Shaktikanta Das involvement in a controversial land deal in Chennai, 100 acres allotted at a pittance

Economics of a deal signed by the Tamil Nadu government whose Industrial secretary was Shaktikant Das.

Economics of a deal signed by the Tamil Nadu government whose Industries secretary was Das
Economics of a deal signed by the Tamil Nadu government

The Ministry of Finance has issued the following notification on this post. Link: https://m.facebook.com/story.php?story_fbid=1054345194643555&id=172154416195975

As promised, we are publishing the same below:
Ministry of Finance response to PGurus

To the readers:
Please read the entire post and send us your comments (read our disclaimer first) and we will publish it. The intent of the article was to question the economics of the deal. No aspersions were intended.

Last week, Senior BJP leader Subramanian Swamy had tweeted that Department of Economic Affairs Secretary Shaktikanta Das was involved in a controversial land deal connected to P Chidambaram. Finance Minister Arun Jaitley stepped in quickly to give a good certificate to Shaktikanta Das. The matter seemed to have died down, with no follow up from the media on what deal this might be referring to. Here is one possible deal that took place in that area and time period:

In July 2007, Das, during his stint in Tamil Nadu cadre as Industrial Secretary approved 100 acres of land to a United States (US) company called Sanmina SCI Corporation at a pittance of a price, fixed at 1970 rates. The land was allotted in Oragadam Industrial Park, 50 kilometres south of Chennai for Electronic Accessories manufacture. The price of the land allotted was a jaw dropping Rs.19.5 lakhs ($30,000) per acre with a subsidy of Rs.4 lakhs ($6,000) per acre. That means the US company had to pay only Rs.15.5 lakh ($23,000) per acre. (Page No: 3, Clause 4 (g) of the order, shown below). This was a price that was prevailing in 1970 and the Tamil Nadu government was under the DMK patriarch Karunanidhi, who gave this extra-ordinary largesse in July 2007.

The clearances from Center and State were obtained at lightning speed. As per the order, Sanmina was offering to invest just Rs.250 crore ($37.2 million) initially. It also says that it may increase it to Rs.350 crore ($52 million) later. Additionally, the order says that the company expects to employ around 4000 people, which never materialised (Page 1, Clause 2 of the Order).

Why did the State government give such huge benefits to a company with such modest targets? The land was allotted to the US company’s newly floated Indian unit. In 2007, the market price of Oragadam industrial area was not less than Rs.4 crore ($595,000) per acre. Then why give it away at a pittance for Rs.15.5 lakh ($23,000) per acre? The current market price is around Rs.10 crores ($1.49 million) per acre.

The jobs promise of  4000 never materialized. At present the company has only around 550 persons. The US company offered very low salaries to labour ranging from Rs.6000 ($89.3) to Rs.8000 ($119) per month. That is around 3-4 dollars a day or 50c an hour! Sanmina ranks low in terms of their salaries in GlassDoor site, so this low balling of salaries does not come as a surprise. Sanmina’s  not-so-labour-friendly attitude has created a series of strikes in the Chennai unit.  Recently the company retrenched several workers by offering a Voluntary Retirement Scheme (VRS) between Rs.2 lakh ($3,000) to Rs.4 lakh ($6000) compensation and are now left with around 550 employees and workers, say trade union leaders.

Within a year of inking this controversial deal, Shaktikanta Das landed in Finance Ministry under Chidambaram in 2008.

To understand the merits of this deal, let us do some number crunching – To get a foreign investment of Rs.250 crores ($37 million), the government subsidized $572,000 * 100 = $57.2 million! How does this benefit the citizens? Sanmina got the natural resource, land in India at cheap price and pays low wages and never kept their promise of hiring 4000 persons. Thanks to the low headcount, Sanmina is probably losing money and the government has already subsidized the land cost, which means they too are missing out on lost revenue. Then who benefited?

Sanmina Land Allotment in Chennai Signed by Shaktikanta Das in 2007 by PGurus



Note:
1. The conversion rate used in this article is 1 USD = 67.20 Rupees.
2. Text in Blue points to additional data on the topic.
3. Error in calculation of differential price per acre ($595,000 – $23,000 = $572,000) in the first version of the post. Corrected.

Team PGurus

We are a team of focused individuals with expertise in at least one of the following fields viz. Journalism, Technology, Economics, Politics, Sports & Business. We are factual, accurate and unbiased.

11 COMMENTS

  1. Shri Das was rewarded by elevating to central finmin only because he obliged Chidambaram by alloting a big chunk of land to a co.on low price in which the latter had interest . This connection needs no probe as it is a documentary one .Why Das was suddenly in the good book of FM is thus an open secret and it is enough circumstantial evidence against him of being corrupt .

  2. Such articles defame pgurus. What is the purpose of quoting salary in USD. Whether foreign companies should pay employees in India equivalent to what they pay in their countries? All governments gave concession to companies to establish in India depending on requirements at that point of time. Political corruption is the order of the day in TN as it is ruled by DMK & AIADMK continuously. Casting aspersions on the official (indirectly) is mischievous.
    Please grow & don’t get blinded with obsession on AJ. Otherwise people may not take u seriously.
    Your services are required for the nation

  3. Being in opposition AJ should fight to put SKD behind bars, but giving him clean chit is a surprise. Recommending him RBI guv is terrible. This is another evidence of AJ and PC partenship. Now RBI Guv is common choice of both. They will imbalance economy just to show good growth figures.

  4. Dear Sir / Madam,

    With respect to pricing per acre in 2006-07 SIPCOT offered lands to set up Industries for 99 years Lease and price fixed was Rs.20.0 lakhs per acre to most of the Industries. Like Sanmina many other big industries too would have got some concession. Check for Irungattukkottai rates post 1990s for Hyndai and also the agreement with TN State Govt for Electricity Charges to be much less than what is suppose to be on commercial rate. But SIPCOT Leased out lands at Rs.20.0 lakhs per acre in SIPCOT INDUSTRIAL PARK / CENTRE IN ORAGADAM to many during 2006-07. You can verify on this.

  5. FM think that public are fools. We know how Buerocrats collude with corrupt politicians and help each other. Why AJ defending decisions of MK govt? Is he also a party to the deal?

  6. FM think that public are fools. We know how Beurocrats collude with corrupt politicians and help each other. Why AJ defending decisions of MK govt? Is he also a party to the deal?

  7. First of all why would finance minister AJ respond to charges on an officer for an alleged mischief done during previous govt? And secondly: Is finance minister saying that things mentioned by Pgurus are wrong or is he saying allocating an acer land at 20 lakhs is correct? Or is he saying investment by Sanmina is NOT $37 M and govt did NOT give $57M subsidy? What does he mean by “allegation is totally false”?

  8. Interesting.Some of the comments in twitter on this issue is also interesting.One such “Chandrusweb” literally frothing that officials will stop performing if uncalled for allegations are laid on them.I think clowns like this should stop taking sides and see the issue on the merit of the information placed in this article.What is the logic of giving away land at throw away rates? Why not the govt. lease the land so that if the company fails the land can be taken back.

    • Exactly to the point .ministers and bureaucrats are hand in glove to create loopholes in laws cunningly to trade self interests through its cracks as share partners and thereby looting the country in the name public service. A Sheshan (ex cec) type of iron man needed as head of state to root out rampant corruption

  9. Dismissing a secretary as a rubber stamp is completely mischievous. Proposals are made by the secretaries and approved by illiterate politicians.
    Why is FM providing shield to Shashikanta Das?

  10. It is really surprising that the Finance Ministry chose to respond to only this post. Even if we accept this so called “explanation” wonder why it chose to keep mum on Shakthikanta Das’s involvement in Aircel_maxis scam? Are they admitting that he was involved in it?

    If the FinMin is so confident then, let them institute a probe, instead of issuing statement like these

LEAVE A REPLY

Please enter your comment!
Please enter your name here