HYDERABAD, JULY 14 Two days after publicly defending his government’s deal with Vashishta Wahan, a company which claimed to be the Indian arm of auto giant Volkswagen, Andhra Pradesh Chief Minister Y S Rajashekhara Reddy dumped his industries minister and asked for a CBI probe.

Minister Botsa Satyanarayana, the architect of the Volkswagen deal that never was, has been divested of his portfolio.

Fearing competition from neighbouring Tamil Nadu, the Andhra Pradesh government had hurriedly transferred 2 million Euros to an HSBC account of Vashishta Wahan on January 13 even before a memorandum of understanding (MoU) was signed. The money was to go into setting up an auto plant in Vizag.

An Indian Express investigation traced Vashishta Wahan, the firm that received Rs 11 crore, to a small room in a south Delhi market.

Volkswagen confirmed to The Indian Express that it did not have anything to do with Vashishta Wahan, and it had sacked the official, Helmuth Schuster, who was negotiating with the state government.

While continuing to defend the payment of Rs 11 crore to the Delhi-based company, the chief minister said the CBI probe is being ordered to find out how the money was siphoned off and who did it. He, however, said that the responsibility of protecting the state government’s interests lay with the German car company as ‘‘we had acted as per the wishes of the Volkswagen official authorised to deal with us.’’

The chief minister claimed that Volkswagen is still keen on pursuing its proposed car manufacturing project at Vizag. Reddy announced the CBI probe and the decision to take away the minister’s portfolio at a crowded press conference after a meeting with senior ministers and officials.

‘‘It was only on June 25 that the state government received a communication from Volkswagen that Helmuth Schuster is no longer associated with them and that Ashok Jain, chief advisor to the India project, will also not be dealing with the car project. Therefore, the onus of accepting responsibility for Schuster’s actions before June 25 lies with Volkswagen,’’ CM Reddy said.

Asked about the need for a CBI probe when he did not find anything wrong in what the state government did, the Chief Minister said that it was necessary to unravel who opened the account with the HSBC bank in Delhi and where the money had gone.

STORY OF A SOUR DEAL  

• The Andhra government and Volkswagen talk about a plant in Vizag. Helmuth Schuster, Ashok Jain and Jagdeesh Alaga Raja represent Volkswagen. • Schuster writes to the government on Volkswagen letterhead on January 7 saying that the company had decided to set up the plant. He says they would promote an Indian company and asks for equity participation. • Meetings are held in Hyderabad and Germany. The govt decides to pay Vashishta Wahan, even before an MoU is signed. • Volkswagen writes to the Andhra government on June 22 to say that Schuster and Ashok Jain are no longer with them. • Bhuwan Kumar Chaturvedi, a director of Vashishta Wahan, tells The Indian Express that large sums were siphoned out from the company’s HSBC account in March.