Adani
Ports and Special Economic Zone Limited is India’s largest private multi-port
operator. It operates ports at Mundra,
Dahej and Hazira in India and at Abbot Point in Australia. APSEZ is India’s first multi-product port-based
special economic zone (SEZ). The port is
located in the Gulf of Kutch making it a preferred gateway for cargo bound
westwards and can handle all types of cargo.
Gautam Adani is the Chairman of Adani Group and one of the richest man in the world. He led the Adani group from a modest background to create a $8 billion professionally managed empire in a relatively short period of time and he is counted amongst the most influential businessmen worldwide in the shipping trade and developing shipping related infrastructure.
What is hugely interesting is that the phenomenal rise of Gautam Adani has happened only during the time of the Gujarat Model of Growth as promulgated by Mr Narendra Modi. In the 10 year period from 2002 to 2012, Mr Adani rose from an ordinary medium term businessman to become India’s 21st richest man as per fortune magazine numbers.
The Story so Far - The Gujarat Model of Growth
The
dismantling of Industrial Licencing in 1991 saw the emergence of a new wave of
‘courting & Preening economics’.
Since the investors were free to choose which state they can invest in,
the Indian states now began to compete with each other to court and attract big
business. In the process they offered
huge sops and moolahs to their potential investors and continue to do so till
today. The State of Gujarat too like
others offered huge sops to its investors just as many other states like
Tamilnadu, Bihar, Maharastra and Orissa did the same.
Perhaps no other state or its economic model in the history has been so much politicized, celebrated and lampooned with zeal and fervour like that of Gujarat. Its Chief Minister Narendra Modi is seen by many as the redeemer of Indian growth story and by others as a prophet of crony capitalism and big business. The Gujarat state has been accused of placing interest of big business ahead of its small and medium investors and public at large. Take for example the Adani saga which is an interesting case in the point and largely exemplifies the Gujarat Model.
The Adani Saga
The
Central Charge by its opponents is that the Adanis got large tracts of land at
throw away prices. Prices that were far
lesser than the market. The group is
said to have got land at prices ranging between Rs 1 to Rs 16 per square metre. According
to Mr Yagnik, a lawyer leading the charge against Adanis, the group has stated
before the commerce ministry and submissions before the courts that it has
45,000 acres of land. This huge land
tract was given to the group for about Rs 33 crore while the Jantri (price
fixed by Revenue department) value of the land was Rs 3,000 crore.
To be fair to Mr Adani, every state offers its potential investors huge expanse of lands for Industrial growth. Also the way the market price of a land is measured varies greatly from area to area and based on facilities available. Mr Adani issued a press statement on the same as follows "We went to Kutch when no one looked there and acquired only barren and dessert-like land that was not suitable for agriculture, we wanted 10,000 acres but got only 5,000 acres. Now people are comparing the price we paid 20 years back for barren, non-agriculture land with the market rate of a land that has been developed with all facilities like road and electricity".
Further every state offers large tracts of land at subsidized rates to its investors. States like Tamilnadu and Bihar has set up land banks and passed special Land Acquisition Acts to obtain lands throughout the year and build a land bank so that investors can be easily allotted the land and they do not have to waste time searching for lands from private parties. Consider for example that the Tamilnadu government allotted 450 acres of land to Mahinda & Mahindra for an investment of Rs 5,000 crores car project. Consider that the Hyundai Motors investment in Tamilnadu of 7,000 was welcomed by the state and approximately 1200 acres was allotted in return at subsidized rate with a host of other tax and fiscal benefits.
Of sops and Incentives
Further, it is also claimed that the Modi
government topped off its largesse of land to the Adani Group with five-year
tax breaks of over Rs. 3,200 crore. But
that again is not something unique to Gujrat. Many other states give such similar
benefits. Consider for example that the
Ultra Mega Integrated Automobile Projects Policy of Tamilnadu provides that
investment of not less than Rs 4,000 crore would give access to wide range of
concessions including land at reduced rates, full exemption from stamp duty,
dual feeder lines for power supply, exemption from electricity tax for 10 years
and refund of gross output value added tax and Central sales tax for 21 years.
Therefore the claim that Modi government having excessively favoured Adanis by fiscal and monetary incentives falls flat as many other states like Bihar, Tamilnadu, Punjab would be willing to offer perhaps much higher incentives.
But what about the Environment?
But how
far should a state go while preening and winking at big business in pursuit of
investments? Are there legal, moral and democratic limits to creating a “good
investment climate”? Can issues of sustainable growth and environmental
concerns be thrown to winds in pursuit of economic miracle? These are questions
of significant importance and will largely come to define the times that we
live in.
But the real concerns perhaps with the Gujarat Model is to do with its scant regard for its environment. While it is true that every state government doles out sops for investors to attract investments, not every government shuts its eyes to environmental concerns and issued raised by local populace. Consider for example, that the SEZ Act 2005 does not permit a company to even lay a single brick without obtaining all environmental clearances. But for reasons best known to the state of Gujarat, the Adanis were allowed to establish a whole port with 5000 acres even as environmental clearances were pending with the environment ministry and experts were still studying the effect of establishment of the port on the environment, the marine life and fisherman population etc. Earlier, the Gujarat High Court had earlier asked the Adani group and Alstom Bharat Forge Power Ltd to discontinue ongoing construction within the SEZ at its special economic zone in Mundra until environment clearance is obtained from the Centre. The order was in response to a public interest litigation filed by villagers.
Also the Mundra port, Adani has also run afoul of environmentalists for violating the Coastal Regulation Zone rules, illegally clearing mangroves and contaminating the water with inadequately treated waste water, leading to considerable damage to the coastal areas. A committee headed by Sunita Narain of Centre for Science and Environment, was set up by the Union Ministry of Environment and Forests to inspect ship-breaking facility of M/s Adani Port and SEZ Limited near Mundra West Port in Gujarat’s Kutch district. The committee which submitted its report on April 18, 2013 found incontrovertible evidence of destruction of mangroves, blocking of creeks and non-compliance of other clearance condition.
The
Report reads “Our overall assessment is that there are instances of violations
and non-compliance with environmental conditions, which need to be addressed.
We need effective deterrents for the future. But it is equally important that
urgent steps are taken to repair damage and to mitigate future harm”. The Report of the committee is dated April
2013 which found several violations including taking over of grazing and
pastoral lands, destruction of natural habitats etc. One cannot simply miss the fact that by April
2013 the Mundra Adani SEZ was fully operational and had already achieved 91
million MT of capacity even as such reports were being written and licences and
approvals happening in parallel at the central and the state level with an ally
state sleeping at the wheels.
Contrast the Tirupur Story of Tamilnadu
Now
Compare and contrast this with the Tamilnadu Model. In 2005, the Madras High Court ordered the
Dyers of Tirupur to implement the Pollution control measures and to pay the
damages and directed the Tamil Nadu Pollution Control Board to implement the environmental
laws and close down all units which do not comply. The State responded to the call of duty. The
Tamilnadu State closed down all the dyeing units in the Tirupur town that did
not follow environmental laws. The state
pollution control board also initiated criminal prosecution of the delinquent
units which failed to rectify defects leading to pollution and disconnected
power supplies to these dyeing units.
This led to an unprecedented loss to the Tirupur Export Industry leading
it to a downward path but this did not faze the regulators. All
Pollution control norms were later complied in full letter and spirits.
Walking Alongside Modi
The
relationship of corporate-state nexus is further strengthened by the fact that
Mr Modi uses the Adani Planes to travel all over India during elections. Further Mr Adani cancelled the sponsorship of
a Wharton India Economic Forum event last year after it dropped a live video
address by Modi.
Even when when Modi staged a dharna in Ahmedabad over the Narmada water issue, it was Adani who arranged special air-conditioned tent on the university grounds. Further the financing and arrangements of Vibrant Gujarat Summit is also sponsored heavily by Mr Adani. Is such strong corporate-State relationship at a personal level unacceptable? We think so.
Even when when Modi staged a dharna in Ahmedabad over the Narmada water issue, it was Adani who arranged special air-conditioned tent on the university grounds. Further the financing and arrangements of Vibrant Gujarat Summit is also sponsored heavily by Mr Adani. Is such strong corporate-State relationship at a personal level unacceptable? We think so.
Conclusion
In the
past, the radia tapes revealed the extent of corporate-State nexus. The perils of running a state and making state
policies from board room are well known to the nation at large. Is Mr Adani another Ambani in making? Or is
he unfairly being targeted by vested interests for possessing a strong business
acumen and skills for being a visionary.
We do not know for sure. But what
we do know is that the markets are celebrating the Adani-Modi victory. We do know that on the day of the election, the
Adani Stocks rose by over 26 percent to celebrate the anointing of Mr Modi as Indias
prime minister and were close to touching the circuit breakers.