KERALA COMMUNISTS ROCKED BY CORRUPTION CASE AGAINST KEY

UNCLAS SECTION 01 OF 02 CHENNAI 000027

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: PGOV KDEM EIND EINV IN
SUBJECT: KERALA COMMUNISTS ROCKED BY CORRUPTION CASE AGAINST KEY
LEADER


1. (SBU) Summary: An investigation implicating Pinarayi Vijayan,
the Kerala state secretary of the Communist Party of India-Marxist
(CPM),in a corruption case has rocked the leftist party. Although
the state and national party have closed ranks behind Vijayan, his
arch-rival Kerala's CPM Chief Minister Achuthanandan has used the
corruption case to continue their feud by lobbying for Vijayan's
dismissal. Media sources predict that Achuthanandan may be forced
to step down if he continues to challenge Vijayan, who controls the
party apparatus and remains a powerful figure within the CPM at both
state and national levels. In any case, the corruption case and the
reinvigoration of the Achuthanandan/Vijayan feud only further harms
the CPM's already poor prospects in the upcoming parliamentary
elections. End summary.

Corruption case rocks the CPM
--------------


2. (SBU) The Government of India's criminal investigative arm, the
Central Bureau of Investigation (CBI),has taken steps toward
prosecuting Pinarayi Vijayan on charges of corruption. Vijayan, the
State Secretary of Communist Party of India (Marxist) (CPM),leads
Kerala's branch of the CPM. The CPM's national politburo confirmed
rumors of the impending prosecution on January 22 when it issued a
statement saying, "the steps taken by the CBI to prosecute Pinarayi
Vijayan, Secretary of the Kerala State Committee of the CPI(M) and
former Minister for Electricity, in the SNC Lavalin case are
politically motivated." Alleging that the CBI was pursuing the
case with an eye toward damaging the CPM in the upcoming Lok Sabha
elections, the politburo warned that the party would "take this
issue to the people and expose the political game plan."


3. (SBU) The CBI investigation centers on a $75 million renovation
project of three hydro-electric facilities in Kerala in the late
90s by the Canadian Company SNC Lavalin. According to media
reports, the CBI alleges that in 1996-1997 then-Electricity Minister
Vijayan conspired with the Electricity Board to award supply
contracts to SNC Lavalin in return for a $20 million grant by the
company for the establishment of a cancer center in Thalassery,
Kerala (which is located in the district where Vijayan was born).
The CBI reportedly has charged that 11 people, including Vijayan,
colluded to enter into a non-binding Memorandum of Understanding
with SNC Lavalin to extend improper favors to the company. The
state's Auditor General issued a report in 2005 finding that the $75
million contract was almost a total loss for the state because the
flawed renovation failed to improve output as expected. The Auditor
General's report also exposed serious procedural deviations and
avoidable payments to the company worth several million rupees.
The report found that the Cancer Center only received 10% of the
promised grant.


4. (SBU) Vijayan's supporters defended him by pointing to the
Congress party's role in the project. Kerala Finance Minister Dr.
Thomas Isaac (CPM),a staunch Vijayan supporter, published a letter
arguing that the Congress-led government had actually initiated the
project in 1996. Isaac also argued that Vijayan had negotiated
substantial reductions in the project's cost. According to Isaac,
the CBI's partisanship is evident in the fact it neglected to go
after the Congress party officials involved in the affair.

CM refuses to back Vijayan but party leaders do
--------------


5. (SBU) Chief Minister Achuthanandan, Vijayan's arch-rival, refused
to back Vijayan. Instead, Achuthanandan traveled to New Delhi to
plead for Vijayan's ouster to CPM General Secretary Prakash Karat,
according to various newspaper reports. Achuthanandan and Vijayan
both serve on the CPM national politburo, which is headed by General
Secretary Karat. The state CPM leadership, which is largely
composed of Vijayan loyalists, was furious with the Chief Minister's
move and has closed ranks around Vijayan. According to a Kerala
media contact, the Chief Minister has painted himself into a corner
and will have to either step out of the Chief Ministership or meekly
surrender, if the CPM Politburo decides to continue supporting
Vijayan.


6. (SBU) Comment: The SNC Lavalin case is a major blow to the CPM.
It is the first time that a sitting member of the politburo has been
charged in a corruption case. Worse yet for the CPM, the case has
reopened the long-running feud between Vijayan and Achuthanandan --
a feud that resulted in Karat's 2007 decision to temporarily suspend
them both from the politburo and has sapped the party's electoral
potential. However Karat decides to resolve the dispute between the
Kerala CPM's two most influential leaders, it is certain that the
CPM will suffer badly in the upcoming Lok Sabha elections in Kerala,
a state where the CPM-led leftist coalition is defending the 18 out
of 20 seats it won in 2004. This makes Kerala one of the bright
spots on the Congress Party's electoral horizon, because as the
primary alternative to the state's communists it stands to gain
those seats that the left alliance fails to defend. End comment.


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