Corruption

Behind the veneer

Print edition : April 12, 2019

Prime Minister Narendra Modi with French President Francois Hollande (third from left), Defence Minister Jean-Yves Le Drian (left), Mayor Anne Hidalgo and Foreign Affairs Minister Laurent Fabius (right) on a tour on the Seine river in Paris on April 10, 2015. Modi made the announcement that India would purchase 36 Rafale fighter jets on this visit to Paris. Photo: BENOIT TESSIER/REUTERS

A Rafale aircraft at the air show in Bengaluru in February. Photo: Bhagya Prakash K

Gautam Adani, CMD, Adani Group, addressing the Uttar Pradesh Investors Summit 2018, which was attended by Narendra Modi on February 21, 2018. Photo: Rajeev Bhatt

Nirav Modi at one of his boutiques in Hong Kong in March 2017. Photo: Billy H.C. Kwok/The New York Times

Vijay Mallya outside Westminster Magistrates' Court in London on December 10, 2018. Photo: Jason Alden/Bloomberg

A number of deals struck by Modi’s government and his cronies undermine his claims about providing a corruption-free government and protecting national interests.

One of the biggest election promises that Narendra Modi and the Bharatiya Janata Party (BJP) made to the people in 2014 was the one about a corruption-free India. The party’s election manifesto went on to explain the steps that would be taken not only to stop corruption at the government level but also to bring back black money parked abroad. All this, they claimed, would be inspired by undiluted nationalism and would highlight the BJP’s commitment to national interests. After five years, most BJP leaders, including Modi, insist that the Centre has weeded out corruption at the government level completely. Hence, on the eve of another election, it will be interesting to remind the ruling party of some of the questions the government never bothered to answer. Indeed, these unanswered questions pertain to the commitment of this government and the party that leads it to fundamental national interests, not to speak of nationalism. Of course, the Rafale deal is the most widely discussed instance of compromising national interests, marked by the unilateral decision taken by Modi, but a closer look at various other deals exposes many other multidimensional scams.

The Rafale deal should rate as the most infamous and scandalous defence deal in Indian history. The inspection of very many aspects of this deal lays out a virtual saga of compromises and even violation of national interest. Consider these basic facts. Way back in 2007, the then government, on the request of the Indian Air Force (IAF), floated a global tender for 126 Medium Multi-Role Combat Aircraft in order to balance the depleting operational power of the IAF’s fighter jet fleet. The winner had to supply 18 aircraft in the country of origin and the remaining 108 had to be built in India by the public sector undertaking (PSU) Hindustan Aeronautics Limited (HAL) under technology transfer. After nearly four and a half years, the French manufacturer Dassault Aviation’s Rafale was declared the winner, and the government started negotiations with the French company.

In May 2014, the government changed. The newly elected Modi government continued with the negotiations for 11 months until March 2015. In April, Modi set off on a three-nation tour and his first destination was France. On his first day, after meeting the then French President Francois Hollande, Modi, out of the blue, announced: “I have asked President to supply 36 ready-to-fly Rafale jets to India.” In India, the then Defence Minister Manohar Parrikar, who was inaugurating a mobile fish stall in his home State, Goa, at the time of Modi’s announcement was caught unawares. He said it was a decision taken by the Prime Minister and that he was waiting for details. Parrikar also said the price per aircraft would be around Rs.700 crore to Rs.715 crore and it would be around Rs.1 lakh crore for 126 aircraft, including all the facilities, over a period of seven to 10 years. It would be pertinent to believe that as the Defence Minister who had seen the reports/files of the negotiations for 126 Rafale aircraft, Parrikar would have had a clear idea of the price.

The scam

When the deal that Modi announced was signed 17 months later, the price mysteriously shot up to Rs.1,660 crore an aircraft and that too in a deal where technology transfer was not involved. Instead of HAL, the Modi government forced Dassault to choose a company formed by Modi’s struggling businessman friend, Anil Ambani, two weeks after the announcement in France. IAF officials complained that “the government did not consider the end user’s [IAF] requirements”. And many senior officials, both serving and retired, stated that the numbers were inadequate. The government, self-professedly committed to national interests and nationalism, never responded to these voices of concern from people who had been protecting the country and managing security for decades. So much so, it did not even clarify as to what process was followed for Modi’s announcement.

When did the IAF request for an immediate purchase of two squadrons? Who authorised Modi to make such an announcement? Why did the Modi government overlook the objections raised by the Ministry of Law? Why was no sovereign guarantee obtained from France or bank guarantee from Dassault when more than 60 per cent of the money was to be transferred in advance to France? If it is a government-to-government deal, why is the liability of the French government limited? Why was the seat of arbitration changed from India to Geneva? Why has HAL been sidelined? And how come the price has gone up from Rs.715 crore as Parrikar mentioned to Rs.1,660 crore an aircraft?

Why did Dassault Aviation invest 48 million euros in a loss-making company of Anil Ambani? The Modi government’s inability to answer any of these questions convincingly completely undermines its claims about providing a corruption-free government and protecting national interests. There are other cases too that are equally unsettling, and can perhaps be called the “Modani group” cases.

The ‘Modani Group’ story

“The Modani business list is very long. Actually, a three-volume book can be written on this,” a bureaucrat recently told this writer. The name is a portmanteau of Modi and Adani. Gautam Adani, one of the richest people in India, is perceived to be a close friend of Modi. It was widely publicised that Modi used Adani’s private jet extensively for his 2014 election campaign. The Adani Group’s fortune is said to have increased manifold after Modi became Chief Minister of Gujarat. “Over a period of 12 months from the time Modi was officially declared the BJP’s prime ministerial candidate on September 13, 2013, the market price of the share of an important group company, Adani Enterprises, jumped from Rs.5 to Rs.786. Over a decade, the Adani group’s turnover rose more than twentyfold from Rs.3,741 crore in 2001-02 to Rs.75,659 crore in 2013-14,” observed the veteran journalist Paranjoy Guha Thakurta.

Over-invoicing

In May 2014, a few days before Modi became Prime Minister, the Adani Group was slapped with a show-cause notice for Rs.5,500 crore by the Directorate of Revenue Intelligence (DRI) for “alleged overvaluation of capital equipment imports” for its power plants. The DRI report read: “From the investigations, as brought out in the foregoing paragraphs, MEGPTCL [Maharashtra Eastern Grid Power Transmission Company Ltd], EIF [Electrogen Infra FZE], PMC [PMC Projects (India) Private Limited], Shri Vinod Adani… appear to have hatched a conspiracy to siphon off money abroad by way of indulging in over-valuation in imports for projects subject to low or nil rate of customs duty….”

In June 2014, the Central Bureau of Investigation (CBI) took over the case on the DRI’s reference. Three Adani firms—MEGPTCL, Adani Power Maharashtra, and Adani Power Rajasthan—had imported power equipment worth Rs.3,580 crore from China and South Korea and transferred Rs.9,048 crore to a Dubai-based company, Electrogen Infra, allegedly on the basis of inflated invoices. Hence, the DRI asked Adani to pay Rs.4,468 crore. It was later found out that Electrogen Infra was owned by a trust based out of the tax haven Mauritius; the trust was owned by Vinod Adani, Adani Group Chairman Gautam Adani’s elder brother.

The CBI registered a Preliminary Enquiry against the three companies and unnamed officials of six public sector banks “to investigate whether credit facilities of the banks were used to procure power equipment and import them on gross overvaluation/over-invoicing thereby siphoning off the funds of various PSBs [public sector banks]”. A CBI affidavit noted: “Another allegation was added during inquiry to look into the effect of exaggeration of project cost on fixation of tariff and also to avail excess finance from the bank to fulfil the requirement of margin money without an infusion of own capital”, which explained the initiation of enquiry against the bank officials.

A year later, the CBI closed the enquiry citing fictitious reasons. The senior DRI officials who initiated and led the investigation against Adani were shunted out. On August 22, 2017, the DRI’s adjudicating authority, K.V.S. Singh, dropped all charges filed by the agency against Adani for allegedly inflating the total declared value of power equipment. The customs department filed an appeal against this clean chit in the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in Mumbai. It stated that K.V.S. Singh’s order was “erroneous, illegal and improper not only in law but also on facts”. The case is still pending.

Coal import scam

Around 40 companies, including five Adani firms, imported coal from Indonesia and filed inflated invoices. The DRI sought details from the firms and banks involved. Adani tried to block the inquiry by filing petitions in Singapore courts because the companies that acted as the middlemen were registered in Singapore, where Vinod Adani is based. The highest court of Singapore rejected Adani’s arguments. The group went to the Mumbai High Court and managed to get a stay from submitting the papers. The non-governmental organisation Common Cause filed a public interest litigation (PIL) petition in the Delhi High Court on the subject citing huge amount of tax evasion. The case is still on.

The Adani Group’s Mundra power plant is located within the Adani Port and Special Economic Zone (SEZ). SEZs are designated areas within a country that have a different set of economic and legal regulations, aimed at increasing the inflow of foreign direct investment. Section 26 of the SEZ Act, 2005, gives customs duty exemption to companies that import or export goods and services to or from SEZ areas. Section 30 of the same Act says: “a) any goods removed from a Special Economic Zone to the Domestic Tariff Area shall be chargeable to duties of customs including anti-dumping, countervailing and safeguard duties under the Customs Tariff Act, 1975, where applicable, as leviable on such goods when imported; and (b) the rate of duty and tariff valuation, if any, applicable to goods removed from a Special Economic Zone shall be at the rate and tariff valuation in force as on the date of such removal, and where such date is not ascertainable, on the date of payment of duty.”

Economic & Political Weekly reported that Adani had not paid mandatory customs duty on coal for years, which amounted to Rs.1,000 crore. The Modi government amended the rule and inserted Sub-Rule 5 in Rule 47 which read: “Refund, Demand, Adjudication, Review and Appeal with regard to matters relating to authorised operations under Special Economic Zones Act, 2005, transactions, and goods and services related thereto, shall be made by the Jurisdictional Customs and Central Excise Authorities in accordance with the relevant provisions contained in the Customs Act, 1962, the Central Excise Act, 1944, and the Finance Act, 1994, and the rules made thereunder or the notifications issued thereunder.” It was alleged that this amendment was made to help the Adani Group not pay taxes.

On the basis of this, the Adani group claimed a customs duty refund of around Rs.500 crore which it had never paid.

People say Modi takes quick decisions and works at lightning speed. Here is an example. On November 8, 2018, a Cabinet meeting chaired by Modi decided to lease out six airports—Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram and Mangaluru—for “operation, management and development under public-private-partnership (PPP) through Public Private Partnership Appraisal Committee (PPPAC). Govt formed a committee of Empowered Group of Secretaries (EGoS) headed by CEO NITI Aayog with Secretary of Ministry of Civil Aviation, Secretary of Department of Economic Affairs [DEA] and Secretary of Department of Expenditure to decide on any issue falling beyond the scope of PPPAC.”

The EGoS held two meetings, on November 17 and December 4, and decided that “prior airport experience may neither be made a prerequisite for bidding, nor a post-bid requirement”. The reason cited for this was to enlarge the competition for already operational brown-field airports. And the EGoS also decided that no restriction was to be placed on the number of airports to be bid for or to be awarded to a single entity.

The Ministry of Civil Aviation submitted the PPPAC memo, draft RFP (request for proposal) and project reports for operation, management and development of all six airports under the PPP model to the DEA on December 6. On December 7, it submitted the draft of concession agreement for “in principle and final approval”. The appraisal note of the DEA and the NITI Aayog were circulated to PPPAC members on December 10 and the PPPAC met on December 11.

It was decided and approved that the concession period would be 50 years, not 30 years like earlier. And the Airports Authority of India (AAI) would pay 50 per cent of the value of the non-aeronautical assets created by the operator in the first 30 years at the end of the concession period to the operator to take the airport back. The RFP was floated on December 14. The AAI gave access to the data room on December 21. The last date for bid queries was January 10, 2019. A pre-bid conference was held on January 17 and the last date of bid submission was February 14.

The technical bid was opened on February 16 and the financial bid on February 25. All six airports went to the Adani Group. It has no previous experience in airport operations or development. And it came to light that the proper procedure—the mandatory consultation with the public and State governments before leasing out an AAI airport—was not done by the Ministry of Civil Aviation and the Central government. As the Model Code of Conduct for the general election kicked in, the Cabinet could not give the approval to Adani. Hence the Letter of Award is on hold as of now.

Mining permission

Before looking into some other interesting deals, one more “Modani group” deal has to be mentioned. How the Modi government helped the Adani group operate coal mines in one of the largest contiguous stretches of dense forests in central India—Hasdeo Arand forests in Chhattisgarh. In 2009, the Ministry of Environment had categorised Hasdeo Arand as a “no-go” area for mining because of its rich, unfragmented forest cover. On February 21 this year, the Environment Ministry cleared the operation of coal mines inside the forest. Rajasthan Collieries Limited (RCL), a unit of Adani Enterprises Limited, will be the biggest beneficiary.

In 2016, the Environment Ministry had done away with a Rs.200 crore fine imposed on Adani Port & SEZ by the previous United Progressive Alliance government for environmental violations.

PNB scam

The total amount defrauded by diamond businessmen Nirav Modi and his uncle Mehul Choksi from Punjab National Bank is Rs.14,356.84 crore. Just days before the news of the scam came out, both escaped from India with their families. Without any prior information, how could a businessman escape from the country a couple of weeks prior to the complaint from the bank to the CBI? And after escaping from India in the first week of January 2018, Nirav Modi was seen in a photograph along with Prime Minister Modi and other Indian businessmen in the same month. The latest on this case is that Nirav Modi has been arrested in London.

In a similar case, flamboyant businessman Vijay Mallya is said to have met Finance Minister Arun Jaitley a day before he left the country despite having a lookout notice against him. Later, it came to light that the lookout notice was diluted just before his escape from the country. But all the same, Nirav Modi’s arrest is being used by some to claim that the government has scored an amazing win in the United Kingdom in the fight against corruption.

GSPC bailout

Gujarat State Petroleum Corporation, a State government PSU, was in the news when Modi was Gujarat Chief Minister. Modi announced that GSPC had discovered 20 trillion cubic feet of gas in June 2005 and that its value would be around Rs.2.2 lakh crore. Modi said GSPC would spend Rs.1,500 crore and within two years it would commence production. After 10 years and spending tens of thousands of crores, in March 2015 it came to light that the company had borrowed Rs.19,716 crore from banks and had not produced anything from the “discovery” Modi announced. As the Chief Minister of Gujarat until 2014, Modi was well aware of all these developments.

GeoGlobal Resources, which was incorporated in Barbados and whose total employee strength was just two people, became a “technical partner” of GSPC within six days of its incorporation and got 10 per cent stake in the discovered gas field without investing a penny. Jubilant Group was another partner which got a 10 per cent stake. Within months, GeoGlobal sold half of its stake to the Roy Group based in Mauritius for an undisclosed amount. The drilling partner of GSPC was Tuff Drilling, a company that had no experience in gas exploration or drilling and whose promoter ran a garment business. Yet, this company got contracts worth hundreds of crores to provide technically complicated deep-water platform rigs which had to be used at the gas field in the Krishna-Godavari Basin (K-G Basin). Later, the company defaulted on bank loans to the tune of more than Rs.100 crore and went bankrupt.

Last year, to save GSPC, the Modi government forced Oil and Natural Gas Corporation (ONGC) to buy GSPC’s 80 per cent stake in the gas field for Rs.8,000 crore. Modi knew pretty well that it was almost impossible to extract anything from the field in a profitable way. Then why did the Modi government force ONGC to shell out Rs.8,000 crore to buy such a field? What was Modi’s interest? Answers or explanations never came.

A long list of such scandalous deals has happened under the Modi government. For blind sycophants and the followers of “WhatsApp university”, whatever Modi says is divine. They believe he cannot be corrupt because he has no family or children. But for those who really follow the government policies and his politics, Modi is one of the most corrupt politicians India has ever seen.

Ravi Nair is a consultant and tweets at @t_d_h_Nair.

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