“In a shocking revelation of new information, it turns out that the government of India, in 2009, had issued a sovereign guarantee on behalf of Infrastructure Leasing & Financial Services (IL&FS), which is at the centre of what is fast turning out to be one the biggest financial scandals in India,” writes Sucheta Dalal in an article published on 01 April 2019 in Moneylife.in magazine of which she is the managing editor.
What Sucheta Dalal calls "IL&FS scam" is actually a misnomer, in my opinion. It should be called 'PPP scam'. (Imagine government-backed private goondas demanding money of citizens for the use of public roads/bridges. What gall!)
Even activists like Medha Patkar and Prashant Bhushan never ever filed any petition asking for a judicial review of the whole PPP policy.
I think there has been 'lag-bhag' (to use a Kejriwalism!) complete 'elite consensus' on PPP policy -- and the 'elite' includes 'activists' and the judiciary.
(Medha Patkar-led National Alliance of People’s Movements or NAPM did make some feeble noises about the Delhi-Mumbai Industrial Corridor in 2010-11 and then shtummed up!)
By the way, Modi government has taken no action on my complaint against Public Health Foundation of India or PHFI, an entirely unlawful and corrupt entity fraudulently embedded in the government by Manmohan Singh and run by Dynasty-loyalist crook called K. Srinath Reddy -- even after Reddy allowed a huge bank swindle in which Rs 100 crore of public money has been lost.
PHFI is not even PPP, but is an outright fraud in the name of PPP. It continues to run its illegal empire in the government, corrupting/controlling Secretary-level officials.
It's one case in which I seriously believe that Manmohan Singh should have gone to jail.
However, last year a defamation notice was sent to me -- a mere anonymous blogger -- which shows that my work really hurt the crooks like Reddy.)
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The article is headlined: ‘IL&FS Shocker: Govt Quietly Paying Up on Sovereign Guarantees to ADB and KfW for Failed Group’s $50.4 Million Loan’.
“Sovereign guarantees are only issued for government projects or, occasionally, for public sector companies,” she writes.Having known Sucheta Dalal for a long time, I am surprised that she found it “shocking” that the government in 2009 (of Manmohan Singh) had been issuing sovereign guarantees to a ‘private company’ like IL&FS.
It’s because The Economic Times had been reporting about such a sovereign guarantee to a Japanese loan to IL&FS-controlled Delhi Mumbai Industrial Corridor (DMIC) Development Corporation in 2008; take a look at this July 2008 report , for instance.This 05 Oct 2008 report of the Economic Times said Prime Minister Manmohan Singh "intervened" to get the Finance Ministry to extend sovereign guarantee to a Japanese loan on-lent to DMIC Development Corporation (DMICDC) which was controlled by IL&FS.
Owned 51 per cent by IL&FS and IDFC and 49 per cent by the government, DMICDC was designated a 'private company' under government rules, and was operating from the ministry of industry’s office in Udyog Bhawan!So sovereign guarantees WERE being extended 10 years ago by Manmohan Singh government and the media WAS talking about it.
How come a senior journalist like Sucheta Dalal missed all of that?I thought she knew all along that IL&FS was a dubious, crony-capitalist organization that was allowed by the government to monopolize the fraudulent Public-Private Partnership (PPP) sector right from the early 1990s when the very first PPPs, such as Delhi-Noida Toll Road project, were conceived.
Sucheta Dalal told me as far back as April 2011, in response to my question, that she actually wanted to write on the goings-on involving IL&FS. I wonder if she did write and publish anything on IL&FS in 2011 or immediately afterwards.
(Since I'd go through Moneylife website quite frequently then, I don't think she published anything probing and IL&FS-specific in 2011 or afterwards.) The following is what I wrote to Sucheta Dalal in an email dated 13 April 2011.
"...I was contemplating doing a research-based story on another shockingly dubious phenomenon called 'Infrastructure Leasing and Financial Services (IL&FS)'. IL&FS is now the virtual government, central as well as many states', (with zero accountability, of course) when it comes to hatching and awarding PPP projects. This 'private company' operates from ministries, including Udyog Bhawan, and hundreds of SPVs to efficiently siphon off public assets through PPPs.
The IL&FS story is on hold because I am likely to be busy for the next few weeks... I wonder if you have the interest and human resources to pursue the story on IL&FS. (As also, of course, a lot more that needs to be written on PPPs, project wise and policy wise.)"
In her reply on the same day, Sucheta Dalal said the following.“On IL&FS... I am very keen on following it up- in fact did you see my piece on NSDL? We need to find a way to file a PIL on how these guys, including the National Stock Exchange have become a law unto themselves which high self-rewards for management and no accountability.”
In the same mail, she said: "I did spend a lot of time on your blog." Since she spent "a lot of time on my blog," she might have seen the article headlined 'Delhi-Mumbai Industrial Corridor: Devious Scheme, Dubious Deals', which I published on 13 March 2011 (the same day my article on Manmohan Singh-Rajat Gupta 'partnership' was posted which she read and liked).
In that article, I wrote about the government, in a “highly dubious move,” issuing sovereign guarantee to a 75 million US dollar loan from Japan Bank for International Cooperation (JBIC) to IIFCL for on-lending to DMICDC. I also wrote: The loan agreement was signed between Japan Bank for International Cooperation (JBIC), India Infrastructure Finance Company Ltd (IIFCL) and DMICDC in December 2009.
The General Financial Rules (GFR 2005) of the central government clearly say that the “government guarantees shall not be provided to the private sector.”
“It should be out of question to extend sovereign guarantee to a loan that will benefit a private company and yet the government has done it; it’s a dangerous precedent,” a senior Planning Commission official told this writer.
In fact, the government itself let it be known, willy-nilly, in 2007 that there were serious problems in PPP projects -- and in IL&FS' conflict-ridden monopolization of the sector. The General Financial Rules (GFR 2005) of the central government clearly say that the “government guarantees shall not be provided to the private sector.”
“It should be out of question to extend sovereign guarantee to a loan that will benefit a private company and yet the government has done it; it’s a dangerous precedent,” a senior Planning Commission official told this writer.
For instance, the Planning Commission commissioned Sheoli Pargal to do a study of Delhi-Noida Toll Road Project , which was published in 2007 on a website run by the Commission.
It's pretty damning study. Pargal says IL&FS awarded the project to itself, there was no cap on project cost, making for open-ended base for profits which were guaranteed, without risks, and massively inflated. Pargal’s study shows that privileging IL&FS and making it the main thekedar of the whole PPP racket actually goes back to early 1990s when first PPPs (such as Delhi-Noida Toll Road) were conceived.
The Planning Commission had commissioned another study on a PPP and published it on its website in 2007. Done by Bharat Salhotra, it was the study of Nhava Sheva Container Terminal project. Salhotra says the concessionaire "extracted inadmissible returns of Rs 524 crore, which translated into annual returns of over 100 per cent on its equity".I had published an article on IL&FS' dubious role in another PPP -- i.e. Tirupur water supply project – which was based entirely on the investigation by an NGO called Manthan. I had also done another article on Tirupur water supply project for Governance Now magazine.
By the way, Sunil Jain, who then worked for Business Standard, had reported in July 2010 about an "issues paper" (called ‘Sub-prime Highways?’) leaking out of the Planning Commission. Jain's detailed reports on that "issues paper" made for quite an alarming reading -- such as the fact that "public-sector banks and other financial institutions have been lending money to the road PPPs far in excess of the approved total project costs (TPC)."
For instance, central government-owned IIFCL was willing to lend Rs 832 crore, which is 324 per cent higher than the TPC of Rs 196 crore in the case of Panaji-Karnataka Border highway stretch.I not only wrote a series of articles on PPPs, including a 5000-word, fully-referenced critique of the PPP policy and a 3000-word critique of the DMIC, I followed that up by lending my name and journalistic work to a petition to the Delhi High Court in 2011 against the corruption in DMIC (the largest PPP scheme ever conceived in India with full personal involvement of Prime Minister Manmohan Singh, and one whose IL&FS-controlled SPV, a 'private company', was given sovereign guarantee by Manmohan Singh.)
After Delhi HC dealt only superficially with my petition, I went to the Supreme Court with an SLP which I filed in 2012 through Prashant Bhushan who was not only reluctant but resistant, but he did eventually file it. (The Supreme Court, I was told, asked us to go back to Delhi High Court with a review petition. The case ended there, I having been resource-less, helpless.)
Interestingly, a day before Prashant Bhushan was to file my SLP on DMIC, Manmohan Singh cabinet convened specifically to declare that the government will bring the private equity in DMICDC down in order to change the status of this SPV from 'private' to 'public'. It goes without saying that sovereign guarantee to the 'private company' (DMICDC) was one of the important points in my petition.
-----What Sucheta Dalal calls "IL&FS scam" is actually a misnomer, in my opinion. It should be called 'PPP scam'. (Imagine government-backed private goondas demanding money of citizens for the use of public roads/bridges. What gall!)
I believe PPPs have always been a swindle, planned and pushed by the Congress governments, but something to which BJP governments gave their full approval.
In fact, all other parties (as well as the mass media) gave their approval, explicit or implicit, to the PPP fraud -- considering that since the early 1990s, when the first PPPs were conceived, there has NEVER been any real accounting or questioning of the PPP policy, which has absolutely no legislative backing. I seriously doubt if this policy can pass muster in a Constitutional test.
I have never even seen any fairly comprehensive and critical article of the PPP policy as a whole in the media.
I have shown above that a senior journalist like Sucheta Dalal also knew all along about the clearly dubious role of the IL&FS in PPP projects, but she wrote nothing to shed light on the wrong-doing involved. I have never even seen any fairly comprehensive and critical article of the PPP policy as a whole in the media.
Even activists like Medha Patkar and Prashant Bhushan never ever filed any petition asking for a judicial review of the whole PPP policy.
I think there has been 'lag-bhag' (to use a Kejriwalism!) complete 'elite consensus' on PPP policy -- and the 'elite' includes 'activists' and the judiciary.
(Medha Patkar-led National Alliance of People’s Movements or NAPM did make some feeble noises about the Delhi-Mumbai Industrial Corridor in 2010-11 and then shtummed up!)
So, it seems both Congress and BJP are on the same page. (Someone like Nitin Gadkari is, after all, the poster boy of PPP road projects.)
-----By the way, Modi government has taken no action on my complaint against Public Health Foundation of India or PHFI, an entirely unlawful and corrupt entity fraudulently embedded in the government by Manmohan Singh and run by Dynasty-loyalist crook called K. Srinath Reddy -- even after Reddy allowed a huge bank swindle in which Rs 100 crore of public money has been lost.
PHFI is not even PPP, but is an outright fraud in the name of PPP. It continues to run its illegal empire in the government, corrupting/controlling Secretary-level officials.
It's one case in which I seriously believe that Manmohan Singh should have gone to jail.
However, last year a defamation notice was sent to me -- a mere anonymous blogger -- which shows that my work really hurt the crooks like Reddy.)
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