India Finance
Anti-corruption bureau to investigate Adani port deal in SW India
Jan 05, 2021
Anti-corruption body to investigate Adani-government port deal

Adani’s massive port development at Vizhinjam in south-west India has caused waves of controversy, from allegations of corruption to claims that it has triggered severe erosion of the nearby coast. AdaniWatch reported on this festering issue in November 2020. Now the government of Kerala state has announced an official investigation into the contract made between the previous government and the Adani company developing the port.

The Vigilance and Anti-Corruption Bureau of the government of Kerala will investigate the Vizhinjam Port concession agreement made between the Adani Group and the Kerala government in 2015. The decision was made by the state government after reviewing the Judicial report by a commission headed by Justice C N Ramachandran Commission on the corruption allegations against the port project. These developments occur in the wake of findings by the Comptroller and Auditor-General (see the CAG report) in 2017.

The bureau will investigate whether the project has incurred losses to the government and if anyone has made personal gains out of it. The government order in this regard will be issued soon. The investigation will be led by a special team. If any discrepancies are found in the preliminary inquiry a ‘first information report’ will be filed for more detailed investigation.

Adani's port development at Vizhinjam

On 23 May 2017, the Comptroller and Auditor General tabled its report to the State Legislature. The report said that the port contract signed in August 2015 by the then Chief Minister (Congress-led UDF United Democratic Front) Oommen Chandy and the Adani Group was detrimental to the state's interests (Point 3.1.9.1)  and caused financial losses to the state treasury. The CAG report pointed out that while the standard period for a public private partnership project was 30 years, the contract awarded 40 years. This allows the concessionaire, an Adani Group company, to earn additional revenue of Rs 29,217 crores (about AUD $6 billion).

According to the report, this amount should ideally have come to the government. The total project cost is Rs 7525 crores (about AUD $1.5 billion) and 67% of the investment was made by the government. Despite having assured the financial and economical viability of the development, the state government failed to ensure adequate benefits to its coffers, which is tantamount to corruption, the CAG report noted. This led to heated political debate.

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After the LDF government (CPI(M)-led Left Democratic Front) came into power, chief minister Pinarayi Vijayan appointed Justice C N Ramachandran to lead the inquiry commission on the CAG report. The commission filed its report on 31 December 2018, saying that it couldn't find any evidence of corruption and giving a clean chit to former CM Oommen Chandy.

But the judicial commission found that certain provisions of the agreement were against the interests of the state. These included permitting the Adani company to use state assets as collateral (see Concession agreement Point 41.5), the termination-payment agreement (see CAG report – Point 3.1.7), and changing the project plan after selection of the contractor. These clauses allowed the Adani Group the option to leverage land worth Rs 548 crores (about AUD $100 million) that were acquired by the government for the port project. The judicial commission also pointed out that the after the completion of the contract, the company will be given the sub-contract for the port estate development.

The Kerala Legislative Assembly

Joseph Vijayan, a former researcher at the Ocean Institute, said in a Facebook post that he is happy his submission to the C N Ramachandran Nair commission has led to a results after all this time.

He said ‘the state government had asked the Advocate General to advise on the next course of action based on the Commission's findings, a year ago. We have to wait and see if this vigilance enquiry turns into another eyewash. It's also not clear if the investigation will only be limited to politicians or if it will include senior government officials like the former Port Secretary. Former senior officials of Vizhinjam International Seaport Ltd must also be investigated by the vigilance team. While I made submissions to the Commission, these officers were among those who vehemently opposed me.’