The Adani Group has been thrust into the spotlight yet again following a scathing report alleging that it imported coal worth billions of dollars at prices significantly above market rates. This revelation has fueled suspicions that India's largest private coal importer may have artificially inflated fuel costs, leading to potential overcharges for electricity for consumers and businesses.
The report, meticulously compiled by the London-based Financial Times, analyzed customs records dating back to July 2021. It asserts that the Adani Group paid a staggering $4.8 billion to three intermediary companies for coal imports that were notably overpriced compared to market rates.
The Adani Group reacted to these allegations by initially maintaining a studied silence, a move that compelled Financial Times journalists to conduct an exhaustive investigation into the group's coal imports. The group's unusual step of making a regulatory filing with stock exchanges to discredit an impending Financial Times report only intensified interest in the matter.
In its statement, the Adani Group vehemently rejected the accusations, claiming the Financial Times' report was based on outdated information from a Directorate of Revenue Intelligence (DRI) circular dated March 30, 2016. The group further accused the publication of a relentless campaign to tarnish its image and of having malicious bias while implying links with Hungarian-born American investor George Soros and the Soros-funded journalist network known as the Organised Crime and Corruption Project (OCCP).
The allegations raised in the report were previously examined by a customs tribunal and the Directorate of Revenue Intelligence, which later withdrew an appeal before the Supreme Court this year. However, the Financial Times' report delves into an entirely new set of allegations, casting fresh doubts on the group's coal import practices.
“The Adani Group, the politically connected conglomerate that dominates large parts of India’s economy, appears to have imported billions of dollars of coal at prices well above market value, according to customs records reviewed by the Financial Times,” the report read.
“The data supports longstanding allegations that Adani, the country’s largest private coal importer, has been inflating fuel costs and led to millions of Indian consumers and businesses overpaying for electricity,” it added.
The Financial Times conducted an analysis of 30 coal shipments spanning from January 2019 to August 2021. They cross-referenced these shipments with sailing schedules provided by separate freight data and satellite data companies. The FT specifically selected those shipments where the weights perfectly matched in both databases, and the weights were unusual figures to minimize the likelihood of replication across several shipments.
According to publication’s findings, these 30 representative shipments, totaling 3.1 million tonnes, incurred costs of $139 million in Indonesia, alongside $3.1 million in shipping and insurance expenses. However, upon reaching India, these shipments were declared at a value of $215 million, implying that these voyages yielded $73 million in profits, equating to a substantial 52% profit margin. It's worth noting that the coal trading industry is typically highly competitive, with profit margins typically falling within single-digit percentages.
The report acknowledges that the profits from this alleged over-invoicing did not directly benefit the Adani Group. Instead, these gains were claimed by three intermediary companies: Hi Lingos in Taipei, Taurus Commodities General Trading in Dubai, and Pan Asia Tradelink in Singapore. As per Indian import data since July 2021, Adani reportedly paid a total of $4.8 billion to these three companies for coal that was procured at significant premiums compared to market prices.
Additionally, it highlighted a prior investigation in August conducted by the journalist network, the OCCRP. This investigation alleged that the owner of Hi Lingos, Chang Chung-Ling, a Taiwanese businessman, was secretly one of the largest shareholders in three Adani companies listed at that time. Chang's identity was purportedly concealed behind layers of paperwork in tax havens, with investments overseen from Dubai by an employee of Vinod Adani, the brother of Gautam Adani.
If these allegations, both from OCCRP and the Financial Times, are accurate, it implies that Adani Enterprises overpaid for imported coal, passed on higher electricity prices to consumers based on this coal, and paid substantial premiums to companies that were covertly major shareholders within the Adani Group itself.