May 26, 2024
Massive Coal Scam Exposes Modi Govt-Adani Nexus

Prasanta N Chowdhury

THE country is shocked today by the huge expose of the coal import fraud staged by the Adani group under the direct patronage of the Modi government. In fact, the Electricity Employees’ Federation of India (EEFI), the largest conglomerate of electricity workers and employees unions in our country, has been spearheading an intensive campaign against the coal import fraud as well as the larger anti-people and anti-national power sector reforms pushed by the Modi regime for the last one year. This campaign, which began in April 2023 and intensified further in November-December 2023, has created a powerful discourse against the disastrous designs of the Modi regime. Certainly, we can claim that the groundswell of public opinion through campaigns by the electricity employees' unions is now leading many opposition parties to become vocal on this issue. So, let's delve deeper to unmask the larger scheme on this occasion.

In April 2022, India was pushed towards an acute power shortage due to the purported unavailability of coal supplies, and the power ministry of the Modi government directed GENCOs to import coal for 10 per cent blending before July 2022. Meanwhile, during the same period, the coal ministry of the same government claimed in Rajya Sabha that there was an abundance of coal production and supply in the country. During this period, the cost of imported fuel went up to Rs 7-8 per unit, in comparison to the Rs 2 per unit cost from domestic Coal India Ltd. (CIL).

The average cost of power supply in India has increased rapidly during the 10 years of the Modi rule. Undoubtedly, it will increase further. It is notable that the gap between the average cost of supply (ACS) and average revenue realisation (ARR), i.e., the ACS-ARR gap (a crucial parameter for measuring the economic sustainability and health of any utility), is widening. Based on the annual revenue requirement (ARR) statements of various DISCOMs, it can be observed that the power purchase cost accounts for about 67-78 per cent of the ARR.

Currently, in India, generating companies are advised to use up to 30 per cent imported coal blended with domestic supply to meet the peak power demand in summers. Many state governments have protested, arguing that the centre is conveniently passing on the burden of nearly three times higher cost of imported coal. Most shockingly, all the newly built power plants are designed to use imported coal, perpetually making them dependent on coal traders.

It should be noted that India has the fourth largest coal reserves in the world, amounting to 352 billion tonnes. If the central government had seriously implemented the enhanced coal production plan between 2016 and 2020, India wouldn’t have been saddled with the alleged coal shortage today to meet the growing demand for power. The production of CIL remained mostly stagnant between 2017 and 2020.

Even then, while the power ministry was claiming there might be a 7 MT deficit of coal for power generation during October 2023 to March 2024, it directed the import of around 20 MT. The share of steam coal imports from Australia was insignificant until 2020, but it shot up to 13 per cent in FY22 (the Adani Carmichael coal mine of Queensland, Australia, produced its first shipment of coal in December 2021).

According to a report published by the Financial Times in October, the Adani Group disclosed figures related to 30 shiploads of coal imported from Indonesia to India over the 32 months from January 2019 to August 2021. During this period, 3.1 million tonnes of coal were imported into India via these ships. Adani's own mine in Indonesia provided coal worth a total of $139 million. However, by the time this coal reached India's Mundra port, its price had surged to $215 million. Even after accounting for $3 million in expenses, including traffic fees, Adani amassed a whopping $73 million through this transaction.

Even though the coal was sourced from Adani's own mine in Indonesia, it conspicuously failed to appear in the documents submitted to Indian Customs. This forms the crux of the scandal. Adani furnished customs with invoices from three companies—Hai Lingos of Taipei, Taurus Commodities General Trading of Dubai, and Pan Asian Trade Links of Singapore. The underlying strategy revolves around fabricating documentation suggesting that the coal transported from Indonesia to one of these intermediary companies was indeed delivered to India.

This tactic, known as transfer pricing, aims to inflate the price during this interim transaction. As a result, no tax is imposed on the profits earned by intermediary firms. These intermediary companies undertook no exceptional efforts, as the ship sailed directly from Indonesia to India without any stopovers, yet the invoices underwent a transformation. This ploy enabled the intermediary companies to amass substantial gains. Additionally, Taipei, Dubai, and Singapore serve as tax havens with low tax rates, allowing such companies to circumvent taxation on their profits.

A closer examination of the entities involved in Adani's deceptive practices reveals that they are essentially shell companies, acting as mere fronts for Adani. Operating from small, inconspicuous offices with just a handful of employees, these entities are virtually isolated from neighbouring businesses and lack any genuine business operations. Their primary purpose is to facilitate price adjustments.

The government directive mandating power producers to increase blending of imported coal has resulted in an additional Rs 42,000 crore in power purchase bills for DISCOMs this fiscal year, with the Adani group profiting around Rs 30,000-35,000 crores. The Adani group has even tampered with documents to fake the quality of coal to amass higher prices.

Clearly, the entire blueprint of the coal crisis is nothing but a coal scam to destroy India's energy sovereignty in favour of Adani. The burden of high-priced electricity based on imported coal has been imposed upon the consumers, resulting in tariff shocks and power shortages. The EEFI demands immediate strong legal action against the fraudulent coal import scam by the Adani group, the withdrawal of the imported coal blending directive, and the ensuring of supply rakes with the full-fledged operation of CIL. The EEFI calls upon all sections of workers and the general public to raise their voices and unmask the unholy nexus between the Modi government and corporate groups, and to ensure the fall of this government in the upcoming last two rounds of elections.