New Delhi: Fresh allegations of business malpractice by the Adani Group have erupted in the international media, with a news report alleging that the group was inflating the price at which it said it was importing coal and was selling coal-fired electricity at a higher price to Indians.
The UK-based publication Financial Times Thursday reported that its investigation had found that, between January 2019 to August 2021, the Adani Group had allegedly inflated the price of its imported coal by a quantum of $73 million across 30 shipments that the newspaper examined.
That is, FT alleged, these 30 shipments had an export price totaling $139 million when they left the Indonesian shores. On arrival in India, they were allegedly registered as having an import price of $215 million — a 52 percent increase.
The FT investigation said that while the gains from the over-invoiced coal didn’t directly accrue to the Adani Group, it did go to companies that were allegedly secret shareholders in the group.
The Adani Group issued a preemptive statement Monday terming the then-upcoming FT report as an attempt to rehash “old and baseless allegations to tarnish the name and standing of the Adani Group”. It added that the timing of the report’s release was meant to coincide with the Supreme Court hearing of the case levelled against the Adani Group owing to allegations of corporate malpractice made in a report by American short-seller Hindenburg Research.
The issue is indeed an old one. The Directorate of Revenue Intelligence (DRI) had in 2016 issued a circular saying 40 entities, including five Adani Group companies, were being investigated for alleged over-invoicing of coal imports from Indonesia.
The DRI subsequently sent Letters Rogatory (requests for information sent to investigative or judicial agencies in other countries during investigations of off-shore entities) to Singapore and several other countries. The Bombay High Court in 2019 quashed these Letters Rogatory, saying that due process had not been followed while sending them.
This order was later stayed by the Supreme Court in January 2020, effectively restarting the investigation into the Adani Group and the other companies. However, in 2019, the Bombay High Court had dismissed the case against Knowledge Infrastructure — one of the 40 entities named by the DRI.
There’s been no official statement on the status of the other cases.
The Adani Group, in its preemptive statement issued Monday, highlighted the fact that the Supreme Court had in January 2023 “dismissed as withdrawn” the DRI’s appeal against the Bombay High Court’s dismissal with the observation that “we appreciate the stand taken by the Government in not entering into futile litigation”.
Further, it said the FT’s “brazen agenda” was apparently revealed by the fact that they have singled out the Adani Group, even though the original DRI circular — “the raison d’être for the whole story”, as the Adani Group calls it — mentions 40 importers, including the Adani Group of companies.
“Clearly, the issue of overvaluation in the import of coal was conclusively settled by India’s highest court of law,” the Adani statement said.
The FT report has once again shone the spotlight on the alleged actions of the company.
“The Adani Group, the politically connected conglomerate that dominates large parts of India’s economy, appears to have imported billions of dollars of coal at prices well above market value, according to customs records reviewed by the Financial Times,” FT said in its news report.
It added: “The data supports longstanding allegations that Adani, the country’s largest private coal importer, has been inflating fuel costs and led to millions of Indian consumers and businesses overpaying for electricity.”
ThePrint is awaiting responses from the Adani Group to detailed questions sent to it based on the allegations made by FT. This report will be updated as and when those responses come in.
Also read: Adani Group market value fell 52% in 6 months up to April, 6.4% drop for India’s top 500 pvt firms
Buying cheap, selling expensive — gains to middlemen
According to the FT, it checked 30 shipments of coal between January 2019 and August 2021, and verified them against sailing timings data maintained by separate freight data and satellite data companies.
It then chose those shipments where the weight of the shipments matched perfectly in both databases, and where the weights were irregular numbers to reduce the chances they were replicated in several shipments.
“According to the Indonesian declarations, these 30 representative sailings — totalling 3.1 mn [million] tonnes — cost $139 mn in Indonesia, plus $3.1mn in shipping and insurance costs. The values declared to customs officers in India came to $215 mn, suggesting the voyages made $73 mn in profits: a 52 per cent profit margin,” FT said.
It added that coal trading is usually a highly competitive business where profit margins are typically in the single-digit range.
The FT report does concede that the gains from this apparent over-invoicing did not directly accrue to the Adani Group, but instead went to three “middlemen” — Hi Lingos in Taipei, Taurus Commodities General Trading in Dubai, and Pan Asia Tradelink in Singapore.
“Indian import data since July 2021 indicates Adani paid a total of $4.8bn to the three companies for coal sourced at substantial premiums to market prices,” the FT report said.
FT also pointed to a previous investigation in August, done by the journalist network the Organised Crime and Corruption Reporting Project (OCCRP), which alleged that the owner of Hi Lingos — Chang Chung-Ling, a Taiwanese businessman — was “secretly one of the largest shareholders in the three Adani companies listed at the time”.
It added that Chang’s identity was “obscured by layers of paperwork in tax havens, while the investments were overseen from Dubai by an employee of Vinod Adani, Gautam’s brother”.
If true, all of these allegations — the ones by OCCRP and now by FT — would mean that Adani Enterprises over-paid for imported coal, charged consumers higher prices for the electricity produced by this coal, and paid an over-the-top premium to companies that were secretly large shareholders in the Adani Group itself.
Adani Group denies everything
The Adani Group, however, denied all of the allegations, saying they are “false and baseless” and were part of “deliberate, and motivated attempts to destabilise the Adani Group”.
“This is part of their extended campaign to advance vested interests under the guise of public interest,” the Adani statement said.
“Continuing their relentless campaign, the next attack is being fronted by Dan McCrum of the Financial Times, who jointly with the OCCRP put out a false narrative against the Adani Group on 31 August 2023,” it added. “The OCCRP is funded by George Soros, who has openly declared his hostility against the Adani Group.”
Much like in its statement against Hindenburg Research, where it called the short-seller’s report “a calculated attack on India”, the Adani Group took the nationalistic line against FT as well.
“The FT’s proposed storyline is a clever recycling and selective misrepresentation of publicly available facts and information with a deliberate and mischievous suppression of judicial decisions to arrive at a predetermined conclusion,” Adani said. “It shows scant respect for India’s regulatory and judicial processes and authorities.”
(Edited by Poulomi Banerjee)
Also read: Hindenburg report: ‘How to ensure investors are protected,’ SC seeks suggestions from SEBI