Why Gautam Adani is a Factor in India-US Ties
On September 14, 2012, the Minister of State of Environment and Forests (MoEF), Jayanthi Natarajan constituted a committee under the chairmanship of Sunita Narain, the director of the think-tank Centre for Science and Environment, for an inspection of Mundra port. It reached the same conclusions as its predecessors. Gautam Adani was not at all an important businessman before Narendra Modi helped him to grow in Gujarat as chief minister of the state. Adani was born in 1962 in Ratan Pol in the old city of Ahmedabad, his parents having migrated from north Gujarat. At the age of 18, he dropped out of Gujarat University and moved to Bombay, served a stint as a diamond sorter at Mahindra Bros. and then became a diamond trader. He moved to Ahmedabad in 1981 to help his brother, Mahasukh, who was starting a plastic-film manufacturing business. This company was heavily dependent on supplies of PVC. The sole producer of PVC in India at that time was IPCL, which used to supply two tonnes per month to the Adani brothers. But their rapidly growing business needed over 20 tonnes per month. Therefore, Adani began importing plastic granules through the Kandla port. The Adani group then diversified. In 1988, Gautam Adani set up a commodities trading venture called Adani Exports. In the next four years, his import orders grew from 100 metric tonnes (MT) orders to 40,000 MT. In 1991-92, Adani and agribusiness group Cargill were given 3,000 acres of coastal land in Kutch by the Chimanbhai Patel government for salt production. The project fell through after protests by George Fernandes and others, and Cargill pulled out. Adani held on to his land and began thinking of converting Mundra into a big port. In the framework of the nascent liberalisation, the Gujarat Maritime Board decided to allot ports to private companies in a joint venture with the state – an initial list of 10 ports was created, which included Mundra, which was 14m deep (deeper than Kandla at 12m) and allowed it to berth larger ships of 200,000 MT and above. In 1993, the company was incorporated into a limited company with two backers, Adani himself and Rajesh S. Adani, his younger brother. In 1997, Adani Exports Ltd. entered into a joint venture with the Gujarat government to build a mega port at Mundra. Around that time the Adani group established a base in Dubai, where two of the five Adani brothers were primarily in charge of the supply chain of Adani Exports. In 1999, Adani ventured into coal trading for the first time, with a shipment landing at Mundra. In 2000, Adani let P&O Australia, one of the world’s largest port operators, set up a container terminal in Mundra. There is no evidence that Gautam Adani and Narendra Modi knew each other before the latter became chief minister, but they became very close soon after, in the aftermath of the 2002 pogrom. As this tragic episode of communal violence disrupted the state economy for weeks, businessmen including senior members of the Confederation of Indian Industry, criticised Modi. Rahul Bajaj, a senior member of the CII, described 2002 as a “lost year for Gujarat” and challenged Modi with several “tough questions” during a CII meeting in Delhi in February 2003, where Jamshyd Godrej also raised the issue. In November Azim Premji declared similarly at an IIM Ahmedabad seminar: “Investors are wary of coming to Gujarat due to the lingering communal tensions in the state apart from its proximity to Pakistan.” Tarun Das, the then director-ceneral of the CII went to Gandhinagar one month after the meeting of the organisation during which Narendra Modi had been criticised in Delhi and told him that the CII leaders “were very sorry for all that had happened.” But Gautam Adani and other CII members from Gujarat had already analysed the attitude of bigger businessmen from Gujarat as a great opportunity. They formed the “Resurgent Group of Gujarat” in order to counter what they regarded as “a concerted attempt by a section to defame Gujarat.” Among them were Dr Karsan Patel and Ambubhai Patel (Nirma group), Indravadan Modi (Cadila Pharmaceuticals), Pankaj Patel (Cadila Healthcares), Chintan Parikh (Ashima) Anil Bakeri (Bakeri group) and, last but not least, Gautam Adani who took a leading role. Like Modi, he was relatively isolated in 2002-03. He was not part of the business establishment either, as evident from his marginal position in terms of interlocking directorates. Both were newcomers to the high table of national politics on the one hand and big business on the other. When the first Vibrant Gujarat meeting took place in September-October 2003, Adani went further than his colleagues and pledged Rs 150 billion in investments. This was a major turning point of the Adani-Modi relationship: Modi could start to pay back for Adani’s support, not only within the CII but in the context of his transition from the role of “Hindu hriday samrat (ruler of Hindu hearts)” to that of “vikas purush (one who would bring about development)”. The Adani Port and SEZ (APSEZ) at Mundra (Kutch district) was created the same year to provide cargo handling and other port services. It soon became India’s first multi-product port-based SEZ, after Adani was granted 3,585 hectares (ha) of land, including 2,008 ha of forest and 990 ha of gauchar or village grazing land. Two converging investigations have alleged that the Adani Group bought this land, in one area, at a rate ranging from Re 1 to Rs 32 a square metre when the market rate was over Rs 1,500 rupees a square metre and, in another area, at the cost of Rs 10 rupees per sq. m., when the market price there was between Rs 700 and 800 per sq. m. In Mundra, Adani acquired up to 7,350 ha. Forbes argues, on the basis of the signed agreements, that for most of this area ‘he got the 30-year, renewable leases for as little as one US cent a square meter (the rate made out at 45 cents a square meter). He in turn has sublet this land to other companies, including state-owned Indian Oil Co., for as much as US$ 11 a square meter. Between 2005 and 2007 at least 1,200 hectares of grazing land was taken away from villagers.’ During the 2009 Vibrant Gujarat summit, the Modi government “signed MoUs allowing the Adani group a Rs-150-billion expansion of its SEZ over the next 15 years. The government topped off its largesse of land to the Adani group with five-year tax breaks of over Rs 32 billion, almost four times what it had marked for redeveloping Kutch after the 2001 earthquake. Government data shows an investment of Rs 1.32 trillion in the Adani SEZ, port, and power plant, but only 38,875 jobs were created. That comes to an astonishing figure of Rs 33.8 million for creating one job…”. This is a clear indication of capital intensity – a question we’ll return to below. In 2013, a CAG report pointed out that in the Adani Group’s SEZ in Mundra “14 lease deeds for an area of 4,84,326 sq. mt. in MPSEZ were registered during the period from December 2008 to November 2011. However, the Collector had given permission to only one unit […] Accordingly, the transfer of land admeasuring 4,65,728 sq. mt. by way of lease in the remaining 13 cases were irregular”. The CAG also indicted the Gujarat government for purchasing electricity from the Adani group at an abnormally high price. It pointed out that this “non-adherence to the terms of Power Purchase Agreement led to short recovery of a penalty of Rs 1.60 billion and passing of undue benefit to a private firm”. In 2012, the Modi-Adani connection was targeted by Arvind Kejriwal, the leader of the Aam Aadmi Party who, the year before, had taken part in anti-corruption campaigns along with Anna Hazare. He accused the Gujarat government of buying power from the Adani Group at Rs 5.45 per unit when the Gujarat Mineral Development Corporation had made a better offer. Gas was another source of income for the Adani group, as it had also acquired a monopolistic position in the supply of CNG in Ahmedabad. In its last report dealing with the Modi government in Gujarat, the CAG reiterated the critique it had made in 2012 against the Adani group and arraigned the Essar group too: “…The purchase of power from the private sector increased to 37.22% (2012-13) from 15.22% (2008-09). Of this increase, the share of Private IPPs in power purchased from private sector [the Adani and the Essar groups], increased to 82.75% (i.e. 22,562.17 million units) in 2012-13 from 66.59% (i.e. 5,653.24 million units) indicating an increase of 300% in purchase of power from them during 2008-09 to 2012-13.” The Adani group was also targeted by environmentalists. The Gujarat Coastal Zone Management Authority (GCZMA), in May 2006, formed a subcommittee which reported that the Adani Group had built many bunds in the inter-tidal area and blocked many creeks feeding water to the mangrove patches. To no avail. Four years later, in December 2010 the Ministry of Environment and Forests (MoEF) sent an inspection team to follow up on complaints from local inhabitants. The report presented after the visit found many instances of non-compliances. It made the same observations regarding large scale destruction of mangroves and obstruction of creek systems and natural flow of seawater because of reclamation. It made no difference. On September 14, 2012, the Minister of State of Environment and Forests (MoEF), Jayanthi Natarajan constituted a committee under the chairmanship of Sunita Narain, the director of the think-tank Centre for Science and Environment, for an inspection of Mundra port. It reached the same conclusions as its predecessors.