Updated: January 23, 2021 5:32:56 pm
IN WHAT raises questions of conflict of interest and propriety, a cement company part-owned by Andhra Pradesh Chief Minister Y S Jagan Mohan Reddy’s family, has received a bulk of the purchase orders for state government works in the first 10 months of the current financial year.
Bharathi Cement Corporation Private Ltd — in which Reddy’s family holds 49 per cent stake, and his wife is a Director — received 14 per cent or 2,28,370.14 metric tonnes of all purchase orders for cement made by the state from April 2020 till January 18, 2021.
Vicat, a French company, had acquired a majority 51 per cent stake in Bharathi Cement in 2010.
The India Cements Ltd received the second highest purchase orders of 1,59,753.70 MT, which is about 30 per cent less than Bharathi Cements. The India Cements had investments of Rs 95.32 crore in Bharathi Cement, and had sold it the same year Vicat acquired 51 per cent in Bharathi.
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N Srinivasan, Managing Director, The India Cements, is one of the persons named in the CBI’s (Central Bureau of Investigation) quid pro quo case against YS Jagan Mohan Reddy and others. The CBI had accused that the then Y S Rajashekara Reddy government had favoured certain companies and allotted land at lesser prices, circumvented laws to give mining leases or allocated additional river water against rules, in lieu of which they invested in firms owned by Jagan Reddy.
Of the 11 chargesheets filed by the CBI between April 2012 and September 2014, the sixth, seventh and eighth pertain to quid pro quo by Dalmia Cements, India Cements, Raghuram Cements (earlier name of Bharathi Cement), and Penna Cements. Penna Cements had received purchase orders of 1,50,325.02 MT.
Taken together, these three companies account for a third of the total purchase orders during April 2020 and January 2021.
When contacted, Andhra Pradesh Industries Minister M Goutham Reddy said Bharathi Cement and India Cements received a bulk of the orders because they were able to supply as per the government schedules. “Some manufacturers have supply chain issues and it is challenging for the government to ensure constant supply of cement to keep up with the schedule of works. The orders are placed as per the requirement,” he told The Indian Express.
In Andhra Pradesh, purchase orders are made through YSR Nirman, a state-launched portal used by all state departments to procure cement for government works such as housing, roads, irrigation projects, etc. The portal connects stakeholders including the Cement Manufacturers’ Association, manufacturing companies, and government departments.
The YS Jagan Mohan Reddy government has fixed the price of a 50-kg cement bag at Rs 225 for purchases by its departments. The departments send their requirements to the District Collectors who then place the orders using YSR Nirman to the AP Cement Manufacturers’ Association (APCMA). The APCMA then distributes the orders amongst its 23 manufacturers.
M Ravinder Reddy, Director, Bharathi Cement, who is also Vice-President, APCMA, dismissed allegations of favouritism. “The government orders have nothing to do with Y S Bharathi (wife of YS Jagan Mohan Reddy) being a director. She has been there since the beginning and we have supplied to the government during the previous regime too at Rs 230 per bag,” he told The Indian Express.
An official of APCMA said the trade body does not favour any particular company in allotting orders. “The allotment is based on market share of the manufacturers and their capacities in Andhra Pradesh. The reason why Bharathi Cements or India Cements has got bigger orders is other companies are unable to supply the required quantity. Some companies do not want to take big orders because the government price is very low,” the official, who did not wish to be named, said.
A few cement companies which received lower purchase orders refused to comment.
YSR Congress rival Telugu Desam Party has alleged that cement companies led by Bharathi Cement have formed a syndicate and increased prices from Rs 220-250 per 50 kg bag to Rs 350-400 per bag in the last few months. “This has been done to benefit Bharathi Cement in which the CM’s family still had 49 per cent stake,” claimed Kommareddy Pattabhi, National Spokesperson, TDP. TDP claims the state government has turned a blind eye to cement price rise in the open market. The general public ends up paying much more, allowing cement companies to make super normal profits through open market sale, even if they supply at a lower price to the government, it alleges.
Ravinder Reddy, Director, Bharathi Cement, dismissed these allegations. “Prices have risen due to many factors. We have a plant with a capacity of 5 million tonnes, so we receive many government orders. But it is a burden because the price is very low. We do it as part of corporate social responsibility especially because housing for weaker sections is also involved,” he said.
When asked about TDP’s allegation that cement prices have steadily risen, Industries Minister Goutham Reddy said the government cannot enforce price control. “Prices have risen, but the government has no role in it. We cannot dictate prices,” he said.
When asked if cement companies were acting in concert to influence prices, he said, “Cements companies have their own platforms. I am not really in a position to discuss it because I cannot present evidence.”
Clarification: Responding separately to this January 20 report, ‘Firm owned partly by CM Jagan family gets bulk of govt orders’, the Industries and Commerce Department, Government of Andhra Pradesh, and the South India Cement Manufacturers Association (SICMA), have denied that some cement companies were favoured.
Industries and Commerce Department, Andhra Pradesh:
The government exhibits no partiality between various cement manufacturing companies in placing orders for cement procurement in various government projects. Cement companies in the state under the Andhra Pradesh Cement Manufacturers Association (AP CMA) supply to all government departments at Rs 225 per 50 kg bag, much lower than the market price. To ensure transparent and assured supply, the government has designed “YSR-Nirman”, a centralised online portal for all cement consuming departments.
So far, all departments put together have placed indented quantities of 16.64 Lakh MT, of which 13.20 Lakh MT has been supplied. AP CMA allocates cement suppliers on a pro-rata basis as per their installed and operating supply capacities. If supplies are delayed by a company, they are allocated to well-performing suppliers. Companies take up these supplies as a social cause under corporate social responsibility.
South India Cement Manufacturers Association:
We have supplied cement on a marginal cost basis to governments of Tamil Nadu, Karnataka, Andhra Pradesh and Telangana for the last so many years. To accuse the association of a cartel for a product where pricing is free and market driven was not acceptable. To the best of our knowledge, no other industry comes forward for a social cause at this scale.
The Indian Express replies:
The report quoted the purchase order figures displayed in the YSR Nirman portal. It also mentions the government purchases cement at Rs 225 per 50 kg bag, which is lower than the market price; and that purchase orders are given based on market share of the companies and their ability to supply on time. It only raises the question of conflict of interest since a company which is part-owned by Chief Minister YS Jagan Mohan Reddy’s family has bagged the maximum order during the year. The Indian Express had also contacted M Goutham Reddy, Andhra Pradesh Industries Minister and M Ravinder Reddy, Director, Bharathi Cement, and Vice-President, APCMA, and accurately reported their statements.
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