Emaar case and the risks in PPP deals

It was a luxury villa project that was meant to leverage the boulders of Hyderabad, a city known for the granite boulder outcroppings that dot the outskirts of this metro. But allegations of irregularities in the land deal and in the sale of villas is taking its toll and like an uncontrollable boulder running downhill, it is leading to several arrests in the case. The latest arrest being the most high-profile of all. On January 30th, the Central Bureau of Investigation (CBI) arrested BP Acharya, the Principal secretary (home), government of Andhra Pradesh.
 
Acharya was the vice chairman and managing director of APIIC when the alleged irregularities had taken place. The CBI is now probing his role in the scheme of things that led to dilution of APIIC stake in Emaar Hills Township Private Limited (EHTPL), a joint venture formed for the project between Emaar Properties and the APIIC. The CBI investigation in the dealings in this project since August last year has already led to the arrest of a top executive of Emaar, G. Vijaya Raghava; industrialist Koneru Prasad and Sunil Reddy, believed to be close aide of Y Jaganmohan Reddy.  For the moment, the argument against Acharya seems to be that he was surely in the know of things and having known them, why he chose not to object to lesser price being quoted on record for the villas.

Acharya, who has been questioned earlier in the case too, is being probed on the role he played in the joint venture with Emaar which allegedly led to the dilution of APIIC's stake from 25 to 6 per cent, leading to a revenue loss to the state exchequer. In fact, a report by the Vigilance & Enforcement to the Andhra Pradesh High Court has already looked into the role of officials at Emaar, its Delhi-based partner MGF Development, the APIIC and other agents involved in the project.
 
The deal raises several questions. Why did EHTPL permit Emaar to create a new entity Stylish Homes to act as an agent? What about the allegation that the villa plots were sold at prices between five to 10 times higher than the Rs 5,000 a sq yard shown on paper? If so, then, how and to whom did the excess money paid by the buyers go? Why did APIIC allow this and how did it allow the dilution of its equity from 25 per cent to 6 per cent in the joint venture? Leading from all these is the larger question of what new safeguards should the state include while reaching public-private partnership (PPP) deals and creating sub-entities?