New Delhi: Having accused Prime Minister Narendra Modi of bailing out cash-strapped Infrastructure Leasing & Finance Services (IL&FS) through LIC and SBI, Congress president Rahul Gandhi's allegations fell flat on Monday. MyNation accessed a two-page letter written by senior Congress leader KV Thomas requesting the PM for a bailout.

Rahul Gandhi's allegation

On Sunday, Gandhi had alleged that PM Modi had unduly extended the embattled company a bailout package of Rs 91,000 crore using the resources of public sector companies LIC and SBI, suggesting impropriety.

Gandhi further accused the prime minister of having granted the same company a project worth Rs 71,000 crore back in Gujarat when he was the chief minister. 

Gandhi also tweeted, casting aspersions on PM Modi, quipping if IL&FS meant 'I Love Financial Scams' for the prime minister. 

It was Congress that had asked for a bailout

One would ask why the Congress chief would raise a hue and cry over financial help for a sick company which his own party leader asked for. 

Thomas, Congress MP from Ernakulam,  had written a letter to the PM on September 20, barely 10 days back, making a case for financial help to the company.

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Thomas devoted a fair bit of the letter singing paeans of the company. “If for some reason IL&FS defaults in its commitment due to lack of liquidity, this will have a huge impact to our economy, banks, lakhs of individual investors, who have deposited their savings in mutual funds and also to the international investment community," Thomas argued.

Thomas suggested three ways to help the company. He asked the prime minister to “guide Indian institutional investors like LIC, SBI, HDFC to support IL&FS to provide equity and debt of Rs 8000 crore requested by the company”. He also suggested that the National Highways Authority of India (NHAI) and other government agencies release funds to IL&FS on priority.

Meanwhile, Finance Minister Arun Jaitley took a dig at Gandhi for "spreading disinformation".

"Was it a scam in 2005 when LIC acquired 15% stake in IL&FS and in March, 2006 when it acquired another 11.10% stake in the IL&FS?  In fact, LIC further bought 19.34 lakh shares in IL&FS in 2010," Jaitley said on Twitter.

"The Congress Party, for the last few days, has been busy spreading disinformation about the Government’s possible moves in relation to the private sector company IL&FS," he added.

Background

It is a core investment company of the IL&FS Group. This finance company defaulted on payments to lenders triggering panic in the industry. The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (also called the Land Acquisition Act, 2013) made many of its projects unviable and hence the default. The defaults gave jitters to a slew of investors and banks associated with IL&FS. Since the company is involved in several infrastructure projects, such as roads etc, the Centre intervened. The Modi government took timely control of IL&FS's management and prevented any substantial impact on the financial sector, avoiding a ripple effect and job losses.