VZCZCXRO0700
RR RUEHAST RUEHBI RUEHCI RUEHLH RUEHNEH RUEHPW
DE RUEHCG #0027/01 0330829
ZNR UUUUU ZZH
R 020829Z FEB 09
FM AMCONSUL CHENNAI
TO RUEHC/SECSTATE WASHDC 2064
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE

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. 
 
 
CHENNAI 00000027  002 OF 002 
 
 
SIMKIN