Anxious officials backed a £2.3 million forestry grant for Sanjeev Gupta’s Highland estate as a way to help meet nature targets they were at risk of otherwise missing, documents obtained by The Herald reveal.
The award went ahead even though the then Rural Affairs Secretary Mairi Gougeon was “nervous” about it.
Emails, ministerial submissions and the grant contract show Scottish Forestry pressed ahead with the £2.3 million award to Jahama Highland Estates, despite the then Cabinet Secretary's office repeatedly questioning the plan.
Civil servants told her they had no power to reject it because of who owns the land.
Read more
- Scottish ministers to hand Gupta £2.3m of taxpayers' cash — while taking him to court
- Pension contributions at Sanjeev Gupta's Lochaber smelter unpaid since July
- Scotland's £586m Gupta guarantee tied to secretive Jersey offshore vehicle
As The Herald previously revealed, Scottish Forestry has said it has no concerns about continuing to fund the estate even though the Scottish Government is pursuing Mr Gupta's GFG Alliance in court over alleged breaches of the terms of the Lochaber guarantee.
The company that received the grant, SIMEC Lochaber Hydropower 2 Ltd, has not filed accounts for five years.
Companies House has previously brought criminal charges against Mr Gupta over a failure to file accounts for more than 70 entities. He pleaded not guilty in March 2024
Earlier this month we told how employer and employee pension contributions for workers at the Lochaber smelter have not been paid since July.
The disclosures come as creditors to Mr Gupta’s Liberty Steel Newport, the first of his UK steel plants, have appointed liquidators to oversee a wind-down of the business.
The Welsh steelworks, which he bought in 2013, employs about 180 people.
Mr Gupta is also under investigation by the Serious Fraud Office, which opened its inquiry in 2021.
The "nervous" remark came on February 26 this year, when Brendan Callaghan, who was Scottish Forestry's interim chief executive, helped colleagues prepare a "Hot Issues" briefing.
He wrote: "I know Cab Sec has been nervous about this one, but we shouldn't underplay the significance."
The then Rural Affairs Secretary Mairi Gougeon was “nervous” about the grant. (Image: Getty)
Other emails show why officials were also keen. On February 2, Mr Callaghan told Diarmuid Ó Néill, the Scottish Government's Director of Environment and Forestry, that Jahama might be persuaded to dedicate its land to nature.
He wrote: "Also to flag that I think Jahama would be prepared to consider committing to managing the project area land (Circa 31k ha) for biodiversity so that it could be included in the SG 30% of land managed for biodiversity by 2030. Worth raising that as I know it's one of the targets that was raised as challenging at the biodiversity board."
The Scottish Government has pledged to manage 30% of Scotland's land for nature by 2030. Mr Callaghan set out the scale of the shortfall the next day.
He wrote: "I think the 30 by 30 target was reported as being around 22% (of Scotland) at the Biodiversity board in Jan, so if Jahama could be persuaded to sign up, it would cover about 8% of the gap to get to 30% by 2030."
Mr Ó Néill's reply was enthusiastic. He wrote: "Wow, that's significant. So we should def be encouraging them to do that and then we do all we can to get in behind it etc."
A ministerial submission sent to Ms Gougeon on November 20 admitted that the grant would be controversial. It stated: "Due to the scale of the project, the funding amount and the identity of JHE's owner there is a high likelihood that this will attract attention."
It also acknowledged that the estate is the catchment that feeds the hydro scheme powering his Lochaber aluminium smelter.
The submission stated: "They hope that restoring the habitat will gradually increase the water storage capacity and slow down its passage through the landscape, leading to an improved hydro output and increasing the profitability of the smelter operation."
It added that the estate may use carbon credits generated by the trees within its smelter business.
Ms Gougeon's private office sent a series of questions in response. On November 24 it asked about the impact on sheep farmers who would lose seasonal hill grazing.
A private secretary wrote: "Should that be the case, the Cabinet Secretary would have serious concerns about this proposal and has asked if tenants are content with the proposals, and if not, would they feel able to have their say?"
On December 8, after receiving a response, her office came back again. It wrote: "Ms Gougeon also doesn't feel this answers her questions which were previously fedback [sic] and has asked if sheep are being removed because that is what the farmer wants to do or because that is what they are being asked to do?"
On December 9 a special adviser to the First Minister took up the questions, asking officials to look into the finances of the man behind the estate.
It said: "Not in any way disputing any of what you have set out – the asks are simple – ground truth what you are being told by this large landowner given size of potential award of public money. Can we also bottom out the tax status of the beneficial owner of this estate – given that may be picked up on?"
Jason Hubert, Scottish Forestry's head of forestry sector development, passed the request to colleagues that evening. He wrote: "As you will see [redacted] (the spad) is getting a bit nervous about the Jahama project."
He added: "Lindsay and [redacted] as well as trying to unpick the farm payments, could you double check the ownership and beneficial owner? I am sure we can then do some Googling to see what we can find regarding their tax status."
Nicola Sturgeon and Sanjeev Gupta together when the aluminium smelter was rescued. (Image: PA)
Inside Scottish Forestry, the demands caused alarm. The next morning an official based at the quangos Highland and Islands Conservancy wrote: "These requests go well beyond any assessment we would normally do and so I'm not comfortable progressing with them.
"If the Cabinet Secretary does not support landscape scale natural regeneration nor wants to fund this owner then its [sic] better we just say so and we can reject the application — not sure on what grounds though — loss of seasonal grazings?"
The official added: "It would be good to know where we stand on large cases and onwers [sic] as we are spending huge amounts of time and effort trying to progress such applications across the H&I."
That afternoon Mr Callaghan wrote: "I'm also surprised and concerned by the level of detailed questions. All very frustrating, but I gather this is par for the course with certain SPADs."
He reminded colleagues where the limits lay. He wrote: "Bottom line is that Cab Sec / SPADs don't have a formal role in the regulatory or grant assessment process. We asked them in 2013 whether they wanted to have this for FGS and they didn't, so they don't have the say in the way that they did…."
He was also critical of the line of questioning. He wrote: "It's telling that he has read over that [the agricultural assessment], is now questioning on the basis of a partial understanding of the case."
On December 12 Mr Hubert replied to the questions and said there was no way to refuse the grant on those grounds. He wrote: "The application process does include confirmation of land ownership and the right to carry out the works, but we do not have a legal mechanism for rejecting applications on the basis of the type of owner."
He added: "This proposal will also give the company the opportunity to generate its own carbon credits to offset its own emissions, but it will likely be 30 years before any significant credits are generated as tree growth in this area will be slow."
The concerns did lead to changes. The grant contract, dated February 2026, requires the estate to create two full-time equivalent new local jobs and to continue farming and support tenancies as set out in its agricultural impact assessment. Failure to comply is classed as a major breach.
The contract is worth up to £2,318,980.25 over five years, made up of £102,237.25 annually in management payments plus two capital payments of £903,897 in 2028 and 2029. A second phase, seeking a further £1m, was expected to take total funding to £3.3m.
A summary of payments since 2016 shows four earlier awards to the same company between 2017 and 2023, for woodland creation and rhododendron control. They total £791,835.42.
The Jahama estate (Image: Supplied)
Scottish Liberal Democrat MSP Andrew Baxter said: "If we're to trust Scottish Forestry to spend taxpayers' money ethically and wisely, the process by which Sanjeev Gupta's estate ended up receiving this grant must be accounted for.
"The 30 by 30 nature target is a noble aim, but it offers no excuse for officials to dismiss serious misgivings about the recipients of millions of pounds of public funds.
"Scottish Forestry officials need to explain why they thought ministers' obvious concerns didn't warrant full investigation before the money was allocated to someone under investigation by the Serious Fraud Office."
The Scottish Government declined to provide a comment but made clear Scottish Forestry is wholly responsible for administering the Forest Grant Scheme and all decisions on grant awards are made by Scottish Forestry.
Read more
- Scotland's £586m Gupta guarantee tied to secretive Jersey offshore vehicle
- Swinney says £586m Gupta smelter guarantee was 'rational decision for government'
- SNP ministers take GFG Alliance to court over 'unauthorised' Lochaber transactions
A Scottish Forestry spokesperson said: "Our Forestry Grant Scheme awards are subject to rigorous processes with clear criteria that must be met before payments are made.
"The scheme's purpose is to support the creation and sustainable management of woodlands and forests that deliver economic, environmental and social benefits.
"In February 2026 a Forestry Grant Scheme application for a native woodland restoration project at Jahama Highland Estates was approved and contracts signed. Grant payments are only made after work has been carried out, and in accordance with the contract requirements. No payments have yet been made in connection with this award."