Adani supplied low-quality coal to Tamil Nadu’s Tangedco at high cost: FT

The Gautam Adani-led Adani Group passed off low-quality coal as far more expensive cleaner fuel in transactions with Tamil Nadu Generation and Distribution Company (Tangedco), a state-owned power distribution company (discom), according to a report.

The Financial Times (FT) has published the report with documents secured by the Organized Crime and Corruption Reporting Project (OCCRP). “Adani may have fraudulently obtained bumper profits at the expense of air quality, since using low-grade coal for power means burning more of the fuel,” says the report.

22 shipments of coal

The report says that in January 2014, Adani purchased an Indonesian shipment of coal that was said to contain 3,500 calories per kg. This shipment, brought over by the vessel MV Kalliopi L, was then sold to Tangedco as 6,000-calorie coal, says the report.

Since 6,000-calorie coal is among the most valuable grades of the fuel, Adani may have more than doubled its money, the FT report adds.

There is a pattern of grade inflation, the report further says, adding that it has documentation for a further 22 shipments in 2014 involving Adani and Tangedco. This “indicates a pattern of grade inflation in the supply of 1.5 million tonnes of coal”, it adds.

High cost, low quality

“Adani sourced the coal in Indonesia from a mining group known for its low-calorie output, at prices consistent with low-grade fuel,” the report further says, adding that it delivered the coal to Tangedco, “fulfilling a contract that specified expensive high-quality fuel”.

OCCRP says it obtained the evidence comes from multiple sources, “including invoices and banking documents from several jurisdictions, details of investigations by India’s Directorate of Revenue Intelligence (DRI), leaked documents from a key Indonesian coal supplier for Adani”, and “a trove of documents” from Tangedco.

The FT report says Adani has denied fraud allegations. It quotes a company spokesperson as saying the quality of the coal was independently tested at the point of loading and discharge, as well as by customs authorities and Tangedco scientists.

“With the supplied coal having passed such an elaborate quality check process by multiple agencies at multiple points, clearly the allegation of supply of low-quality coal is not only baseless and unfair but completely absurd,” the spokesperson said, as quoted by FT.

NGO's complaint

In 2018, Arappor Iyakkam, a Chennai-based NGO, alleged a “coal invoicing scam”. It raised a complaint with the Tamil Nadu Directorate of Vigilance and Anti-Corruption, saying Tangedco “paid above market prices for coal and that the calorific value of coal mentioned on tenders and purchase orders did not match what was received”.

“Tangedco has been suffering heavy losses every year over the past decade,” the NGO said in its complaint. “We must understand that this translates directly into higher power tariff for the common man and is affecting the common man greatly.”

The FT-OCCRP report comes amid the Adani Group’s efforts to rebrand itself as a major renewable energy player. It is building a mega wind and solar park in Khavda, near the Pakistan border.