Gautam Adani, Chairman, Adani Group has led it from a modest beginning to a $8 billion professionally managed empire in a relatively short period. He is counted amongst the most influential businessmen worldwide in shipping trade and shipping-related infrastructure.
What is hugely interesting is that the phenome-nal rise of Gautam Adani has happened during the time of the Gujarat Model of growth propounded by Narendra Modi. In the 10 year period from 2002 to 2012, Adani rose from an ordinary medium term businessman to become India’s 21st richest man according to the Fortune magazine.
The story so far...
The dismantling of industrial licensing in 1991 saw the emergence of a new wave of ‘courting and preening economics.’ Since the investors were free to choose which state they can invest in, Indian states began to compete with each other to court and attract big businesses. In the process they offered huge sops and moolahs to potential
investors and continue to do so. Gujarat offered huge sops to its investors just as many other states like Tamil Nadu, Bihar, Maharashtra and Odisha did.
Perhaps no other state in the history has been so much politicised, celebrated and lampooned with zeal and fervour like Gujarat. 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. Gujarat has been accused of placing the interest of big business ahead of its small and medium investors. Take for example the Adani saga which is an interesting case in 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 throwaway prices, far less than market prices. The group is said to have got land at prices ranging between Re 1 and Rs 32 per square metre. According to Yagnik, a lawyer leading the charge against Adanis, the group has stated in its submissions to 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 3000 crore.
To be fair, every state offers its potential investors huge expanse of land for industrial growth. Also, the way the market price of a land is measured varies greatly from area to area based on facilities available. Adani issued a press statement in which he stated: “we went to Kutch when no one looked there and acquired only barren and desert-like land that was not suitable for agriculture. We wanted 10,000 acres but got only 5000 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.”
States like Tamil Nadu and Bihar have set up land banks and passed special Land Acquisition Acts to acquire land throughout the year so that investors can be easily allotted the land and they do not have to waste time searching for land from private parties.
Consider the incentive offered by Tamil Nadu government that attracted over Rs 12,000 crore of investments from two large auto companies, Ford and Hyundai: the state allotted 450 acres of land to Mahindra Ford that resulted in an investment of Rs 5000 crore; approximately 1200 acres were allotted at modest prices with a host of other tax and fiscal benefits to Hyundai Motors that triggered, over time, an investment of Rs 7000 crore.
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. 3200 crore. But that again is not something unique to Gujarat. Many other states give similar benefits: the Ultra Mega Integrated Automobile Projects Policy of Tamil Nadu provides that investment of not less than Rs 4000 crore would be given access to a 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 has excessively favoured Adanis by fiscal and monetary incentives falls flat as many other states like Bihar, Tamil Nadu and Punjab offer even much higher incentives.
But the real concerns over the Gujarat Model relate to potential damage caused to the environment. The SEZ Act 2005 does not permit a company to lay even a single brick without obtaining environmental clearances. But the Adanis were allowed to establish a whole port over 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. Earlier, the Gujarat High Court had asked the Adani group and Alstom Bharat Forge Power Ltd to discontinue their ongoing construction within the SEZ in Mundra until environment clearance is obtained from the Centre.
On the Mundra port, Adani has also run afoul of environmentalists for violating the Coastal Regulation Zone rules by clearing mangroves and contaminating the water with inadequately treated waste water. 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 the ship-breaking facility of Adani Port and SEZ Ltd near Mundra West Port in Gujarat’s Kutch district. The committee which submitted its report on 18 April, 2013 found evidence of destruction of mangroves, blocking of creeks and non-compliance of other clearance conditions.
One cannot simply miss the fact that by April 2013 the Mundra Adani SEZ was fully operational and had already achieved 91 MMT of capacity even as such reports were being written and licences and approvals happening in parallel at the Centre and the state level. Surely there is need for the Central Ministry of Environment to be quick in deciding on environment clearances.
Walking alongside Modi
The relationship of corporate-state nexus is further strengthened by the fact that Modi uses the Adani planes to travel all over India during elections. Adani cancelled the sponsorship of a Wharton India Economic Forum event last year after it dropped a live video address by Modi.
Even 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. Not to be forgotten is the fact that the Vibrant Gujarat Summit is also sponsored in part by Adani. Is such strong corporate-state relationship at a personal level unacceptable?
Is 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 over by 26 per cent to celebrate the anointing of Modi as India’s Prime Minister and were close to touching the circuit breakers.
And the markets normally don’t lie.