The Adani Saga: Questions from Drones to Ports that the PM must Answer

Is it prudent, from a national security perspective, to allow a firm facing serious accusations of money laundering and round-tripping via offshore shell companies to dominate a strategic sector like ports?

The Adani Group today controls 13 ports and terminals. It is no surprise that this growth trajectory has accelerated since 2014. In addition to the Mundra port in Gujarat, recent acquisitions include Dhamra port, Odisha (2015), Kattupalli port, Tamil Nadu (2018), Krishnapatnam port, Andhra Pradesh (2020), Gangavaram port, Andhra Pradesh (2021), Dighi port, Maharashtra (2021).

There is a clear strategy at work: Gujarat, Andhra Pradesh and Odisha account for 93 per cent of the overseas cargo traffic from India’s ‘non-major ports’. Krishnapatnam and Gangavaram are the largest private ports in the south.

The Adani Group has even declared its goal to expand market share to 40 per cent by 2025 and is attempting to acquire even more ports.

The government facilitated an Adani monopoly in the ports sector using all the means at its disposal. Ports with government concessions have been sold to the Adani Group without any bidding. And where bidding has been permitted, competitors have miraculously vanished at the time of bidding.

Income Tax raids appear to have helped “convince” the previous owner of Krishnapatnam port to sell it to the Adani Group. Is it true that in 2021, the public sector Jawaharlal Nehru Port Trust was bidding for the Dighi port in Maharashtra in competition with Adani but was forced to withdraw its winning bid after the finance and shipping ministries changed their mind about supporting its bid?

Generally, port concessions are negotiated with Special Purpose Vehicles for each port to segregate risks and protect assets. Yet many of these ports are now part of a single listed entity—Adani Ports and SEZ. Has this transfer of assets been done in violation of the Model Concession Agreement for ports? Have the concession agreements been changed to accommodate Adani’s commercial interests?

While the Prime Minister keeps talking of cracking down on illicit flows of black money, his favourite business group is alleged to have manipulated stock prices using offshore shell companies posing as investment funds to bypass SEBI regulations.

One of the egregious cases is that of the Monterosa Group that has owned as much as Rs 37,000 crore of Adani Group stock. The CEO of this supposedly independent firm is allegedly linked to a fugitive diamond merchant whose son is married to Vinod Adani’s daughter. Other large funds are known to have invested almost exclusively in Adani Group companies, which is unusual for an investment fund.

Take Elara Capital, in which former Conservative minister Jo Johnson, brother of former British Prime Minister Boris Johnson, was until recently a director. Elara held some Rs 24,300 crore worth of stock almost exclusively in the Adani Group.

The Union finance ministry told parliament that SEBI had frozen the accounts of certain funds operated by the Monterosa Group in 2016, but no further action is evident. What has SEBI done to properly investigate these dubious benami companies?

The inclusion of Adani Enterprises in the widely used National Stock Exchange (NSE) Nifty 50 index in September 2022 proved controversial. It had questionable fundamentals, an inflated PE (price-to-earning) ratio and a tiny free float. Adding Adani Enterprises compelled seemingly conservative Nifty index funds to make significant purchases of this risky stock. They included the Employees Provident Fund Organisation.

While global stock indices have suspended Adani Group companies while the matter is investigated, the NSE has failed to take similar action to protect investors. Is there pressure from the Prime Minister’s Office on the NSE and SEBI to go easy on Adani?

The Adani Group’s takeover of Mumbai airport should be a case study in crony capitalism. The GVK Group had vigorously contested Adani Group’s attempts to buy a stake in Mumbai airport in 2019, going to the courts and raising funds to buy out its joint venture partners Bidvest and ACSA. Yet in August 2020, only one month following raids by the CBI and Enforcement Directorate, GVK felt compelled to sell its most valuable asset to the Adani Group.

What happened to the CBI and ED investigations against GVK? How did they miraculously disappear after the sale of Mumbai airport to the Adani Group?

The Adani Group, with the Prime Minister’s blessings, has set up ventures with Israeli firms covering areas as varied as drones, electronics, small arms and aircraft maintenance. A number of startups and established firms develop, manufacture and operate drones for civil and military applications. They include public sector firms like Hindustan Aeronautics and Bharat Dynamics. Yet Israeli company Elbit was made to set up a joint venture to manufacture drones with the Adani Group, which had no prior experience in this strategically important sector.

In December 2018, the venture set up a factory to build Hermes 900 drones and also took over the Bengalurubased startup Alpha Design. On 1 September 2021, Alpha received an order for 100 attack drones from the Indian Army. As with drones, a number of startups and ordnance factories have been developing and manufacturing small arms for the civilian and military markets. Yet in September 2020 the Adani Group bought a majority stake in the Gwalior-based PLR Systems that manufactures a wide range of small arms in collaboration with Israel Weapon Industries (IWI).

IWI weapons like the Tavor assault rifle, Galil sniper rifle and Negev light machine gun are already in service with the Indian Army, and this acquisition by Adani simply handed over a longstanding defence relationship to the Prime Minister’s friend.

Given that the Adani Group is facing credible allegations regarding offshore shell companies for some years, is it in the national interest to hand over such a critical defence relationship to one questionable conglomerate? Is there a quid pro quo?

In 2014 Directorate of Revenue Intelligence (DRI), found that three Adani Group companies—Maharashtra Eastern Grid Power Transmission, Adani Power Maharashtra and Adani Power Rajasthan—had paid Dubai-based Electrogen Infra FZE Rs 9,048 crore for power equipment imported from China and S. Korea worth Rs 3,580 crore, with the balance siphoned out of the country. It turned out that Electrogen was controlled by Gautam Adani’s brother Vinod via a Mauritius-based entity, Electrogen Infra Holding. After Modi became PM, the adjudicating officer of the DRI dismissed the charges although he acknowledged that ‘I find that EIF and APRL to be related entities through Shri Vinod Shantilal Adani'.