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Highly placed sources said the deals under scrutiny are worth Rs 12,000 crore (Rs 120 billion), which allegedly benefited disgraced Satyam founder B Ramalinga Raju.
Chief Minister Reddy's detractors claim the state government envisaged the policy of selling land under the guise of raising funds for its increased annual plan outlay.
Dr Reddy was summoned to New Delhi on Saturday by the Congress leadership, which is worried about his Satyam connections posing problems for the party in the upcoming parliamentary and assembly elections.
rediff.com is in possession of a three-page note sent by Montek Singh Ahluwalia, deputy chairman of the Planning Commission, to Prime Minister Manmohan Singh that reveals Dr Reddy's mindset on the issue of selling government-owned land.
Eyebrows were raised in the Planning Commission last April when Dr Reddy secured clearance for the state's annual plan outlay of Rs 44,000 crore (Rs 440 billion) for 2008-2009, a hike of 47 per cent from Rs 30,000 crore (Rs 300 billion) in 2007-2008, which claimed to raise Rs 12,000 crores (Rs 120 billion) from the sale of land.
Ahluwalia had misgivings on how and why the chief minister could raise so much money by selling government land, but eventually cleared the annual plan that was promised to be funded by a 32 per cent increase in the state's tax revenues.
He, however, put on record his doubts in a three-page communication to the prime minister on April 23, 2008, a copy of which is available with rediff.com, wherein he states that the 'prospects of mobilising such a large amount from sale of land appear somewhat uncertain.'
But Ahluwalia also noted the chief minister claimed the state had already raised Rs 6,586 crores (Rs 65 billion) through sale of land in 2007-2008 and hence it should not be difficult for the state to raise more money from further land sales to fund the plan.
Little did Ahluwalia know at that time that his suspicion about the land deals would one day turn out to be a controversy. Only now, after the Satyam scam erupted are Dr Reddy's claims being looked into.
Andhra Pradesh sold the land which made it possible for Maytas, the companies owned by then Satyam chairman Raju's sons, to undertake massive construction projects.
Congress President Sonia Gandhi on Saturday summoned Dr Reddy to New Delhi, ostensibly to discuss preparations for the ensuing general and assembly elections, but sources said the Satyam issue was high on the agenda.
Congress leaders worry that the perception is gaining ground that the chief minister may be soft on Raju because of their association, and also because of the land deals concluded during the party's current tenure in Hyderabad. It is believed Sonia Gandhi wants Dr Reddy to ensure that the state government act swiftly before the Satyam episode erodes the party's credibility.