In 2017, an extraordinary board meeting was convened at the offices of Economic and Political Weekly (EPW ), a venerable Indian publication with a reputation for solidly researched articles by Indian academics. Two years earlier, in a bid to spruce up its image, the board had hired a journalist named Paranjoy Guha Thakurta as editor. Known for his investigations of Indian business conglomerates, Thakurta authored a number of articles that departed from EPW’s image, among them two on the benefits Adani Group was reaping from the Indian government. When Adani threatened to take EPW to court, the board, comprising some of India’s foremost academics, sacked Thakurta. Since then, EPW has returned to its stodgy self, and the number of Indian publications willing to carry news reports critical of Adani Group, once just a handful, is now a scant few.
Chairman and founder Gautam Adani’s transformation from a small struggling businessman in the state of Gujarat, a trading state with a vast coastline, to one of the richest and most feared industrialists in India is a story that runs parallel to the opening of the Indian economy since the early 1990s. It is a story of ambition and enterprise, as well as of the proximity of business to politics, which allows those who know how to work the system to make huge gains by ensuring that rules, if not bent, are suitably interpreted in their favour.
In 1981, Adani was a 19-year-old trying to join the diamond trading business while studying in college in Mumbai. Unable to manage both he dropped out of college. Soon afterwards, he was summoned back to Gujarat to begin work with a family firm that made plastic film used to wrap textiles. The key raw material in the production of this film is polyvinyl chloride (PVC), and in the late ’80s, when the Indian economy was still largely controlled by the government, it could only be bought from government enterprises or imported under licence.
Adani pooled together licences awarded to small manufacturers and started importing PVC in bulk. Soon he was not only meeting his firm’s requirements, he was making money selling the surplus. Over the next five years the foundations of the Adani empire were laid. The trading firm that was to become Adani Group grew fast: from importing a mere 100 metric tonnes of PVC in 1988, to ordering container loads totalling 40,000 metric tonnes by 1992. Soon enough the family firm had transformed into a trading house importing a range of chemical products.
As the business grew, an interaction with politics became inevitable. The Adanis are Gujarati Jains, a community that has a long history of accommodating and co-opting political power. Jainism is a heterodox religion dating back to the 5th century BC, about the same time as the advent of Buddhism. It is an ascetic religion, prescribing vegetarianism and non-violence, born out of an abhorrence of killing. With professions of war and statecraft closed off, the Jains have largely been traders, and in the long history of India have funded kings and rulers, invaders and insiders with equal ease. It is no coincidence that much of the world’s diamond trade is controlled by Gujarati Jains.
Adani had relied largely on Gujarat’s Kandla port and Mumbai for imports, and the business was beset by delays at both facilities. In 1994, the Gujarat government granted Adani 1000 hectares of land adjacent to the sea in Mundra on lease for salt production, in partnership with the international conglomerate Cargill. Protests by local groups saw Cargill withdraw from the project and Adani was left holding surplus land. When the government announced a new port policy in 1995, Gautam Adani saw another use for the leased land. Soon he obtained permission for the company to build a new port in Mundra.
In 1998, as his public prominence and wealth grew, Adani was kidnapped and media reports suggest he was released only after a ransom of A$3 million was paid. Like every controversy involving Adani, this story was never covered in great detail in the media. In the same fashion, India’s business media – in which Adani Group is a major advertiser – has largely glossed over the story of environmental violations in the construction of the new port.
In 2013, the environmental magazine Down To Earth reported on the findings of a committee set up by India’s ministry of environment to examine the Mundra port project:
Using remote sensing technology, the committee has found that that over the last decade, 75 hectares of mangroves have been destroyed in Bocha Island, a conservation zone. Satellite imagery indicates deterioration and loss of creeks near the proposed North Port due to construction activities ... The report also states that the Adani group has been less than serious about reporting on compliance with the conditions set at the time of clearance. In many cases, non-compliance with reporting conditions has been observed. The committee also noted that there have been instances to circumvent statutory procedures by using different agencies, at the Centre and state, for obtaining clearances for the same project.
The government imposed a fine of $40 million, or 1 per cent of the project cost, whichever was higher, for damaging the environment and breaking laws. These violations were not Adani Group’s first brush with the law. Gautam Adani’s brother Rajesh, a senior figure in the Adani business, has been arrested on three occasions by different central government agencies for evading duty or under-invoicing.
The first time was in 1999, when the Directorate of Revenue Intelligence arrested him on charges of forging documents and evading duty on coal imports of $280,000. At that time he was executive director (finance) of Adani Exports Ltd. The court released him on bail after two weeks. The second occasion was in 2010 when the Central Bureau of Investigation arrested him on charges of evasion of customs duty of $150,000. Three years later, he was again arrested on charges of evasion of customs duty and undervaluation fraud tentatively pegged at $310,000. He was granted interim bail from the Gujarat High Court.
This pattern of emerging unscathed through the law-enforcement machinery after being charged with evasion of duty was one that EPW’s Paranjoy Guha Thakurta had picked up on. One of the articles Thakurta was sacked for writing began:
For more than a decade now, the Directorate of Revenue Intelligence (DRI) has been investigating how a clutch of companies in the Adani Group led by Gautam Adani allegedly evaded taxes and laundered money while trading in cut and polished diamonds and gold jewellery. The DRI, which is an investigative wing of the Department of Revenue in the Ministry of Finance, has issued a number of show-cause notices to firms in the group alleging evasion of taxes to the tune of roughly Rs 1,000 crore [$200 million].
Thakurta described the fate of the case, similar to many of the charges the group has faced:
While the allegations against the Adani Group have meandered through various tribunals and courts of law, questions are being raised as to whether the Ministry of Finance is deliberately dragging its feet in moving a review petition before the Supreme Court that could safeguard its revenue interests.
In India, the best protection that exists against the actions of the bureaucracy or the police is political connections. Cases pursued by investigative agencies under one government tend to disappear when another more favourable government comes to power. The larger the business, the more likely it is to have these connections, simply because in India’s vast election campaign system political parties are largely funded through big business.
During the years that Adani Group rose to prominence in Gujarat, Gautam Adani had built strong connections with state politicians. These connections turned out to be a handicap in October 2001, however, when the ruling Bharatiya Janata Party (BJP) jettisoned its old guard and replaced the state’s chief minister, Keshubhai Patel, with an unknown figure named Narendra Modi. Modi, until taking over as chief minister, was a party insider strongly committed to its Hindu fundamentalist ideology. He looked upon Gujarat’s entrenched businessmen with suspicion, and Adani’s attempts to woo him did not work at first.
In February 2002, Modi presided over an administration that largely stood by as Hindu mobs killed Muslims during one the worst incidents of ethnic violence in modern India. A year later at a meeting of the non-government business association, the Confederation of Indian Industry (CII), attended by Modi, two of India’s leading industrialists, Jamshed Godrej and Rahul Bajaj, voiced concerns. Modi ensured that Gujarati industrialists formed a parallel body called the Resurgent Group of Gujarat, which took on the CII. Adani was one of the architects of the group. Within a month, the director general of the CII flew to Gujarat to apologise to Modi.
For Modi it was one thing to make the CII bend to his will, but quite another to prove wrong the industrialists who had said that religious violence in the state would be bad for business. At the first of what would become a biennial investors’ event in the state – Vibrant Gujarat – Gautam Adani stood up and pledged investments of $3 billion in the state. It is a debt Modi has never forgotten.
Over the next five years Adani was awarded an additional 5000 hectares of land at Mundra, at rates lower than those offered to any other company that invested in the state, with permission to set up and manage a special economic zone, with less restricted trade laws. The group also set up a coal-fired thermal power plant in the area, beginning its foray into power production.
As his business expanded, Gautam Adani made decisions that were both economically and politically strategic. Outside Gujarat, the four thermal power plants in which he invested were in the electorates of some of India’s most powerful politicians from across the political spectrum. The group also moved into mining, acquiring a coalmine in Indonesia. Adani was soon the largest importer of coal in India.
Soon enough, the Indian Directorate of Revenue Intelligence began investigating five firms of Adani Group for over-invoicing coal imports from Indonesia. The Gujarat government’s favourable treatment of Adani was documented by the Indian government’s comptroller and auditor general. To cite two examples, which were reported in the Indian media in 2009 and 2012: Adani failed to meet its commitments to supply power to the Gujarat government’s electricity board but only a third of the $49 million penalty was recovered; and the Gujarat State Petroleum Corporation bought natural gas at open-market rates and then sold it to an Adani subsidiary at a discount, for a benefit of around $15 million.
In 2000, a year before Modi took over as the head of state in Gujarat, Adani Group’s turnover was $662 million. In 2013, after three terms of Modi in power, the turnover stood at $9.4 billion.
But Adani’s ability to reap economic advantage from political connections was not restricted to Gujarat or Modi’s BJP. In 2017, the Indian government’s comptroller and auditor general report noted that Adani Ports and Special Economic Zone Ltd will stand to gain $5.6 billion from a deal to set up a port in the coastal state of Kerala. The deal was signed in 2014 when a Congress Party government was in power in that state.
In 2014 Modi won the prime ministership. Shortly after he took his position, the sharemarket made its own assessment of the likely effect on Adani, sending its stocks soaring by more than 85 per cent. Within months of Modi’s accession, environmental clearance was granted to the Mundra project, and two years later the earlier fine was waived as well. Since then a number of government enterprises have invested in Adani Group.
Now, as India heads into another general election, Adani Group has won bids to operate six airports in major Indian cities that had earlier been run by the Airports Authority of India. The group will manage the operations of the airports for the next 50 years. It is already the biggest private operator of Indian ports.
After the 2014 general election, India was left with the enduring image of Modi climbing into an Adani–branded jet for the journey from Ahmedabad, Gujarat, to Delhi, to take office as prime minister. The relationship has only grown stronger over these past five years. Ahead of this year’s election, Modi’s fate may not be completely certain, but Adani’s is. If Modi wins another term, Gautam Adani’s fortune is set to soar further. If Modi is defeated, Adani still appears set to thrive.
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