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Maharashtra minister Subhash Deshmukh’s firm leases land to garment unit funded by his own dept

RTI records show that the Preshak society first wrote to the Textile Department on August 10, 2009, to set up a readymade garments unit on a two-acre plot, with a 40-year lease, in Savatkhed in South Solapur tehsil.

Written by Vishwas Waghmode | Mumbai | Updated: October 9, 2017 8:09:53 am
Maharashtra Textile Minister, Subhash Deshmukh, Subhash Deshmukh Lokmangal Group, Devendra fadnavis, conflict of interest office, Maharasthra Textile Department, Right to Information, RTI Act, Preshak Mahila Textile Garment Audhyogik Utpadak Cooperative Society, National Cooperative Development Corporation, Mumbai news, Indian express Officials red-flag project on leased land; no conflict of interest, says Deshmukh.

A company belonging to Maharashtra Textile Minister Subhash Deshmukh’s Lokmangal Group will earn lease rent from a cooperative society’s garment unit being set up through a financial scheme operated by the Textile Department, according to records obtained by The Indian Express under the Right to Information (RTI) Act.

Records show that Deshmukh approved financial assistance to the unit under his government’s scheme despite red flags being raised by his officials that contrary to norms governing the scheme, the society did not own the land on which the unit would come up.

Deshmukh is the Maharashtra BJP’s vice-president and became Textile Minister on July 8, 2016. The society that leased his company’s land — Preshak Mahila Textile Garment Audhyogik Utpadak Cooperative Society Ltd Solapur — is chaired by Vidya Lolge, who is also a vice-president of the Opposition NCP’s women’s wing.

Government records show that on March 31, 2017, the last day of the financial year, the Maharashtra government sanctioned Rs 58.40 lakh as assistance to the society as a first installment, under a National Cooperative Development Corporation (NCDC)-sponsored scheme for development of powerloom cooperatives.

Records also show that a one-acre plot of agricultural land owned by Lokmangal Developers, part of the Lokmangal Group, has been leased to the society for Rs 2 lakh annually, to be upwardly revised by 15 per cent every three years, to set up the unit. The land, which is classified as non-irrigated, falls in Mandrup, under Deshmukh’s Assembly constituency.

When contacted by The Indian Express, Deshmukh denied suggestions of conflict of interest and said that his department assisted the society as part of its plans to increase rural employment and make the area a textile hub. Preshak chairperson Lolge said the unit will start operations “in six months” and provide employment to “350 women”.

RTI records show that the Preshak society first wrote to the Textile Department on August 10, 2009, to set up a readymade garments unit on a two-acre plot, with a 40-year lease, in Savatkhed in South Solapur tehsil.

Documents show that the society’s estimated project cost was Rs 5.30 crore, which was revised by the Department to Rs 3.07 crore while forwarding the proposal to the NCDC on January 1, 2014. On March 11, 2014, the NCDC approved project assistance of Rs 2.92 crore. Over a month later, records show, the society decided to shift the location of the unit to Mandrup village in South Solapur.

But on May 22, 2017, in a letter to the Maharashtra Director for Textiles, the society said it had received “expert” opinion that the land is not suitable, and sought to implement the project on another plot of land owned by Lokmangal Developers.

Records show that on June 2, 2017, the director of the state Textile Department forwarded the society’s proposal to lease land from Lokmangal for 10 years, but with a file noting observing that according to norms for assistance, the society should own the land or have a lease agreement for at least 30 years.

On June 28, 2017, records show, the file was put up before Textile Minister Deshmukh.

On July 29, 2017, the Textile director wrote to Ujjwal Uke, Principal Secretary (Textiles), with a revised proposal from the society, and pointed out that it had thrice changed the proposed location after its first proposal in 2009.

”The society has so far changed the project location three times and must first finalise the place and submit a final resolution regarding this. In this way, the society will not be able to repeatedly change the project location after getting state government approval. When the society owns land, it is felt that it would be inappropriate for a project on leased land,” said the director’s letter.

The director was referring to the society’s claims in 2017 to his department: in March, it said it was purchasing 929.36 sq m in Solapur city, instead of Savatkhed; in May, it submitted a 10-year lease agreement for one acre in Mandrup, belonging to Lokmangal Developers Ltd; in July, it submitted a 30-year lease agreement for one acre in Basavnagar, South Solapur, also belonging to Lokmangal Developers Ltd.

Records show that on August 9, 2017, the Textile department prepared a note, stating that the minister, during a discussion, had directed it to seek a 30-year lease agreement from the society, according to a Government Resolution (GR) on February 24, 1999, and that the proposal be put up again.

This note also referred to a meeting chaired by Sunil Porwal, Additional Chief Secretary (Textiles), on April 4, 2016, during which he directed that it would be “mandatory for powerloom cooperatives to purchase land due to low recovery under the scheme”. However, the note said that the minister referred to the 1999 GR and directed the society to be allowed to take land on lease for 30 years and the change of location to be approved. Two days later, Uke noted on the file in Marathi: “What is the status of the purchased plot?”

On August 16, 2017, the director replied, stating that the society’s plot purchase in Solapur city had fallen through after the land owner cancelled the deal when the cheque issued by the society bounced. “At present, the society has two plots and hence it should first finalise a plot and must submit a final resolution regarding it,” the textile director noted in the letter.

Uke put up the file to the minister “for orders” on August 21. Deshmukh granted approval on August 22, noting on the file that the society wants to relocate the project to the Basavnagar plot.

The NCDC assistance scheme was started in Maharashtra in October 1996 — the state releases the assistance to the society first and claims reimbursement from the Corporation thereafter. But recovery of assistance from beneficiaries of the scheme was so poor that the scheme was discontinued in February 2004 before being re-started in January 2009. In January 2011, the government decided that personal property of the societies’ directors would be mortgaged for effective recovery.

In the case of Preshak, the NCDC sanctioned assistance comprising a term loan of Rs 1.46 crore and an investment loan Rs 1.16 crore. The state government is to pass on Rs 1.16 crore as share capital in the cooperative unit and Rs 1.46 crore as term loan to the society. The period of loan is eight years with a moratorium of one year for the term loan only.

‘To generate rural employment’

Maharashtra Minister Subhash Deshmukh said, “When I heard that the society is looking for a plot, I suggested to them a plot near Mandrup, which falls in my assembly constituency. This is basically to generate employment in rural parts… Lokmangal Developers had quoted a higher lease amount, but I convinced them to reduce it. There is no profit to Lokmangal Developers.”

Deshmukh denied any conflict of interest in his department facilitating funds for a project which has leased land from a firm under his group. He said he intends to set up a textile hub in his Assembly constituency, in the area adjoining Mandrup village.

Lokmangal Developers Ltd director Dhananjay Patil said there is no conflict of interest as the company is part of the Lokmangal group but also a separate entity owned by him, his father and his maternal uncle. “We have followed all legal procedure for making the lease agreement for 30 years with the society. It was not Deshmukh but the society that approached us requesting the land lease,” said Patil.

Vidya Lolge, who heads the society, said the garment manufacturing unit would start operations within six months. “This is the only such project by women. Around 350 women will get employment,” said Lolge.

On reasons for shifting the project location, she said, “We found that women from Hotagi, Mandrup and adjoining villages in South Solapur would have to travel to the city if they wanted to work at the unit, and so a unit closer to their homes would be preferable.”

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