Adani Power built a plant in Jharkhand.
It is a coal based power plant. It was set up in a Special Zone for Exports.
The plant was to supply 100% of its power to Bangladesh and earn US Dollars for the company.
As the plant was built in a Special Zone, all the material consumed in setting up the plant was allowed to be imported duty free. Thus the company did not pay any customs duty for the equipment used to set up the plant, a major financial concession.
This must have caused a significant loss to the Government of India as it had to forego customs and excise duty.
The plant was set up in Jharkhand, which is a source of coal, thus Adani Power got the advantage of saving freight as transportation required was minimum. Smart move.
Secondly, the plant was set up close to Bangladesh border, thus ensuring that the T&D (Transmission and Distribution) losses were minimal. Another Smart Move.
The income for the company was also tax free as it was export earning. Another Smart Move.
What a wonderful deal.
Then things changed in Bangladesh, in a public led protest, Hasina Sheikh, the PM of Bangladesh was deposed and she had to leave Bangladesh at a short notice, taking shelter in India (where else?).
Now Bangladesh’s new government has found that Hasina Sheikh was buying power at an increased price, thus they are now examining the cancellation of the purchase agreement.
On top of that, Adani Power has run up bills that are about 1 Billion USD already and which continue to increase as time goes by. These bills may or may not be paid if corruption is established in the power purchase agreement.
Faced with this problem, Adani Power now wants to sell power to India. The situation is getting desperate, but the opposition has been gunning for Adani and Modi. Parliament has been stalled in this winter session and Congress has become aggressive on the Modi-Adani nexus. Thus, taking a decision to buy power from Adani is going to have a political cost.
Also, there is the problem of customs and excise duties foregone and the price at which India will buy the power. The sale of electricity to India would also be classified as local sales subject to taxes (income and other taxes) as it is no longer an export. The other problem is, because the plant is based in a special zone, it can only export power.
A solution needs to be found for Adani and we are sure that a battery of bureaucrats must be burning midnight oil to find a solution, after all Adani can’t be let down. Adani is India and India is Adani. If Adani fails, then India fails and perhaps there will be soon a press conference which will confirm that the people’s coup in Bangladesh was orchestrated by George Soros and Rahul Gandhi.
We wonder, if George Soros and Rahul Gandhi are so powerful, then why Congress is unable to win elections and displace the Modi Government?
ps: Adani Group has also scrapped use of US loan for a power project in Sri Lanka. This has been done perhaps to escape any SEC / FBI action on that project due to allegations of corruption in that deal too. Increasingly, Adani is going to be very cautious in using funds raised in US Security Markets as that will come with increased scrutiny, which he can not manage, like he perhaps is able to manage SEBI or other Indian institutions.
