SATYAM Computer Services, now known as Mahindra Satyam, failed a federal government litmus test for funding but was still given a grant by Victoria to embark on a $75 million Geelong IT project.
The project, which was to have created 2000 jobs and contributed $175m in economic activity for Victoria, was cancelled last week by Mahindra Satyam.
Federal Innovation Minister Kim Carr last year unveiled the $24m Geelong Investment and Innovation Fund (GIIF) established after Ford Australia decided to restructure its manufacturing operations in the region.
The fund is made up of $15m in commonwealth funding, $6m from the Victorian government and the remainder from Ford.
According to a spokeswoman for Senator Carr, department officials had initial conversations with Satyam on whether the company would be eligible for the scheme.
But Satyam was told that it did not meet the criteria for the GIIF, she said.
"We can't say how much they were asking for but Satyam didn't proceed to lodge a formal application. They didn't meet the criteria for funding," the spokeswoman said.
A Satyam spokeswoman confirmed it had not made an application to access the GIIF.
In Freedom of Information documents obtained by the Victorian state opposition, Treasurer and ICT minister John Lenders approved an undisclosed amount of cash advance to Satyam as part of its "investment attraction package".
An August briefing document by state government officials to Mr Lenders stated: "The government's investment attraction package to Satyam included a proposed contribution from the GIIF; however, the federal government has not agreed to release funds from the GIIF for this purpose."
Senator Carr's office said the statement was not true; since no application had been made, there were no funds to release to Satyam.
A spokesman for state opposition treasury spokesman Kim Wells said the discrepancy was "mysterious".
"The state government is saying one thing and the federal another," Mr Wells said.
"The main question is why did the state government still give Satyam the grant, which they still refuse to reveal the value of, knowing full well that they couldn't even get through the initial phase of GIIF talks?
"Alarm bells are ringing on how the government has handled this. They need to release details of how much was given to Satyam and why this project was allowed to continue despite all the problems. Where was the due diligence?"
A spokesman for Mr Lenders could not explain why Satyam was given Victorian taxpayer dollars despite the GIIF saga.
"We make absolutely no apology for doing everything we can to bring jobs to Victoria in this tough global economic climate," he said. "It is one of the reasons why Victoria is currently weathering the global financial crisis better than almost anywhere else in the world.
"Deakin University, the City of Greater Geelong and the Victorian government will continue to work together to attract companies and jobs to this precinct."
On September 9, Satyam formally informed Mr Lenders about its decision to pull out of the project, said Satyam's local chief, Venki Prathivadi.
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