Bangalore: The first pre-bid meeting went nowhere.
Held on May 13, 2021 – five months after Praful Patel took charge as administrator of Lakshadweep – it had to clarify questions from private players vying to run the famous state-owned eco-tourism resort at Bangaram.
No more than five companies showed up, however, and the meeting was called off with the Lakshadweep administration promising a second meeting a week later.
The second meeting, also held online, at 5 pm on May 24, was better attended. According to a hotelier who attended the session, Lakshadweep collector Asker Ali, who chaired this meeting as well, said 16 parties had logged in. The meeting, however, ended with participants disagreeing with the administration over bid design.
There were multiple disagreements. A condition pegging Rs 70 crore as the minimum turnover for eligibility was one. “Why do I need a Rs 70 crore turnover to run a 30 room resort?” two participants asked.
The bid documents did not include a draft copy of the agreement to be signed. “What are the safeguards we have to keep in mind?” asked another hotelier, who did not want to be identified.
“What are our ecological requirements? What about local employment? What are our dos and don’ts? If those are not there, then how are they comparing these bids?”
That was not all. A clause allowing consortiums to bid had been dropped between the first and second meeting. The administration also insisted on a speed the hoteliers found surprising. Bidders who wanted to see the resort were told they could do so in the next three-four days.
Unwilling to travel given the second wave of COVID-19, participants asked for an extension. The administration refused. “Bangaram island in (sic) COVID free and guest are coming there without any issue,” it wrote in an email to one of the bidders. At the same time, when one participant, CGH Earth Experience Hotels, which used to run Bangaram, asked to visit, it did not get a response from the administration.
“How do we bid without knowing the condition of the place?” asked Gurmeet Singh Uberai, who runs the Amritara chain of premium resorts. “We asked that. There is a pandemic. We cannot travel. What is the urgency? But there was a reluctance about postponing.”
Things got so heated that a Mumbai-based hotelier asked if the resort had been earmarked for someone.
The view from Daman and Diu
The parallels between Patel’s early actions at Lakshadweep and his innings at the two union territories of Daman & Diu and Dadra & Nagar Haveli are clear for those that look for them. There too, Patel axed government staffers, imposed his cultural values on school mid-day meal programmes, concentrated power at his office, passed so-called Goonda Acts, and launched large road, highway and other civil construction projects.
The lessons from Daman and Diu, however, run deeper.
Opinion is divided on why Patel was sent there. Some media reports remark on his closeness to Prime Minister Narendra Modi.
Others discount that, pointing to the fact that he couldn’t even manage a berth in the state cabinet. “He has fallen out of favour or seen as ambitious and sidelined by others,” said a Gujarat-based sociologist.
What is incontrovertible is what followed once he reached Daman & Diu. He took away power from local MPs and other elected bodies. In tandem, he brought his advisors into the administration. This includes D.A. Satya, a retired IAS officer who works as Patel’s personal secretary; V.K. Das, who heads the Vinoba Bhave hospital in Silvassa and is director (medical and health services) in the pharma-heavy union territory; A.U. Jadeja, who was brought in to run the local anti-corruption bureau; B.C. Warli, overseeing civil construction works; and others.
“The bureaucracy has to take orders from them,” said a local businessman.
The Wire listed their names and asked Patel why he works through them instead of working with the UTs’ own officials. He didn’t respond. In tandem, a surfeit of tenders – spanning hotels, civil construction and more – were given out.
When The Wire took a closer look at civil construction, conversations with local bureaucrats and activists threw up a number of allegations.
First, people familiar with the matter questioned the rationale behind some of the projects. “He proposed a four-lane highway in a place where not even a cycle plies,” alleged one bureaucrat, on the condition of anonymity.
The Wire repeated this allegation to Patel, asking him for his response and perspective on the issue. He did not respond.
Second, a good chunk of the contracts was allegedly snapped up by a handful of companies, not from the UTs, but from Gujarat.
Talking to locals in Daman, one company that comes up in conversations is RKC InfraBuilt. Its biggest shareholder is Kamleshkumar Navinchandra Shah from Godhra. “Most of the big civil construction contracts go to this company,” charged a local businessman, on the condition of anonymity. A bureaucrat in the state agreed with the local.
Interestingly, the company got contracts even when it bid as much as 41.87% and 33% above the cost estimated in the tender. Bids running 30% higher (or more) should be re-tendered, according to the bureaucrat The Wire spoke to.
The Wire asked Patel whether these projects should have been re-tendered and if so, why they were not. He did not reply.
Compounding matters, the company’s own website shows it has not finished these projects, awarded in 2018 and 2017 respectively, even though the first was billed as a 15 month-long projects and the second, twelve months.
The Wire has sent questions to RKC InfraBuilt asking them to comment. No reply has been received so far. This article will be updated if or when they respond.
Across India, state tendering is increasingly performative. Companies are chosen beforehand – for kickbacks, kinship networks, or whatever other clandestine reasons – and rivals told not to bid. “The preferred contractor will know who he is – and so will others,” said the bureaucrat. “Rival bidders are given smaller projects and told to be content with those.”
The Wire asked Patel, whose net worth rose from Rs 1 crore in 2007 to Rs 9 crore in 2012 while he was in the state cabinet, about the allegation that companies are tacitly told not to bid against certain firms. He did not respond. This article will be updated if or when he does.
The view from Daman and Diu: Part Two
Daman & Diu and Dadra & Nagar Haveli are wealthy places.
Both, riding on low tax rates, are heavily industrialised. Big companies – like Reliance and Sterlite – have operations here. Both also have a large complement of chemical and pharma units. There is also tourism – in part due to prohibition in Gujarat.
In the cash-guzzling universe of Indian politics, spaces like these occupy their own unique slot. “There is huge money to be made here – even a 2% cut on GST/VAT would amount to a lot,” said the bureaucrat.
And so, as a political leader in Dadra & Nagar Haveli told The Wire, “Heavy muscled people become leaders. They make their money from haftagiri (extorting money from companies), buying land cheap from locals and selling to companies, and more.”
Under Patel, said a local journalist, extraction by local mafias has stopped. In tandem, however, the local administration seems to have become more arbitrary. Take a representation from the Diu Hotel Association dated June 7, 2021.
The UT administration has abruptly hiked “existing house tax rates and trade license fees and allied tax rates” manifold, amounting to an increase of “1000% and above”.
That is not all. “Three months ago, the administration called for a review of all bar licenses,” said the local businessman quoted above. “We were told those with chawls within 100 metres wouldn’t get their licenses renewed. But, in several cases, the chawls have come up later. Hotels that came up 20-30 years ago are being threatened with closure using a law passed in 2021.”
People say they are afraid of the administration. They will speak only after Patel leaves, said the businessman. He did not want to be identified.
The outlook for Lakshadweep
Even as public attention focuses on Patel’s onslaught on the islands’ ecological, democratic and social frameworks, the administration is handing out contracts to companies – for distributing Amul milk; reoriented shipping traffic from Kerala to Mangalore – and floating new tenders.
These include a Rs 150 crore “Project Management Consultancy And Third Party Inspection Services For New Construction And On-Going Construction Works Of Various Buildings By Lakshadweep Public Works Department”. Issued on February 18, technical bids were opened shortly thereafter, on April 1.
Other civil construction projects are on the anvil as well. There is talk of lengthening the runway, for instance. But a complete list of proposed projects is not available.
There is also talk that some of Patel’s officials from Daman & Diu, Dadra & Nagar Haveli will follow him to Lakshadweep. “We have been told that A.U. Jadeja has been relieved,” said the Daman local. “There is talk he might go to Lakshadweep.”
It remains to be seen if any of the Gujarat companies follow as well. Take the Bangaram tender. It wasn’t sent to the Federation of Hotels and Restaurants Association of India, the biggest hospitality association in the country. “Normally, when the government decides to do something like this, intimation is sent to us,” an executive member told The Wire. “It is the fastest way to get the word out. In that sense, this is really hush-hush. It makes no sense.”
And then, there is the hurry of it all. Bangaram is being bidded out even as the pandemic rages, at the start of the monsoon season when tourist activity falls, even before the administration builds all the tourist infrastructure it is promising. The Wire asked Patel and Asker Ali if it wouldn’t make more sense to build the primary infrastructure like the runway and then bid out the projects. The valuations might be greater, for one, once those are up. They did not respond.
Bangaram is a prized asset, said Uberai. “One advantage of bidding it early, even before the rest of the infrastructure comes up, is that it can be bought cheaper than once all the infrastructure comes up.”
The bigger picture
There is another layer to be peeled.
Hotels are not the only ones that bid for hospitality projects. Over the last 20 years, as land rates have soared, hotels have begun focusing on earning their revenues from hotel operations – as opposed to having hundreds of crores of their cash stuck in land and buildings. Now, high net-worth individuals buy land, build properties on them, and hotels manage these for them.
In India, this includes people like Nepal’s Binod Chaudhary. His CG Group rents out properties to the Taj Chain. His Fern brand of Hotels owns a property at Daman. There are others. According to a real estate advisor to the hotel industry, Delhi alone has about 20-25 people looking to invest in hotels – estimated investment for such island resorts, calculated at Rs 1.5 crore per room, will work out to Rs 150 crore or so. Such projects, The Wire was told by a senior executive in Taj Maldives, who did not want to be identified, will recover their investments in 8-10 years.
In that sense, what Lakshadweep is about to see is plutocrats go head to head with Gujarati kinship structures. The Bangaram bid is one leaf in that storm, to help us discern which lot will win. “According to media reports in Kerala, the auction has been postponed as there was only one bidder – from Gujarat,” said one hotelier whose group attended the pre-bid meeting. “But we have not heard anything from the administration.”
The Wire asked Asker Ali for an update. There was no response.
What is more incontrovertible is that neither faction will be good for the islands – if their ambition is to create another Maldives. (For a look at what untrammelled expansion by plutocrats and hotel chains has meant for the Maldives, see this OCCRP investigation).
Island ecosystems are more fragile than mainland ones. Within that cascade of vulnerability, Lakshadweep is more fragile than the Maldives. The latter, with its 1,000 odd islands, can afford to leave islands to rest and recover. Lakshadweep, however, is about to see a more intense tourism push.
India, said Samit Sawhny, the founder of Barefoot Resorts, needs to find its own model. “In the Andamans, for example, instead of aspiring to be Phuket, we should try and be the sustainable antithesis to Phuket, and in Lakshadweep, a community-driven alternative to the corporate Maldives. What we are doing is the opposite of the way the world is going. Social entrepreneurship is apt for such places, resort companies should consider entering into JVs with the local community. Let others have a management contract. We will end up with something that has a very local flavour.”
For a while, the islands had such a model. Bangaram was local and rustic. No less than 1/6th of its turnover went to the local community. “In terms of share of profits,” an executive at CGH Earth Experience Hotels, which used to run the resort on the island, told The Wire, “that worked out to 50% of gross profit.” It had stringent carrying capacity conditions. The Island Development Authority had determined Bangaram couldn’t handle more than 100 bodies (in terms of sewage, energy and water). That translated to 60 guests and 30 staff members. 95% of its staff was local. Its plastic waste was shipped back. It served local food. And it charged a bomb. At a time the Oberoi Mumbai charged $180 a night, so did Bangaram. “If they offered built-ostenstation, we provided experience,” said the executive.
The tenders we have now are the exact opposite, he added.
The Wire asked Asker Ali and Praful Patel why the Maldives model had been chosen – despite the IDA’s rejection of the same. The Wire also asked if the draft agreement included clauses regarding revenue sharing with the local community, and the quantum of jobs that need to go to locals; if the administration was planning to boost Lakshadweep’s capacity to enforce environmental protections; and the new carrying capacity studies they were banking on. There was no response.
And that is just tourism. Patel has proposed a bunch of construction projects as well. Lakshadweep faces its most urgent existential threat yet.
M. Rajshekhar is an independent reporter studying corruption, oligarchy and the political economy of India’s environment. He is also the author of Despite the State: Why India Lets Its People Down and How They Cope.