Volkswagen row claims minister

With the Andhra Pradesh government losing track of the money it had deposited in a bank account of a supposedly Volkswagen subsidiary, Chief Minister Y S Rajasekhara Reddy on Thursday urged the Government of India to institute a CBI (Central Bureau of Investigation) probe into the whole affair.

"The money deposited by the Andhra Pradesh Industrial Infrastructure Corporation is no more in the HSBC account of Vasishta Wahan. That is the reason we wanted to go into the details and also help German authorities in their ongoing investigation," the chief minister said to the media, which had gathered at his camp office in the morning, adding that Helmuth Schuster, the India project head of Volkswagen then, had apparently taken the money meant for the proposed joint venture project.

Reddy also shifted his Major Industries Minister Botcha Satyanarayana, who is in the eye of the storm, from the existing portfolio, on his request, to facilitate a fair probe into the alleged financial irregularities in the deal.

He, however, defended the government's decision to deposit Rs 11 crore (Rs 110 million) into the account of Vasishta Wahan, besides supporting strongly the role of his cabinet colleague in the negotiations with regard to Volkswagen's India project.

"The government has not done anything in a gullible or a naive way in paying money towards nominal equity to the Vasishta Wahan. We acted only on the advice of the then India Project head of Volkswagen Helmuth Schuster," he said.

"We have no fear for our money being lost. Volkswagen is totally responsible for the acts of Helmut Schuster, who introduced Vasishta Wahan as the German company's nominee for the proposed project in Andhra Pradesh," Reddy added.

He quoted a latest e-mail from VW's Alfred Stroehlein to state industry commissioner on Wednesday, which said Jagadeesh Raja, one of the promoters of Vasishta Wahan, arrived this morning in Hannover and was on his way to meet the authorities in order to clear up the situation.

In a 7-page press note issued in the press conference, the chief minister referred to all the important events and correspondence pertaining to the negotiations with Volkswagen since 2002, saying that neither were the discussions with Schuster a new thing after his government came into power nor was Schuster the only person involved in the negotiations from Volkswagen.

The government in this press release stated that any act done by Schuster as the head of Volkswagen's India project prior to June 22, 2005 -- the date on which Volkswagen conveyed the withdrawal of services of Schuster -- would ipso facto be an act done by the Volkswagen itself as the 'principals'.

"We have nothing to hide from the government's side in the whole affair. Since there is a controversy in newspapers that the government thought it fit to clear the air by instituting a probe by the country's highest investigative agency," Reddy said.

Quoting another letter from the Volkswagen representative, who termed the proposed project as ''our common Volkswagen India project in Andhra Pradesh'', the chief minister said the project will still come to the state.