Source: WikiLeaks

ID 

07CHENNAI640

SUBJECT 

CORRUPTION PLAGUES ANDHRA PRADESH'S BIG TICKET SPENDING

DATE 

2007-10-22 00:00:00

CLASSIFICATION 

UNCLASSIFIED//FOR OFFICIAL USE ONLY

ORIGIN 

Consulate Chennai

TEXT 

UNCLAS SECTION 01 OF 02 CHENNAI 000640 

 

SIPDIS 

 

SIPDIS 

 

SENSITIVE 

 

E.O. 12958: N/A 

TAGS: ECON, EINT, EINV, PGOV, IN 

 

SUBJECT: CORRUPTION PLAGUES ANDHRA PRADESH'S BIG TICKET SPENDING 

PROGRAMS 

 

1. (SBU) SUMMARY: Andhra Pradesh's ruling Congress party has been 

spending billions of dollars on social programs targeted at the 

"common man." The spending programs, though politically popular, 

have led to much talk that Chief Minister YSR REDDY's government is 

engaged in corruption beyond the norm for India. Opposition leader 

Chandrababu Naidu used the high-profile September 9 collapse of an 

under-construction overpass in downtown Hyderabad to argue that 

corruption is so rampant in the Congress government that it is 

endangering the state's citizens. Complaints of corruption seem 

unlikely to give the opposition much traction against the ruling 

Congress party, however. END SUMMARY. 

 

CONSTRUCTION MISHAP BRINGS CORRUPTION CENTER STAGE 

--------------------------------------------- ----- 

 

2. (U) On September 9, the collapse of an overpass which was under 

construction in central Hyderabad killed two people and injured 

several others. The collapse of the high-profile construction 

project in the heart of Hyderabad's commercial district gave the 

leader of the opposition TDP and former Chief Minister, Chandrababu 

Naidu, the opportunity to amplify his ongoing campaign of criticism 

against the ruling Congress party's "rampant" corruption in 

infrastructure projects. Visiting the scene of the collapse, Naidu 

reportedly blamed "corrupt practices" for the deadly incident. 

Naidu's attack touched a nerve with the Chief Minister. REDDY 

countered by alleging that Naidu had enriched himself during his 

tenure as Chief Minister and challenged the opposition leader to a 

joint investigation into their respective personal finances. Naidu 

rejected the challenge on the grounds that the proposed inquiry 

would not be fair. 

 

CORRUPTION BEYOND THE PALE (EVEN FOR INDIA)? 

-------------------------------------------- 

 

3. (SBU) REDDY has used populist spending programs to great 

political effect. The government's massive housing and irrigation 

programs merit special attention. The housing program provides 

material, grants, and loans to eligible citizens for the 

construction of homes. The government claims more than 1.1 million 

of a planned 2 million houses have already been built under the 

first phase of the program. An additional 4.1 million houses are 

planned for phases two and three. At a price of $650 to $1000 per 

house depending on locale, the total program will cost four to six 

billion dollars. At the same time, the irrigation program aims to 

spend more than eleven billion dollars over five years on 26 major 

irrigation projects. 

 

4. (SBU) There is consensus in Andhra Pradesh that the irrigation 

and housing programs are beset with corruption. On separate visits 

to Hyderabad we heard allegations of widespread graft from several 

neutral observers. An economist who studies the effectiveness of 

government programs in Andhra Pradesh said with only "four to five 

companies executing the projects though the work of numerous small 

sub-contractors" and little oversight there are many opportunities 

for graft in the irrigation program. A reporter said he had no 

doubt that many people were profiting from it. He added that the 

scale of the corruption was beyond the norm for the state. 

"Typically five to seven percent is lost to corruption, but in 

REDDY's irrigation program that figure is more like fifteen to 

twenty percent," he said. Speaking about the housing and irrigation 

programs, an editor for a prominent daily also focused on the 

difference in the scale of the corruption in the current government. 

He said "We thought Naidu was bad, but that was child's play 

compared what is happening now." 

 

EVERYBODY KNOWS, BUT DOES ANYONE CARE? 

-------------------------------------- 

 

5. (SBU) Widespread corruption in the Congress government seems to 

an open secret in Andhra Pradesh, but the political impact is 

unclear. One media contact told us the man on the street expects 

it. He said: "corruption is inalienable. It is rather acceptable." 

Another reporter said citizens are fine with corruption so long as 

some the money flows down to them, adding that as long as Congress 

continues to spread the wealth it actually "strengthens its position 

in the state." A third journalist observed that at a minimum the 

Congress is consolidating its political base "offering small 

contracts to party workers, making them happy." 

 

6. (SBU) COMMENT: Many elites are disgusted by the level of 

corruption in the Congress government. The sheer size of REDDY's 

signature programs, with literally billions of dollars at play every 

year, leaves much room for "leakage" to Congress party officials and 

their allies. But the size of the programs also means that even 

with a substantial percentage lost to corruption, a lot of money 

still must be making its way to the common man. With this in mind, 

 

CHENNAI 00000640 002 OF 002 

 

 

Congress seems confident that corruption will not be an effective 

issue for the TDP. When Naidu tried to raise it in the wake of the 

overpass collapse, Chief Minister REDDY took it right back at Naidu 

accusing him of corruption during his tenure. Congress appears 

willing to bet that people will focus on what they are getting from 

the programs and ignore the likelihood that corruption under Chief 

Minister REDDY dwarfs that which preceded him. END COMMENT. 

 

HOPPER

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XDEST_07CHENNAI640

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2011-09-03 17:42:27

STAMP 

2011-09-03 17:42:27

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