Adani Group has been passing off low-quality coal for much more expensive cleaner fuel in deals with India’s state energy company, according to evidence seen by the Financial Times that sheds new light on allegations of a long-running coal scam.
The documents, secured by the Organized Crime and Corruption Reporting Project (OCCRP) and reviewed by the FT, add a potential environmental dimension to corruption allegations linked to the Indian conglomerate. They suggest that Adani may have fraudulently made profits at the expense of air quality because using low-quality coal for power means burning more fuel.
Invoices show that in January 2014, Adani purchased an Indonesian shipment of coal that was said to contain 3,500 calories per kilogram. The same consignment was sold to Tamil Nadu Generation and Distribution Company (Tangedco) as 6000 cal coal, one of the most valuable grades. Adani appears to have more than doubled its money in the process, after shipping costs.
The FT also compared documentation for a further 22 shipments in 2014 involving the same parties, suggesting a pattern of grade inflation in the 1.5m tonnes of coal delivery.
Adani sourced coal in Indonesia from a mining group known for its low-calorie mining at prices commensurate with low-grade fuel. It supplied coal to India’s southernmost state for power generation, fulfilling a contract that specified an expensive, high-quality fuel.
According to a 2022 study in The Lancet, more than 2 million people in India are killed every year by outdoor air pollution, while other studies have found significant increases in child mortality hundreds of kilometers around coal-fired power plants.
Another study a decade ago found that coal-fired power plants, which supply about three-quarters of India’s electricity, account for about 15 percent of the country’s man-made emissions of fine particulate matter, 30 percent of nitrogen oxides and 50 percent. cent of sulfur dioxide.
“Public health in India has definitely taken a back seat against the interest of the energy sector,” said Sunil Dahiya, an analyst at the New Delhi-based Center for Energy and Clean Air Research.
Opposition politicians last year called for an investigation into Adani after the FT reported that between 2021 and 2023 the group paid more than $5 billion to middlemen for coal imported into India at far above market prices.
The latest revelations come as Adani seeks to rebrand itself as a major renewable energy player, including by building one of the world’s largest wind and solar farms in Khavda, near the Pakistani border. The group, which denies wrongdoing, remains one of India’s biggest coal importers.
The findings are also likely to add to a heightened political debate in India about the power and influence of billionaires including Gautam Adani, whose names and vast fortunes have come up during the current election campaign in which Narendra Modi is seeking a third term as prime minister. .
India’s Directorate of Revenue Intelligence (DRI), the finance ministry’s investigative arm that deals with economic crimes, launched an investigation into coal prices in 2016. The prosecution of a trader related to an alleged $68 million increase in coal prices is one of the few tangible ones. the results of the ongoing investigation.
New documents obtained by OCCRP and shared with the FT show how in December 2013 the MV Kalliopi L left Indonesia carrying coal with a quoted price of $28 per tonne. When it arrived in India in the new year, Adani sold the coal to Tangedco at $92 a tonne.
The coal came from Indonesian mining group PT Jhonlin’s operations in South Kalimantan, where the ship was loaded.
PT Jhonlin’s export declaration stated that Tangedco was the ultimate buyer and Adani was listed as the intermediary. However, Jhonlin’s invoice went to British Virgin Islands-based Supreme Union Investors, which was charged $28 per tonne.
A week later, Supreme Union Investors invoiced Adani in Singapore for the shipment at $34 per tonne, saying the coal contained 3,500 calories per kg.
On Adani’s subsequent invoice to Tangedco, the quality jumped to 6,000 calories – as did the price to $92 per tonne.
Other documents indicated that the discrepancy was not isolated. The 2014 order lists 32 deliveries of 6,000 cal coal to Tangedco from Adani totaling 2.1 million tonnes at $91 per tonne. The order was issued under India’s freedom of information laws at the request of the OCCRP.
According to Jhonlin’s internal records, Supreme Union Investors acted as an intermediary for 24 cargoes listed in Tangedco’s order, purchasing them at an average price of $28 per ton. Cargo prices were slightly above the benchmark for 4,200 cal coal from Indonesia, which traded at $22 to $26 a tonne at the time, according to Argus data.
FT matched 22 of 24 routes with submissions from India; in all 22 shipments, Tangedco was the final buyer at an average price of $86 per ton. The price is in line with Argus estimates of local market prices for high-quality 6,000-calorie coal, which were between $81 and $89, including freight costs.
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Current Argus price estimates for shipping costs suggest that for every tonne sold at an average of $86, Adani and its middlemen shared in up to $46 in profit. That totaled about $70 million for 22 voyages.
Adani denies the allegations of fraud. A spokesperson for the group said the quality of the coal was independently tested at the loading and unloading point, as well as by customs and Tangedco scientists: “The delivered coal has gone through such a complicated multi-agency multi-site quality control process. points, it is clear that the claim about the supply of low-quality coal is not only unfounded and unfair, but completely absurd.”
Tangedco, Jhonlin, Supreme Union Investors and DRI did not respond to requests for comment.
“Given the market power of coal suppliers, [utilities] they often have no choice but to put up with non-compliance,” said Rohit Chandra, assistant professor of public policy at IIT Delhi. “Third-party testing has done very little to address these concerns.”
The transactions fit a pattern of endemic fraudulent price inflation reported by Indian authorities in a 2016 notice that named five Adani companies and five importers supplied by the group among 40 entities under investigation.
The DRI notice alleged that offshore intermediaries were used to inflate the price of coal supplied to power companies and that “in a significant number of cases” two sets of test reports were discovered for shipments: “one showing a lower heat of combustion (GCV) and the other a higher GCV.”
In 2018, Arappor Iyakkam, an NGO based in Tamil Nadu’s capital, Chennai, alleged a “coal billing scam” in a complaint to the state’s Directorate of Vigilance and Anti-Corruption.
The NGO, which focuses on transparency issues, said that Tangedco paid higher than market prices for coal and that the calorific value of coal mentioned in tenders and purchase orders did not match what was received.
“Tangedco suffered heavy casualties. [billions of rupees] every year for the past decade,” the NGO said in its complaint. “We have to understand that this translates directly into a higher energy tariff for the common man and it greatly affects the common man.”
The NGO estimates that between 2012 and 2016, a total of Rs 60 billion ($720 million) was wasted in Tangedco’s coal purchases. ($360 million),” Jayaram Venkatesan, convener of the NGO, told the FT.
An Adani spokesperson said the NGO had “re-invigorated the DRI’s allegations”. India is the largest consumer and producer of coal in the world after China. But strong demand and bottlenecks on its railways mean it also has to import, with Indonesia the biggest supplier of thermal coal.
In a 2017 report, India’s Comptroller and Auditor General raised questions about whether Tangedco’s bidding process for imported coal favored large groups like Adani. He emphasized the insufficient time for submitting bids and the requirement for a high turnover of bidders. The ÚOHS investigation is ongoing and is being delayed by court proceedings related to requests for international documents.
Adani said it was justified by the DRI’s decision last year to withdraw an appeal to the Supreme Court in a case against one of the 40 importers named in 2016.
Industry analysts say the calorific value testing of coal – including strict requirements for random sampling from coal racks – is stringent and is carried out by third-party agencies in India. But because it all happens with human intervention, there is room for abuse, they note. The cost of testing is usually split between the supplier and the end user at the loading end and is borne by the end user at the unloading end.
A “large discrepancy” between the amount of the declared calorific value of a shipment and its actual value “can only happen with the consent of the people at the end of unloading”, said a senior energy sector official.
Tangedco’s documents include several certifications from its own scientists and third-party testing companies that coal supplied by Adani under the 2014 order met specifications.
A person working at India’s power grid said the primary objective was continuity of coal supply and balancing generation to match demand, meaning any question of coal quality was a “post-hoc exercise”.
An Adani spokesman said: “It cannot by any stretch of the imagination [Adani’s Singapore subsidiary]with a total supply of less than 2 percent of the coal burned by Tangedco in the relevant period, will be liable for either air pollution or losses” of India’s state-owned power distribution companies.