A former senior civil servant, E.A.S. Sarma, has accused successive Andhra Pradesh governments of illegalities and favouritism towards Varun Hospitality, prompting a denial from the current National Democratic Alliance government.

Sarma, a former Union Secretary, has called for an independent judicial inquiry. In response to queries from The Wire, the Andhra Pradesh Tourism Authority (APTA) maintains that all actions were in line with state policies promoting tourism and economic development.

In a letter dated May 27, 2025, to the Andhra Pradesh chief secretary K. Vijayanand, Sarma detailed the alleged transgressions. His focus appears linked to the Varun Group's recent project launch. On April 1, 2025, The Hindu reported that Andhra Pradesh IT minister Nara Lokesh had laid the foundation stone for "Varun Bay Sands" on Visakhapatnam's Beach Road, a project Lokesh described as a future "iconic structure" involving an investment of about Rs 1,600 crore.

Contested land and concessions

Central to Sarma’s allegations are land allotments made in 2019 under a previous Telugu Desam Party (TDP) administration. He cited Government Orders (GOMs) No 86, No 153, and No 231 (the APTA does not have a copy of this) as "patently illegal," arguing they contravened Supreme Court directives against alienating public land to private entities for commercial use.

APTA stated to The Wire: "As per records it is ascertained that 1236 sq yards land was allotted at Rs. 47,000 / sq yard in 2019 at the prevailing market price." It added: "No allotment was made to Varun group either now or in the past at preferential or discounted price." The authority did not directly address Sarma's claim regarding the alleged violation of Supreme Court directives.

Sarma also targeted GOM No 8, dated May 22, 2025, contending it grants Varun Bay Sands a "bonanza of tax benefits and other benefits, some undue, running into crores of rupees." He highlighted a provision in the GOM for the Visakhapatnam Metropolitan Region Development Authority (VMRDA) to construct a footbridge connecting an existing Varun Group hotel with the proposed Varun Bay Sands, alleging that public funds would exclusively benefit a private enterprise.

The APTA countered that all incentives are "within the Andhra Pradesh Tourism Policy 2024-29." "No benefits have been extended outside the scope of the Policy," APTA stated, adding similar incentives were offered to other hospitality groups. "The question of giving undue tax benefits does not arise and it is completely baseless," it remarked, noting "the same Varun group obtained benefits for 'Taj Varun Beach sands' in 2021" under the previous government's policy.

Regarding the footbridge, APTA said: "VMRDA is not constructing any foot bridge. VMRDA will be granting approval to Varun Group for the construction of a foot-over-bridge at their own cost."

Environmental concerns and public benefit

Environmental concerns are another significant part of Sarma's accusations. He alleged a previous Varun Hospitality building violated regulations by being built in the Vuta Gedda water course. For Varun Bay Sands, he flagged potential Coastal Regulation Zone (CRZ) II norm violations, including height restrictions and possible illegal groundwater extraction.

APTA’s response focused on future compliance: "Construction of the project will be undertaken only after obtaining all necessary statutory clearances and approvals." It added: "It is the prerogative of the project proponent to ensure full compliance with all applicable laws and regulations."

Sarma questioned the public benefit from such concessions, citing employment figures in GOMs No 8 (1,300 jobs for an ₹899 crore investment) as low relative to the investment, and noted no mandate for local hiring. He contrasted these "extraordinary concessions" with the alleged degradation of Visakhapatnam's heritage sites.

APTA defended its strategy, emphasising tourism's "significantly higher multiplier effect" on employment. "The Govt of AP aims to have 20% of the state's gross value added from tourism, and 20% of employment generation from the tourism sector," it stated, arguing incentivising private investment is crucial.

Allegations of favouritism

Sarma implied sustained favouritism towards the Varun Group, describing it as a "favoured promoter." 

However the APTA asserted: "The proposal has been approved following due process... all incentives granted are within the Policy and similar benefits were extended to many such units."

Despite the government's rebuttals, Sarma concluded his letter stating the case "certainly calls for an independent enquiry." The Andhra Pradesh government, through APTA, continues to defend its actions as legitimate and beneficial for the state.

The Wire is now on WhatsApp. Follow our channel for sharp analysis and opinions on the latest developments.