Is IL&FS crisis 'Lehman Brothers moment of Modi government'? asks Congress

The Congress on Friday attacked the Centre over the alleged "financial bungling" in debt-laden Infrastructure Leasing & Financial Services (IL&FS) and wondered if this was the "Lehman Brothers moment" of the Modi government.

Taking on the government over reports to bail out IL&FS, Congress leader Gourav Vallabh said it is a privately held entity saddled with a long-term debt of over Rs 910 billion, and claimed its debt had increased by a whopping Rs 424 billion in just four years of the current dispensation.

"The Modi government's economic mismanagement has left the IL&FS into a precarious financial situation, whereby it does not have the required cash to even sustain them and pay their employees and other dues. Is this the Lehman Brothers moment of the Modi government," he said.

It is reflected by the fact that in the 2017-18 fiscal, IL&FS's current liability mounted to Rs 370.89 billion as against its current assets of Rs 312.59 billion, Vallabh said.

This means that IL&FS will have a "severe cash crunch" and would not be able to pay off its debts, he claimed.

The IL&FS group is facing serious liquidity crisis and has defaulted on interest payment on various debt repayments since August 27. It has over Rs 91,000 crore in debt at the consolidated level.

The company needs an immediate capital infusion of Rs 30 billion and is planning a Rs 45 billion rights issue.

The Congress leader alleged that the Gift City Project, envisaged by Narendra Modi as then Gujarat chief minister, was pending for 11 years and was virtually a "gift" to the IL&FS.

"(Prime minister) Narendra Modi as the then Gujarat chief minister had envisaged the GIFT City - Gujarat International Tech and Finance City - with much hype and hoopla, under the aegis of the Gujarat Urban Development Corporation (GUDC)," Vallabh said.

At a meeting held earlier this month, the key shareholders of the debt-ridden company, including LIC, SBI and HDFC, had kept a pre-condition for IL&FS to raise funds through its assets or non-core businesses, before any additional money could be pumped in.

The Congress leader questioned the involvement of the Life Insurance Corporation (LIC) and the State Bank of India (SBI) in the matter.

"Indulgence of LIC and SBI in this scam will serve whose interest?" he asked, alleging it will serve the interest of "scamsters" and foreign shareholders who hold 36 per cent ownership stake.