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Maharashtra’s Watergate: How money flows

Monday, 8 October 2012 - 9:30am IST | Agency: dna

The birth of Maharashtra’s current model of irrigation corporations began during the Sena-BJP regime, inspired by the Gujarat model of corporations that issued bonds to fund their projects.

On Gandhi Jayanti, an irrigation contractor from Maharashtra, who came to see us in our Mumbai office told me the motto in his fraternity: “Jhagda-jhagdi mat karo, Gandhi-ji ko baant lo”. Meaning: don’t fight amongst yourselves, divide Gandhi-ji (a reference to the Rs 500 currency note, which bears the Mahatma’s image) equally.

He used this bone-chilling slogan to illustrate how corruption is closely intertwined with Maharashtra’s history of dam-building.

The birth of Maharashtra’s current model of irrigation corporations began during the Sena-BJP regime,  inspired by the Gujarat model of corporations that issued bonds to fund their projects. The Krishna Valley Irrigation Development Corporation was the first, formed in 1996, followed by corporations in each of the state’s regions that matched the political interests of the leaders of the saffron regime – Manohar Joshi wanted a corporation for the Konkan, Eknath Khadse of the BJP wanted one for the Khandesh region of northern Maharashtra, and so on.

In theory, these corporations were meant to be semi-autonomous entities, run by professionals. In practice, they rapidly got hijacked by a political-contractor nexus. Every tender was rigged in favour of a particular contractor. And the ‘jhagda-jhagdi’ motto was invoked so no one quarreled. Everyone involved – politicians, officials, contractors – knew the rules and played along with it.

According to this contractor, the going rate for a kickback under the Sena-BJP rule was 5% of the project cost. This was paid entirely to the minister, who would divide it as he wished – between himself and his party, key bosses, etc. Officials in irrigation department were paid cash, usually a fixed amount, not very large, and not linked to the cost of the project.

This apparently changed when the Congress-NCP came to power. The rate card for getting the tender rose to 10%: 7% for the minister and 1% each for the executive engineer, chief engineer, and so on.   

It was in everyone’s interest to jack up the cost of the project, since higher costs meant higher kickbacks to politicians and officials, and higher profits to the contractors. So a project worth say Rs 80 crore would be padded up to be shown as Rs 100 crore project. That’s phase 1. Phase 2 was to ensure that even the lowest bid was higher than the cost of the project. This was easy since everyone was in the know. So the winning bid for this project would be, say, Rs 125 crore. Since any bid higher than 5% of the project cost needed to go to the financial department for clearance, the corporation would revise the costs downwards after the bid was in, so that a bid which was, say, 25% higher would be shown as 4.98% higher. Tender documents sourced through RTI show bid after bid revised to magically fall just short of 5% : 4.98 %, 4.99%, 4.7%, etc.

Phase 3: Once the project got underway, there was a separate rate card for submitting monthly bills to the corporation: 4% of the bill amount went to the minister, and a percent each to the officials.

It was therefore also in everyone’s interests to keep the project pending for as long as possible. The longer the project dragged on, the more its cost went up, and the more scope for gold plating.

With this insight, it’s now clear why Maharashtra’s landscape is littered with half-completed projects, some of whose costs have escalated as much as 500%. And why after spending Rs 70,000 crore, there’s been an increase in irrigated area of only 0.1% .

Its also clear why most of the contract work falls into the hands of a tightly knit group of contractors, prominent amongst whom are Avinash Bhonsale, Ajay Sancheti’s SMS Infrastructure, D Thakkar Construction, FA Construction, and Mitesh Bhangdia. They share several similarities: many of them have terrific political contacts across party lines (like Avinash Bhonsale, who got his first contract during the Sena-BJP regime, and is now seen as close to the Pawars) or are directly in politics (like Ajay Sancheti and Mitesh Bhangdia, both recently inducted into the BJP as Rajya Sabha MP and MLC respectively). And of course, they have all become overnight millionaires.

The reason why this wonderful arrangement carried on for so long was because of a conspiracy of silence. That seems to be coming apart.

The contractor who shared this history with us says the reasons he’s blowing the whistle is not a sudden burst of conscience. He simply wants revenge for being cheated out of a contract which he claimed he had ‘managed’, but at the last minute was snatched by a rival. He claims he complained to the minister, to no avail. And so he broke ranks and decided to leak the dirty secrets of his fraternity and the department.  

There has also been a political breaking of ranks. Until recently, the Congress, which led the coalition, had the run of Mumbai real estate, while NCP could do what it wanted with irrigation. Both parties would tacitly stay out of each other’s business. But Prithviraj Chavan came along and upset the apple cart. He called for a white paper on irrigation, he said projects were not being completed, and that the people want answers. (He has also upset his Congress colleagues’ real estate apple cart, but that’s another story). Taking on Ajit Pawar has its political consequences, and last week it looked like Chavan’s government would fall.

There is an uneasy truce at the moment. But in the process, between a disgruntled contractor and a chief minister who likes to see himself as a crusader, Maharashtra’s sordid politician-irrigation contractor nexus is out in the open. What next? The people of the state want water. And justice. The proposed white paper promises to bring neither.

Sreenivasan Jain is Managing Editor, NDTV. He anchors the ground reportage show, Truth vs Hype, on NDTV 24x7

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