Bharat Rashtra Samithi (BRS) leader KT Rama Rao has been booked by the Telangana Anti-Corruption Bureau (ACB) for alleged irregularities worth about Rs 55 crore in the Formula E race deal.
The Congress government has alleged that funds worth crores of rupees were transferred from Hyderabad Metropolitan Development Authority (HMDA) to the London-based Formula E Operations (FEO) Limited without the requisite approvals.
Apart from KTR, IAS officer Arvind Kumar and former HMDA Chief Engineer BLN Reddy have also been accused in the case. KTR was Minister for Municipal Administration and Urban Development (MAUD) at the time, and Arvind Kumar was the MAUD Special Chief Secretary.
“From the available material, it is evident that there is a substantial loss to the public exchequer resulting in consequential gains to third parties which attract the provisions of the applicable and relevant provisions of penal laws,” the FIR said.
Formula E payments
The case was registered based on a complaint by present MAUD Principal Secretary M Dana Kishore. The bone of contention in the case is a tripartite agreement signed in October 2022 between Formula E Operations, the BRS-led Government of Telangana, and sponsor Ace Nxt Gen Private Limited (a subsidiary of Greenko group) to conduct Seasons 9, 10, 11 and 12 of the Formula E race in Hyderabad.
For Season 9 in February 2023, the state government was to build the race track and provide other civic amenities as per the agreement. While the event cost HMDA Rs 12 crore, the fee and other payments were made by the sponsor, Ace Nxt Gen. The sponsor then backed out of conducting Season 10 (scheduled for February 2024, which was cancelled after the Congress came to power). After the sponsor dropped out, the BRS government decided to sponsor the event.
IAS officer Arvind Kumar, who also then held full additional charge of Metropolitan Commissioner, HMDA, sent a file to KTR in September 2023, seeking approval for payment of fees, tax, civil works, municipal services etc. worth around Rs 160 crore to Formula E Operations, and to make payment of fees worth 22,50,000 British Pounds (around Rs 25 crore) towards the first instalment, the complaint said.
In the same month, the complaint says HMDA received two invoices for 22,50,000 British Pounds, towards the first two installments of the Season 10 promoter’s fee. These payments were sanctioned by the then HMDA Chief Engineer in October, and the payments were transferred to Formula E Operations.
“In both the instances, even though foreign remittances were made, no formal approvals of the relevant regulatory authorities were obtained before transferring the huge amounts,” the complaint said. These foreign remittances resulted in additional tax burden to the HMDA, which had to pay Rs 8.06 crore to the Income Tax Department towards withholding tax for the two installments, it said.
Irregularities
The HMDA paid a total amount of Rs 54.88 crore from its general funds over the Formula E agreement. According to the established procedure, administrative sanction for expenditure of amounts over Rs 10 crore must be obtained from the government, in concurrence with the Finance Department. This procedure was not followed in the Formula E payments, the complaint said.
The complaint also said that the payments were made on October 11, 2023, just after the Model Code of Conduct for the Telangana Assembly elections came into force, without approval from the Election Commission of India (ECI).
Moreover, FEO terminated its existing agreement (signed in 2022 along with Ace Nxt Gen) with the Telangana government on October 27, 2023, after the payments were made, the complaint said. The payments were made “even though there was no obligation to make these payments under the then subsisting agreement. Apparently, these payments were made in anticipation of an agreement that was supposed to be executed. This is a grave irregularity,” the complaint said.
Following the payments, however, a fresh agreement was signed between FEO and the Telangana MAUD on October 30, 2023. Here, the state government took responsibility of paying the sponsor fee of GBP 90,00,000 (over Rs 90 crore), as well as providing civic and logistic support in the form of laying the track for the event etc., essentially replacing the private sponsor.
The complaint also pointed out that HMDA made the payments despite not being a party to the agreement, and that the payments were made before the fresh agreement between the government and FOE was signed.
It said that the payments were made in foreign currency in violation of existing rules related to foreign exchange remittances.
Overall, the agreement created a financial commitment of about Rs 600 crore plus additional recurring expenditure for the next three years, without taking “administrative approval from the competent authority, including clearance from the finance department,” the complaint said.
The complaint notes that both agreements were signed without concurrence from Finance and Law Departments, and without obtaining approval from the Council of Ministers.
Seeking orders on conducting Season 10 of the Formula E race, an office note circulated by Arvind Kumar under the previous government said that the HMDA had already remitted a sum of around Rs 46 crore to Formula E Operations on then MAUD Minister KTR’s directions.
The public servants involved “with fraudulent intention and through deceitful acts, caused wrongful loss to the exchequer and consequential wrongful gain to third parties,” the FIR said.
The ACB has registered the case under Sections 13(1)(a) (criminal misconduct by a public servant, if he dishonestly or fraudulently misappropriates or otherwise converts for his own use any property entrusted to him or any property under his control as a public servant or allows any other person so to do) read with 13(2) of the Prevention of Corruption Act, 1988, as well as Sections 409 (criminal breach of trust by public servant) and 120B (punishment of criminal conspiracy) of the Indian Penal Code (IPC).
The case was registered after Telangana Chief Secretary A Santhi Kumari wrote to the Director General of the ACB, asking him to initiate a probe against KTR in the case.
The matter was discussed during the State Cabinet meeting chaired by Chief Minister A Revanth Reddy on Monday, December 16. Minister for Information and Public Relations Ponguleti Srinivas Reddy revealed that the Governor had given permission to try KTR, and that the case would be taken up by the ACB in accordance with the law.
Read: Formula E is new battleground for Congress–BRS in Telangana
KTR has called the allegations “baseless” and part of the Congress government’s “political vendetta,” insisting that all payments related to the Formula E race agreement were made in a transparent manner. He has sought a discussion on the Formula E race issue in the ongoing Assembly session.