Adani Import Fraud of 2014 and its Continuing Dividend

The Adanis are again in the news, this time for importing transmission equipment from Japan, China and South Korea, hiking its price through an Adani intermediary in Dubai, and transferring the difference to the off-shore haven, Mauritius. According to the Directorate of Revenue Intelligence (DRI), the foreign exchange illegally transferred to Mauritius, through a company controlled by Gautam Adani’s brother Vinod Adani, was to the tune of Rs 1,500 crore.

The recent expose in The Guardian on the Adani Empire shows that DRI in 2014 had charged Vinod Adani and senior officials in Gautam Adani’s flagship company, Adani Enterprises Ltd, with gross over-valuation in import of goods and siphoning off the difference abroad. Not much seemed to have happened subsequently, with the Adanis continuing to use the artificially inflated cost of transmission equipment to charge consumers in Maharashtra higher prices of electricity.

The Adani empire has been in the news for its meteoric rise, the help it had received earlier from the Gujarat government, and now, the central government under Modi. One of the key elements in Adanis’ success in the power sector, now appears to be its ability to buy coal and equipment cheap, hike up the price through Adani intermediaries abroad, and then charge higher prices to the consumers. Apart from siphoning off difference to tax havens, this over-invoicing of equipment yields a continuous flow of increased revenue through overcharging of the consumers. This is a scam that just keeps on giving!


The inflated coal and higher cost of equipment that have been passed on to the consumers, through increased electricity tariff, is in the range of Rs 1.00 to 1.50. The cumulative impact on the consumers and the benefit to those indulging in such over-invoicing in the last five years could be anything between Rs 50,000 to Rs 100,000 crores.

And the Adanis are not the only ones in this business of inflating coal and equipment prices. The others are Ambanis, Ruias, and similar big fish. This is crony capitalism at its worst.

Paranjoy Guha Thakurta’s earlier report on coal imports in the Economic and Political Weekly (EPW) had detailed how the Adanis were buying coal from Indonesia, and then jacking up the price of coal via Adani-owned intermediaries in Dubai. They had also manipulated the calorific value of coal “ the coal increasing its heating value miraculously while being shipped from Indonesia to India. This difference in price, as bought in Indonesia and sold in India, was syphoned off into tax havens. The Adani Indian entity was also given a higher tariff, based on the inflated coal price.

Guha Thakurta also wrote about Adani inflating equipment costs in EPW. He wrote, “Two years ago, in 2014, the DRI issued show cause notices alleging over-invoicing of power plant equipment to the tune of Rs 6,000 crore by a number of companies in the Adani Group. The notices alleged that the Adani Group had over-valued capital goods imported by Adani Power Maharashtra Limited, Adani Power Rajasthan Limited and Maharashtra Eastern Grid Power Transmission Company Limited. These companies were alleged to have indulged in a ‘trade based money laundering scheme’ by mispricing equipment and by routing invoices through an intermediary in the United Arab Emirates, allegedly a front company of the group.

The Guardian report deals only with the imports by Maharashtra Eastern Grid Power Transmission Company Limited (MEGPTCL), and not the others.  These articles by Guha Thakurta have not been taken down by EPW and continue to be on their website.

What is the impact of inflating fuel or equipment cost on the consumers? Coal costs are pass through, meaning that the power plant is paid the full cost of fuel that it buys (or imports). Typically, fuel cost is 50 per cent of the energy cost, the other 50 per cent being other running costs and the cost of capital. Adani’s importing fuel and showing a higher cost by using an Adani intermediary meant that for every unit of energy it sold, it realised an extra benefit ranging from Rs 0.50 to Rs 1.50. The long-term impact on the consumers for inflated equipment costs due to higher tariffs is much bigger than syphoning off the foreign exchange. The consumers have to pay for this “ through higher electricity cost till the capital cost is completely paid for.

The current Directorate of Revenue Intelligence (DRI) report, now made public by The Guardian, UK, deals with one of these companies, MEGPTCL, a wholly owned subsidiary of Adani Enterprises Ltd, the flagship company of the Adani Group. MEGPTCL had two intermediaries “ PMC Projects (India) and Electrogen Infra FZE, Dubai, both of which were owned by the Adanis. MEGPTCL procured equipment from a number of companies in South Korea and China through the above two intermediaries. The task of the Dubai intermediary was to buy the equipment from the manufacturers and then sell it to PMC, who in turn sold it to MEGPTCL. The final price to MEGPTCL was 4 to 10 times that of the original cost of the equipment.


The DRI report makes its modus operandi clear: As a part of the modus operandi, though the goods were shipped directly to PMC/MEGPTCL in India by overseas suppliers  who were OEMs, but for enabling inflation of invoices, it was made to appear on paper as if the goods are being supplied by EIF. Accordingly, back-to-back contracts were being signed between PMC (the contractor for MEGPTCL) and EIF, UAE on one hand, and EIF, UAE and the four OEMs on the other. But the facts that the back-to-back contracts of EIF, UAE with the OEMs were signed in India, that too by Shri (name blacked out in the document), an employee of PMC, shows that the said supply contracts were planned, conceived and executed in India by the same set of persons and that it was a sham transaction.

While the document put up by The Guardian blacks out the names of the Adani employees, Guha Thakurta’s EPW piece names some of them. He had written, Vinod Adani appears to have conspired with other employees, including Jatin Shah and Moreshwar Rabade, to execute the planned conspiracy of syphoning foreign exchange abroad.

There is a further advantage to the owners in inflating the capital cost of the plant. In most plants, the banks give loans to the founders“ the original investors who set up the plant. The original investors bring in about 20 per cent to 30 per cent of the plant cost. If the cost of equipment can be increased artificially,  the founder’s equity is nothing but the recycled cost of the equipment syphoned to tax havens, reappearing later as founder’s equity. This was the Enron scam in Dabhol; this was why its plant and equipment cost was much higher than similar plants elsewhere.

The DRI Report, dated May 15, 2014, clearly the basis of some of Guha Thakurta’s pieces in EPW, makes it clear that the Adanis have been under the scanner for quite some time. The report also documents that the companies concerned “ PMC and MEGPTCL ”  refused to part with full information in spite of repeated opportunities. The amount that was syphoned was to the tune of Rs 1493,84,72,484 (nearly Rs 1,500 crore). The Report ends with the declaration that the goods imported under 57 bills having an aggregate value of Rs 1887,06,49,088 (approximately Rs 18,870 crore) being seized under the Section 110 (I) of the Customs Act, 1962.

This is three years after the DRI notice to the Adanis was issued. A number of other notices have also been issued to the Adanis. What has happened in these cases for the last three years? Has any real action being taken against the Adanis though DRI noted the fraud, and seized the equipment of MEGPTCL in 2014? Has Adani’s proximity to the Modi government slowed down the action against his group of companies?

The other issue is the increased electricity tariffs the consumer is being forced to pay. It has been reported that Adani’s profits increased by 50 per cent, due to compensatory tariff, presumably due to such inflated coal and equipment prices. Why has this still been allowed for the last three years? Even after detection of the fraud? While truing up of the costs, did MEGPTCL submit revised costs based on the 2014 DRI Notice?  Or did it inform the Maharashtra Electricity Regulatory Commission (MERC) that it has received notice from DRI/customs department challenging its capital costs? Will MERC, who issued the tariff orders earlier, based on wrong information, now address the issue of overcharging of the consumers?