Why Ponty Chadha's Time Could Be Up in Uttar Pradesh

Image: Reuters

Time might be ticking away fast for Gurdeep Singh Chadha, popularly known as Ponty Chadha, with Uttar Pradesh Lokayukta NK Mehrotra, expected to soon submit a report on the alleged nexus between the businessman and outgoing Chief Minister Mayawati. Sources in Uttar Pradesh say the report might be submitted before March 17, when Mehrotra’s term ends and might well see Akhilesh Yadav, who will be sworn in as the state’s next Chief Minister on March 15, immediately getting into the thick of things.

In a step unseen in the Indian liquor industry, the Mayawati government had in 2009 handed Chadha, head of Wave Inc, which was earlier known as the Chadha Group, wholesale rights to distribute liquor in the state. This was the first instance of an individual getting complete control over distribution of liquor in a state. Uttar Pradesh, along with Maharashtra, is known to be one of the biggest liquor markets in the country.

During his campaign trail before the elections, Akhilesh had publicly criticized the Mayawati government for sheltering Chadha, whose office premises across north India were being raided by income tax officials. Incredibly, it was later revealed in reports that Chadha was tipped off about the raids three days before officials landed in his offices. Having reaffirmed that his government wont go soft against corruption after romping home in the elections, Akhilesh would be now under pressure to take action against Chadha, whose “at least Rs 6,000 crore” business empire, which includes real estate, sugar mills and distillieries, has probably benefited the most under Mayawati’s reign.

The former chief minister might find herself prominently in the Lokayukta report. Giving her company may be former excise minister Nasimuddin Siddiqui, excise commissioner Mahesh Gupta and principal secretary of excise department Kishan Singh Atoria. Gupta and Atoria were summoned by the Lokayukta last month.

Forbes India's attempt to reach Chadha has been futile till now. His executive assistant 'Raj' promised to call back but has not done so till the time we took this story online.

As the lone wholesaler of liquor in the nearly 10 million-case market, Chadha had the final say on the kind and volume of liquor that other companies could supply to retail outlets in the state. Most importantly, he also dictated the prices. In other states, where companies like United Spirits and Radico Khaitan can’t sell directly to retailers, the local government’s wholesale distribution arm does the work. In UP, Chadha’s common practice was to buy liquor stocks from companies at a discounted price and sell it to retailers for a margin.

Very often, say sources in the UP government, Chadha’s retail outlets would charge a premium of up to Rs 80 over the maxiumum retail price of a bottle of beer. “In many of the retail outlets in the state, only Chadha’s Wave brand of beer is sold,” a state official told Forbes India.

A seasoned player in the Indian liquor industry, Chadha is as much known for his proximity to political parties as for his knack to work the system to his advantage.

Folklore in the Indian liquor industry has that sometime in the middle of the last decade, the Punjab state government called for open auction of liquor retail stores. Till then, retail shops of the liquor industry were in the hands of few monopolistic individuals. By having an open auction, the government wanted competition to come in. But Chadha, who was one of those few monopolists in the Punjab liquor market, had other plans. He got around "one thousand of his employees" to make PAN cards for themselves and bid in the auctions through them. Almost 100 per cent of the retail shops ultimately went to Chadha!

The grant to wholesale distribution of liquor in UP though might be just one of the many allegations that the Lokayukta is probing against Chadha and Mayawati. In a recent report, the Comptroller and Auditor General found “discrepancies” in the Mayawati government’s auction of sugar mills, many of which went to Chadha. The street-smart businessman also formed a joint venture with the UP Co-operative Sugar Mills Federation for operating the retail outlets in western Uttar Pradesh that had come under his control. During these five years, Chadha’s Wave Inc (rechristened from The Chadha Group) also amassed almost 5,000 acres of land bank.

The Indian liquor industry is known for its close proximity with politicians and political parties. “At the same time,” says industry veteran-turned consultant Santosh Kanekar, “it is not just about liquor and politics and more about personality and personal equations.”  Interestingly, while Chadha had managed to remain away from public glare before the income tax raids, the most famous personality in the Indian liquor industry is Vijay Mallya, owner of the country’s largest liquor empire, the UB Group. Mallya is known for his friendship with politicians and is a member of Parliament.