According to evidence reviewed by the Financial Times (FT), Adani Group is accused of selling low-quality coal as high-grade fuel to an Indian state power utility. These findings shed new light on longstanding allegations of a coal scam involving the Indian conglomerate.
Know All about Alleged Coal Scam by Adani Group
Coal Scam: What are the Allegations on Adani Group?
Documents obtained by the Organized Crime and Corruption Reporting Project (OCCRP) and analyzed by FT suggest that Adani engaged in fraudulent practices, resulting in substantial profits while potentially harming air quality. The use of low-grade coal requires burning more fuel, which can lead to increased pollution.
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When and Where Did the Alleged Coal Scam by Adani Group took place?
- The report by OCCRP reveals that in January 2014, Adani bought an Indonesian coal shipment with a calorific value of 3,500 calories per kilogram.
- This same shipment was sold to the Tamil Nadu Generation and Distribution Company (TANGEDCO) as 6,000-calorie coal, a much more valuable grade.
- This transaction allegedly allowed Adani to more than double its profit after accounting for transport costs.
- FT matched documents for an additional 22 shipments in 2014, showing a consistent pattern of grade inflation for 1.5 million tonnes of coal supplied to TANGEDCO.
- These shipments were sold at an average price of $86 per tonne, aligning with local market prices for high-grade coal, which ranged between $81 and $89 per tonne, including freight costs.
- The report indicates that Adani sourced the coal from an Indonesian mining group known for its low-calorie output at prices typical for low-grade fuel.
- Despite this, the coal was delivered to India’s southernmost state for power generation under a contract that specified high-quality fuel.
Adani has denied the accusations of price inflation in its transactions with the state utility, according to the report.
What are the Past Controversies surrounding Adani Group on Coal Price?
Nearly a decade ago, India’s Directorate of Revenue Intelligence (DRI), operating under the Finance Ministry, launched an investigation into whether Adani Group and other companies used offshore intermediaries to inflate the price of coal supplied to utilities. However, the investigation was halted in 2019 when Adani won a case in Bombay High Court, preventing the DRI from obtaining details about shipments, including the types of invoices now secured by the OCCRP. The DRI subsequently appealed to India’s Supreme Court, where the case has since stalled.
Last year, opposition politicians called for a renewed investigation after the Financial Times reported that Adani Group appeared to have paid over $5 billion to middlemen for coal imported at prices significantly above market rates between 2021 and 2023.
Arappor Iyakkam, a Tamil Nadu-based NGO advocating for accountability in the alleged coal scam, estimates that the state’s power company, TANGEDCO, overpaid Rs 6,000 crore ($720 million at today’s exchange rate) for coal from all vendors between 2012 and 2016. Nearly half of these tenders were awarded to Adani, according to the organization. In 2018, Arappor Iyakkam filed a complaint against TANGEDCO with the state anti-corruption agency.
DRI VS Adani Group: The Tale of Over-invoicing Indonesian Coal
According to the report, the Directorate of Revenue Intelligence (DRI) began investigating Adani’s imports in 2014 as part of a broader probe into 40 companies. The agency alleged that these companies, including Adani, were over-invoicing Indonesian coal deliveries by presenting inflated bills routed through intermediaries in Singapore and other locations.
Indian authorities have examined 1,300 shipments linked to Adani Group companies, alleging in court filings that the company “grossly overstated” or “artificially inflated the import value of coal” compared to the export value from Indonesia. This practice aimed to siphon funds to tax havens and justify higher power prices in India.
The DRI claimed that the sums involved could amount to billions of rupees, though it has not identified any specific Indonesian supplier. (News Source)
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Is Adani Group Inflating Coal Price?
An October 2023 report by FT indicates that Adani has imported billions of dollars’ worth of coal at prices significantly above market value. This supports allegations that Adani, India’s largest private coal importer, has been inflating fuel costs, causing millions of Indian consumers and businesses to overpay for electricity.
The records reveal that in the past two years, Adani used offshore intermediaries in Taiwan, Dubai, and Singapore to import $5 billion worth of coal at times more than double the market price. One of these intermediaries is owned by a Taiwanese businessman recently identified by FT as a significant hidden shareholder in Adani companies.
These revelations emerge as Adani aims to transform its image into a major renewable energy player, planning to construct one of the world’s largest wind and solar parks in Khavda, near the Pakistan border. Despite its denials of wrongdoing, Adani remains one of India’s largest coal importers, FT notes.
Source and Reference for Quickly Know All about Alleged Coal Scam by Adani Group
- OCCRP
- Financial Times
- News article source
