New Delhi: In its lead story, the respected London-based business daily The Financial Times (FT) has reported that Gautam Adani’s company is “suspected of fraud by selling low-grade coal as high-value fuel”. Adani has rejected all accusations of inflating prices.
Adani being “suspected of fraud by selling low-grade coal as high-value fuel” has been in the news earlier too, FT says it has reviewed so far unseen documents obtained by Organized Crime and Corruption Reporting Project (OCCRP) towards this investigation. OCCRP too has published its findings on the matter.
These allegations have added a “potential environmental dimension to accusations of corruption” associated with Adani. The implication is that Adani in pursuit of “bumper profits” may have done so “at the expense of air quality”. Low-grade coal for power means burning more of the fuel and so many more emissions.
FT notes that “Adani seeks to rebrand itself into a big renewable energy player, including by building one of the world’s largest wind and solar parks in Khavda, near the Pakistan border.” The group, which denies wrongdoing, remains one of India’s biggest importers of coal.
Adani has been at the heart of the opposition campaign, with the Congress and others speaking of Billionaire Raj, accusing the Modi government of skewing policies to suit favoured cronies. Modi himself waded in, accusing ‘Adani-Ambani’ of bribing the opposition before going silent again.
FT reports from invoices it has seen make that “in January 2014 Adani purchased an Indonesian shipment of coal said to contain 3,500 calories per kilogramme. The same shipment was sold to the Tamil Nadu Generation and Distribution company (Tangedco) as 6,000-calorie coal,” regarded as one of the highest grades. Adani may have “more than doubled its money” even after taking care of costs of transporting the coal.
The FT says it has also tallied this with documents for 22 more shipments in 2014 involving the same parties. The pattern that is revealed is of “grade inflation”, i.e. saying it is higher grade coal but actually bringing in inferior quality coal, “in the supply of 1.5mn tonnes” of the fuel. As a state utility is involved, this is about direct losses of public money.
As per this report, Adani purchased the coal in Indonesia from a mining group known for its low-calorie output, at fuel prices payable for low-grade coal. But it delivered the coal to India, for power generation, to fulfil its contract with Tangedco, that was for expensive, high-quality fuel.
Last year FT reported that between 2021 and 2023 Adani paid over “$5bn to middlemen for coal imported to India far in excess of market prices”. The Directorate of Revenue Intelligence (DRI), the finance ministry’s investigative unit had started probing coal prices in 2016.
New documents that have been obtained by the OCCRP and shared with the FT deal with how in December 2013, “the MV Kalliopi L ship left Indonesia carrying coal with a listed price of $28 a tonne. When it arrived in India in the new year, Adani sold the coal to Tangedco for $92 a tonne.”
Modus involved a British Virgin Islands-based company
The coal was originally bought from the Indonesian mining group PT Jhonlin’s supplies in South Kalimantan, where the ship was loaded. An export declaration by PT Jhonlin stated the end buyer was Tangedco, and “listed Adani’s details as an intermediary”. But Jhonlin’s invoice went to the British Virgin Islands-based Supreme Union Investors, which was charged $28 per tonne. The key thing is that in a week, Supreme Union Investors invoiced Adani in Singapore for the shipment at $34 per tonne, stating that the coal contained 3,500 calories per kg.
But when Adani invoiced Tangedco for the coal, the quality jumped to 6,000 calories — and so did its price, to $92 per tonne. FT claims that “a 2014 purchase order lists 32 deliveries of 6,000-calorie coal to Tangedco by Adani, totalling 2.1mn tonnes at $91 per tonne. The order was released under an RTI filed by OCCRP.
The FT went onto match “22 of the 24 voyages with filings from India; in all 22 shipments, Tangedco was the end buyer at an average price of $86 per tonne.” The price is in line with industry’s standard estimates for high-grade, 6,000-calorie coal, which were between $81 and $89, including freight costs.
Adani and its middlemen shared up to $46 of profit. This is estimated at $70mn in total for the 22 voyages, concludes FT.
Adani denies
Adani denies all allegations. A spokesperson for the group told FT, “With the supplied coal having passed such an elaborate quality check process by multiple agencies at multiple points, clearly the allegation of supply of low-quality coal is not only baseless and unfair but completely absurd.”
Tangedco, Jhonlin, Supreme Union Investors and the DRI did not respond to requests by FT and OCCRP for comment.
Arappor Iyakkam, a non-governmental organisation based in Tamil Nadu’s capital, Chennai, in 2018 alleged a “coal invoicing scam” in a complaint to the state’s Directorate of Vigilance and Anti-Corruption. The NGO, said “Tangedco paid above market prices for coal and that the calorific value of coal mentioned on tenders and purchase orders did not match what was received.”
The NGO in its complaint connected the higher procurement prices for low-grade coal to higher power tariffs which taxed and burdened the public.
The NGO also estimated that a total of Rs 60bn was wasted in Tangedco’s procurement of coal between 2012 and 2016. “Out of this, given that Adani supplied about half of it, the loss caused by Adani alone would be Rs3,000 crores ($360mn),” Jayaram Venkatesan, the NGO’s convener, told the FT.
Adani’s spokesperson dismissed what the NGO had said as having “rehashed the DRI allegations”. The DRI’s probe is ongoing. But Adani said it was vindicated by the DRI’s decision last year to withdraw an appeal to the Supreme Court in a case against one of the 40 importers named in 2016.
Industry analysts told FT that the “testing of calorific value of coal — including stringent requirements for random sampling of coal racks — is rigorous and conducted by third-party agencies in India.” But because there is scope for abuse as human intervention is also involved.
However, a senior power sector employee is cited by FT as saying, “A large variation” between the amount of a shipment’s declared calorific value and its actual value “can only happen with the connivance of the people at the unloading end.”
Appalling levels of air pollution kills over 2 million people are killed in India annually, according to a 2022 study in The Lancet. Coal-fired power plants, and this is important as India is the second largest consumer of coal after China, account for a significant part of emissions of fine particulate matter, which are responsible for poor air quality. “Public health has definitely taken a back seat in India against the interest of the power sector,” Sunil Dahiya, a Delhi-based analyst at the Centre for Research on Energy and Clean Air is quoted as saying by FT.
A spokesperson for Adani told the newspaper that it would be wrong to blame Adani for air pollution or losses to the exchequer, via losses to government-owned power utilities. “By no stretch of imagination can [Adani’s Singapore subsidiary], with a total supply of less than 2 per cent of the coal burnt by Tangedco in the relevant period, be held responsible for either air pollution or the losses.”
Political implications
‘Adani-Ambani’ has been an election issue in the ongoing Lok Sabha elections. The BJP and Modi have been battling charges of Gautam Adani’s personal proximity to Narendra Modi, translating to favours, special treatment and acquiring of valued infrastructure like ports and airports. Modi created a stir recently by naming ‘Adani-Ambani’ as sending money at “night” to opposition in “tempos”, but since then he has been silent, in fact completely changing tack on that and saying, During a public rally in Jamshedpur on May 19 (Saturday), Prime Minister Modi alleged that the Congress and their allied parties oppose business and investment in India.
