Instances of state government's stakes in joint venture projects with foreign companies being diluted during regimes of both Chandrababu Naidu and YSR are coming into light. In yet another instance where state government gets pittance while its counterparts in the venture get the lion's share has surfaced recently.

The YSR government had entered into two separate MoUs in 2007 with the government of Ras al Khaimah (an emirate forming part of UAE) and Jindal South West Holdings Ltd for supply of bauxite through the AP Mineral Development Corporation Ltd for the proposed aluminium refineries and smelters currently being established by these two private promoters in Vizianagaram district.

Incidentally, Ras al Khaimah has business ties with Emaar Properties, Dubai, which is already under the CBI scanner in view of allegations that the Chandrababu Naidu and YSR regimes favoured it by diluting the state's stake in joint ventures like the Emaar Hills Township and Hyderabad International Convention Centre (HICC). Ras al Khaimah had recently petitioned Prime Minister Manmohan Singh to direct the AP government to speed up the Vadarevu and Nizampatnam Port Industrial Corridor (Vanpic) project coming up in the coastal region. Incidentally, the Vanpic project, of which Ras al Khaimah is a promoter, is also under the CBI spotlight in the Jagan assets case.

The company floated by Jindal South West Holdings was incorporated as 'JSW Aluminium Ltd' and that of Ras al Khaimah as 'AnRak Aluminium Ltd'. In November 2007, the state had appointed a six-member high powered committee for fixation of the sale price of bauxite and the percentage that the AP Mineral Development Corporation (APMDC) would get as royalty for the sale of bauxite. The committee of bureaucrats headed by then industries secretary Y Srilakshmi and with another IAS officer B P Acharya as member, then consulted PriceWaterhouseCoopers Pvt Ltd, and on their guidelines, fixed the pricing policy and royalty.

The formula, as spelt out in GO MS 222, issued on August 13, 2008, APMDC would get an equity participation of 1.5 per cent subject to a maximum of Rs 50 crore per year plus an extra sum of 1.25 times of the prevailing royalty for tribal development. The remaining 97-odd per cent of the revenue was earmarked for these two private promoters. The GO claimed that the formula was based on a model evolved by the Orissa Mining Corporation to supply bauxite to Vedanta Aluminium Ltd which was, ironically, faulted by the CAG for causing a huge revenue loss to the state. As per this formula, for a production of 2,50,000 tonnes of aluminium per annum, AnRak Aluminium Ltd will earn a revenue of Rs 3,625 crore while JSW Aluminium Ltd with an annual production of 1.4 million tonnes of alumina, will earn Rs 3,150 crore. In contrast, as per the MoU, AP Mineral Development Corporation will get only Rs 100-Rs 150 crore per year as royalty and its share of the profit.

The royalty rate fixed by the state's high powered committee is in complete contrast to what the government of India had fixed for PSUs like SAIL and Nalco. Moreover, in a bauxite-related case, the Central Empowered Committee (CEC) of the Supreme Court had said that the royalty should be one pre cent of the price of aluminium on the London Metal Exchange. If the state had followed the CEC's formula, if AnRak and JSW together mine 7.5 million tonnes of bauxite every year, APMDC should get Rs 907.5 crore as royalty. However, as per the MoU, the state will get only a pittance while the two private promoters will walk away with the bulk of the revenue at the state's expense.

The CBI, which is probing the Jagan's assets case, is in receipt of a letter written by former IAS officer E A S Sarma to then chief secretary P Ramakanth Reddy in 2009 urging the state to cancel GO 222 as it weighed heavily in favour of the two private companies at the cost of the state exchequer. While the state did not do anything on it, it remains to be seen whether the CBI will act on it.