The Business of YSR’s Legacy

Politics has been really cosy with business in Andhra Pradesh. That is the real story of the YSR succession drama.

The untimely death of the former Andhra Pradesh Chief Minister YS Rajashekhar Reddy has led to dozens of suicides among his followers, and the rare event of the mighty Congress High Command being arm-twisted by the 36-year-old claimant of the CM’s post, Jagan Mohan Reddy, and his vocal supporters. But the Bell helicopter that crashed in the Nallamala forest on 2 September is now turning into a bullet that threatens to pierce the heart of the cosy club of Andhra industrialists which flourished during YSR’s five-year-long tenure. Businessmen who took advantage of their proximity with the state government are working overtime to ensure they can realign their relationship with any new dispensation in Hyderabad with minimal loss. And there’s no dearth of those who believe that it’s corporate interests, and not political considerations or caste equations, that will eventually determine the succession.

That’s because Andhra Pradesh’s political economy is unique in India, possibly matched only by that of its neighbour Karnataka. “While there has been considerable development of physical infrastructure in the state, no one can deny that it has given birth to more than a dozen oligarchs. Almost all of them have made their fortunes through real estate, infrastructure and mining of natural resources,” says a senior CII official. Keen not to repeat the mistakes of his predecessor and arch rival Chandrababu Naidu, who was seen as a poster boy of the infotech-oriented urban elite, YSR’s focus was on building hundreds of kilometres of irrigation canals, roads and even special economic zones (SEZs) worth more than Rs 100,000 crore. In fact, Andhra is home to more than 100 SEZs, both operational and under development. That’s nearly twice the number in India’s most industrialised state, Gujarat. Ergo, is it a surprise that some of the fastest growing infrastructure groups in India, such as GMR, GVK, Lanco, Ramky and the now disgraced Maytas Infra, trace their roots to Andhra Pradesh?   During the last five years or so, GMR Industries, promoted by Grandhi Mallikarjuna Rao, bagged prestigious contracts to redevelop the Delhi and Hyderabad airports, while GVK won the rights to redo Mumbai airport. Both companies were relative newcomers back then and beat many well established firms to the post.

Lanco Infratech is another infrastructure star in this new firmament, with interests in power generation, construction and real estate. Its founder, Lagadapati Rajagopal, now a Congress Lok Sabha MP from Vijayawada, kickstarted his political career by joining YSR in his ‘padayatras’ across the state. “Although the government under YSR was more efficient than most of its counterparts, it was fairly evident that the decision-makers were blasé about doing their ‘friends’  business favours,” says the promoter of a large Hyderabad-based real estate firm. “Unsure about the twists the succession saga will take, as insurance Andhra industrialists are trying their best to woo top Congress leaders in Delhi,” he adds.

While YSR may have forged friendships with ambitious industrialists in the state, he was a vocal critic of the country’s largest private enterprise, Reliance Industries Ltd (RIL). He took a populist stand that the Government should take over the allocation and pricing of the gas produced from the D-6 block of the Krishna-Godavari basin. In a strongly worded letter to Prime Minister Manmohan Singh on 4 July 2009, YSR said: ‘For a long time to come, RIL will continue to be the lone supplier of gas. With thousands of consumers already holding a substantial number of stranded assets waiting for gas supply by RIL, no fair market discovery rate was possible, as RIL enjoys monopoly status. Even diehard capitalists would ungrudgingly concede that a private monopoly is decidedly against the public interest… We have requested the EGoM that we should get at least 10 per cent of gas allocation on a preferential basis as the first landfall point for the gas is our state. We are apprehending that the litigation between RIL and RNRL might take away powers of the EGoM unless it is properly defended in the Supreme Court. All gas supply, be it family contracts or GSPAs with power plants, should become subordinate to the powers of the EGoM and not otherwise. We cannot allow the decision-making in regard to such an important resource to fall in the private monopolistic domain.’ If Jagan Reddy or any other YSR successor takes a similarly hawkish stand, it may not be great news for RIL’s litigation-ridden KG basin plans.

Bitter political rivals trading charges is nothing new, but when the former CM and TDP supremo N Chandrababu Naidu launched a tirade against YSR last year in the run-up to Assembly polls, several Andhra business houses figured in the accusation. Back then, Naidu alleged that Jagan Mohan Reddy, YSR’s son and promoter of Jagati Publications, which operates the 24-hour Telugu news channel Saakshi and a newspaper by that name, raised money to fund these expensive operations from business houses such as India Cements, Lanco, Ramky Group, Aurobindo Pharma, Matrix Laboratories, Hetero Drugs, Karvy Group, Pioneer Infrastructure and Tanla Solutions. Naidu alleged that in return, the father-son duo had doled out business contracts and mining licences worth several thousand crore for a song. “The growth of Jagan Reddy’s media empire in less than two years has been phenomenal. His TV channel uses technology that could rival the best pan-India English channels, and within no time, his Saakshi daily ratcheted up circulation in excess of a million copies. Deloitte valued his business at more than Rs 3,000 crore. Media entrepreneurs in India should queue up outside Jagan Reddy’s residence for some handy tips,” says the Hyderabad-based head of a media buying agency, tongue clearly in cheek. 

Since 2004, YS Jagan Mohan Reddy has been based in Bangalore, staying at the upmarket HSR layout before moving to a palatial farmhouse in Bagalur in north Bangalore. His primary business was real estate and some investments in limestone quarries. That’s when he came into contact with the Bellary mining magnates, brothers Janardhan and Somashekara Reddy, who despite being ministers in Karnataka’s BJP government, are known to be close to YSR’s family. The friendship evidently worked as the Reddys-promoted Brahmani Industries set about putting up a two-million tonne steel plant and an airport in YSR’s family pocketborough of Kadapa district.

The lack of second rung Congress leaders apart, it’s hardnosed business interests that’s making more than 120 of the 156 Congress MLAs in Andhra cast their lot with Jagan Reddy as the next Chief Minister. “It may also be in the short to medium term business interest of many of the industrial houses to bankroll Reddy if he does indeed take the drastic step of rebelling against the central leadership and splitting the party in the state,” assesses a senior executive at an Andhra-based cement firm. Given how high the stakes are, the drama may only have just begun. 

Additional reporting by Anil Lulla

Andhra Pradeshbusinesspolitical economyYSR