In a further setback to former Karnataka minister Gali Janardhana Reddy, Andhra Pradesh government tonight terminated the MoU with Brahmani Industries for a steel plant in Kadapa district alleging it "totally failed to fulfil its commitments".
The validity of the Memorandum of Understanding with the company expired on May 20, 2010, and it "failed to fulfil its obligations and live up to the agreement", an order issued by Principal Secretary (Industries) T S Appa Rao said.
Brahmani Industries Limited (BIL) is a subsidiary of Obulapuram Mining Company owned by Gali Janardhan Reddy who is now in jail in connection with the illegal mining scam.
The then government headed by Y S Rajasekhara Reddy had allotted 10,760 acres of land to BIL for setting up an integrated steel plant with an initial production capacity of two million tonnes per annum, which was to be expanded to ten million tonnes by the year 2017, providing direct employment to 10,000 persons and also creating indirect employment to one lakh persons.
Initially, when the project was mooted, the government had agreed to allot only 8,000 acres to BIL but the then Chief Minister ensured the company got more land than required.
Several other incentives under the state's Industrial Promotion Policy 2005-10 were also extended to BIL as it was classified as a 'mega project'.
The YSR government had also allotted 3,115 acres of land to BIL for setting up a "commercial airport and flying academy" at Ambavaram village in Kadapa district.
The CAG, in its latest audit report, rapped the Andhra Pradesh government over "indiscriminate" allotment of land to BIL.
The state government had issued several notices to BIL seeking an explanation as it "failed" to fulfil its obligations and complete the project work.
The government had also found out that BIL mortgaged the land allotted for the steel plant and obtained a loan of Rs 350 crore from Axis Bank.
The Kadapa district Collector had filed a criminal case against the company in this regard and the case is now under investigation.
In its response to the government on March 1, 2011, BIL said since its parent company stopped operations, the steel plant work was also stopped.
It even sought to put the blame on the Andhra Pradesh government alleging the latter "deliberately and arbitrarily" prohibited the mining operations of Obulapuram Mining Company and Ananthapur Mining Corporation, the profits of which were the sole source of funding for construction of the steel plant.
BIL claimed it had invested Rs 1350 crore of its 'own money' in the project but the government pointed out that it had spent only Rs 170.95 crore.
After obtaining field-level reports from the Kadapa district administration and seeking legal opinion, the state government decided to terminate the MoU entered into with BIL, the Principal Secretary said in his order.