Explained: Multi-crore scam for which Chandrababu Naidu is in the dock

Former Andhra Pradesh chief minister N Chandrababu Naidu is currently lodged in Rajahmundry Central Prison following a 14-day judicial remand ordered by an anti-corruption court of the state.

The case against him is that he conspired to misappropriate government funds when he was chief minister between 2014 and 2019 by creating a Public Private Partnership (PPP) corporation called the Andhra Pradesh State Skill Development Corporation (APSSDC).

So, what exactly is the APSSDC and why did Chief Minister YS Jaganmohan Reddy call it a scam before entrusting the matter to the CID for a deep probe?

What is the APSSDC?

Naidu’s TDP government set up the APSSDC in 2014. The objective was to provide job-specific skills to unemployed youth for better placement opportunities.

The government entered an MoU with Siemens Industry Software India Pvt Ltd and DesignTech Systems Pvt Ltd (Pune) to set up skill development centres to impart job-oriented skills to 20 million youth over 15 years.

The project was to be executed by APSSDC in partnership with the consortium of Siemens and Designtech, which were tasked with establishing centres of excellence in schools, degree colleges, and engineering colleges besides having their own training centres. The total project cost was Rs 3,281 crore.

As part of the project implementation, on January 19, 2015, Naidu virtually launched 17 skill development centres (SDC) across the state. The SDS would gather contents of various skill development courses offered by various institutes across the world and dovetail them to suit the needs of students of Andhra Pradesh.

PPP project

A Government Order (GO) was issued on June 30, 2015, stating the rules and regulations of the project. According to the GO (No MS 4, SDEI, 2015), 90 per cent of the cost was to be borne by the technology partners, while 10 per cent would be met by the government.

Later, on March 4, 2015, the Cabinet approved the release of Rs 371 crore as the grant towards its share to the private partners to start the setting up of skill development centres in schools, degree colleges, and engineering colleges. Some centres had already been set up.

Jagan calls it a scam

After Reddy took office as the chief minister of Andhra Pradesh on May 30, 2019, a review of the project was initiated. In March 2021, he said on the floor of the House that the project was a scam and referred the matter to the CID for a preliminary inquiry. The inquiry found the release of funds was not in tune with the GO, and misappropriation took place on a large scale.

CID finds conspiracy

According to the CID, the entire project was a conspiracy to siphon off government funds. In contravention of the guidelines issued in the GO, the government reached a tripartite agreement with Suman Bose (MD, Siemens) and VV Khanvelkar (MD, DesignTech) “with an intention to misappropriate” the funds of APSSDC which were entrusted to them as part of the 10 per cent share of the state government.

The CID alleges that an amount of Rs 279 crore was diverted to various shell companies, such as PVSP IT Skills, Skillar Enterprises Pvt Ltd, Allied Computers International (Asia Limited), etc. even though no work was executed or no competent services stipulated in the agreement delivered. The CID alleges that the entire amount was credited to the account of DesignTech.

The CID says the shell companies routed the money through associated entities, thereby committing misappropriation to the tune of Rs 279 crore, causing loss to the exchequer.

Genesis of the crime

The CID says the release of Rs 371 crore was the point where the conspiracy surfaced. The release of funds was illegal and went against the rules mentioned in the GO. According to Clause 6(d) of the tripartite agreement, the government released Rs 371 crore as a grant to M/S Siemens Industry Software (India) and M/S DesignTech Systems to set up Skill Development Institutions. This clause violates the principle conceived in the GO that the project should be funded to the extent of 90 per cent by the technology partners, i.e., Siemens and DesignTech.

According to the CID, the Directorate General of GST and the Income Tax Department got wind of the transaction in 2017 and initiated an investigation that found misappropriation of Rs 241 crore out of the total Rs 371 crore granted, by diverting the funds to shell companies by producing fake invoices.

CID registers case

The APSSDC chairman lodged a complaint about the irregularities in project implementation in September 2021. Based on the complaint, the CID’s Economic Offences wing registered a case under the Prevention of Corruption Act, 1988, under sections 166, 167, 418, 465, 471, 409, 201, 109, r/w 120(B) of IPC, and sections 13(2) r/w with 13(1) (c) and (d) of Prevention of Corruption Act 1988.

The CID also said that based on the FIR filed by CID, the ED had also initiated an investigation into the money-laundering aspect of the case and attached Rs 31.20 crore belonging to DesignTech.

Naidu's alleged role

Naidu’s name appears in the latest FIR as A-37 and he was arrested early on Saturday from Nandyal where he was on tour. He was presented before the Vijayawada ACB court on September 8.

According to the remand report submitted to the ACB court by the CID, Naidu was the chief architect of the conspiracy to misappropriate the funds. It claims that the very purpose of the incorporation of APSSDC, creation of the Department of Skill Development, Entrepreneurship and Innovation, the appointment of CEO and others in APSSDC, the selection of Siemens and DesignTech as technology partners, and the release of funds, were part of a conspiracy hatched by Naidu. He allegedly implemented his design by appointing his own men to key positions, bypassing the council of ministers.

Naidu, along with then minister Atchannaidu, allegedly connived with the other accused to ensure that there was no monitoring committee to oversee the implementation of the project in order to misappropriate the funds.