revised packages has gone up from Rs 35,904 crore to Rs 38,849 crore. Of these, packages awarded to Megha and its joint ventures are now valued Rs 16,756 crore, up from Rs 15,809 crore.

In addition, of the six new contracts worth Rs 10,783 crore, Megha and its joint ventures have won three, worth Rs 6233 crore. The others have gone to joint ventures of Navayuga, Larsen and Turbo and AFCONS Limited.

Taking all the contracts together, Megha and its joint ventures hold nine, worth Rs 22,989 crore, which is 46.3% of the total value of contracts awarded. SEW Infrastructure and its joint ventures have seven contracts worth Rs 14,154.7 crore. This includes three collaborations between the two companies. Navayuga and its joint ventures come third, with five contracts worth Rs 9,651 crore. However, SEW Infrastructure has not bagged any of the six new projects introduced after the TRS government was elected in 2014. Nor has Maytas, the fourth company identified by the CAG in its 2012 report.

Both Megha and Navayuga have their headquarters in Hyderabad, now the capital of Telangana. In fact, the majority of the companies in the contracts list are based in Hyderabad, making it difficult to trace their antecedents.

However, it is well known that PV Krishna Reddy, the founder and managing director of Megha, is from Dokiparru in Krishna district in coastal Andhra Pradesh. The company was incorporated in 1989 as a small fabrication unit, its website says. As an unlisted firm, it does not need to make statutory disclosures about its growth and turnover. However, in its self-declarations to the media, it has boasted of exponential growth – from about Rs 100 crore in 2006 to about Rs 20,000 crore in 2017-’18. This has earned Reddy the moniker “Mega Krishna Reddy” and attracted allegations of political favouritism, but the company has repeatedly dismissed them.

The founder of Navayuga, C Visweswara Rao, started his business in 1986 from Visakhapatnam in coastal Andhra Pradesh. The company works in nine different sectors, including ports, energy, steel and engineering. It is also an unlisted company.

With Megha and Navayuga having a stake in half the order book of Kaleshwaram projects, the criticism of the Congress seems fairly accurate – businessmen with roots in Andhra Pradesh continue to prosper in Telangana.

The chief minister’s office did not respond to Scroll.in’s request for comment. Neither did the two companies. This article will be updated if and when the replies are received.

However, an official of the state government, on condition of anonymity, said Telangana lacks native companies with large capacities. “Telangana has large manufacturing companies but very few engineering companies to do works of this scale,” the official said.

Larger concerns

Beyond the ownership of the companies that won contracts are larger concerns. By retaining 23 old contracts, the former official said, Telangana government has kept alive the concerns raised by the CAG in 2012.

For example, the CAG pointed out that the government awarded the contracts between May 2008 and May 2009, well before the detailed project report was submitted in April 2010. A detailed project report is the foundational document of any project which elaborates on its scope, design, cost and benefit. By awarding contracts ahead of the detailed project report, the Congress government in Andhra Pradesh created “a mismatch between the time stipulated for completion of the project”, which led to a cost escalation of over 100%, the CAG noted.

“The question here is if the Telangana government set right the deficiencies the CAG pointed out,” said the former official.

It is not clear if the government revised the contract value of the 23 Pranahita-Chevella packages after formulating a fresh detailed project report for Kaleshwaram. Scroll.in sent questions to the office of Vikas Raj, the principal secretary of irrigation in the Telangana government. He did not respond.

This is the first in a three-part series on Telangana’s irrigation projects. Read the other parts:

2800% jump in farm returns: Telangana government’s claims about irrigation project are ‘laughable’

To facilitate land acquisition for irrigation projects, Telangana undermined the law