NEW DELHI: Has India’s largest bank, the government-controlled State Bank of India (SBI) decided to scrap a memorandum of understanding (MoU) it entered into with one of India’s largest corporate conglomerates led by Gautam Adani? The MoU was to advance a first-of-its-kind loan of US$ one billion or ?6,200 crore for a controversial coal mining project in Queensland, Australia.

One newspaper report suggested that there would be a 'quiet and natural death' of the loan agreement between the SBI and the Adani group. But nothing is official yet.

If indeed the MoU is scrapped, it would signify a dramatic shift in the position of India's biggest lender. On 13 March, SBI Chairperson Arundhati Bhattacharya had dubbed media speculation about the possibility of scrapping the MoU between the bank and the Adani group as "all gossip".

If, and when, the SBI decides not to extend a loan for a part of a major project -- that entails developing a coal mine, building a railway line and revamping a port at a cost of around $10 billion or ?62,000 crore in the north-eastern part of Australia -- India's biggest bank will join a long list of international banks and financial institutions that have so far categorically expressed their unwillingness to finance the controversial project which is being opposed by local communities and environmental activists.

The list of banks mentioned include BNP Paribas SA, Credit Agricole SA, Societe Generale SA, Barclays Plc., Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group, Inc., HSBC Holding Plc., J P Morgan Chase & Co., Morgan Stanley and Royal Bank of Scotland Plc. Whereas most of these banks have decided not to be associated with the project on ecological considerations -- it is contended that the project may adversely impact the ecosystem of the Great Barrier Reef, one of the seven wonders of the natural world -- the economic viability of the project has also been questioned.

Should the SBI decide not to advance the biggest loan of its kind to an Indian corporate group for an overseas project, the Adani group is exploring other options. Media reports suggest the group is in talks with the Exim Bank of Korea and some Chinese banks to raise over $one billion to part-finance the building of the coal mining part of the project on which an estimated $7.8 billion would be spent.

However, the more intriguing story is how Gautam Adani, the business magnate who is perceived to be Prime Minister Narendra Modi’s blue-eyed boy, could have dared to think as big as he does. He clearly has ambitions to become not just one of this country's biggest tycoons but one who hopes to lead India's biggest multinational conglomerate.

Gautam Adani has indeed come a long way from the time he dropped out of college. He turns 53 this June. A quarter century ago, he had given up studying in a morning college in Mumbai to start trading in diamonds and plastics. After a successful stint as a diamond trader, he moved to Gujarat's capital Ahmedabad in 1981 to help start a cousin’s firm to trade in poly-vinyl chloride (PVC).

He set up a commodities trading venture in 1988 under Adani Exports, and was successful enough to start hitting the headlines of business papers in his home state. By the mid-1990s, Adani's business successes starting attracting attention, including attention of the unwelcome kind.

Eighteen years ago, in 1997, he was allegedly abducted by underworld don Fazl-Ur-Rehman alias 'Fazlu Rehman', who is currently lodged in Tihar Central Jail in New Delhi. Rehman and two of his accomplices were accused of kidnapping Adani in a car from the outskirts of Ahmedabad and subsequently released him after extorting ?15 crore as ransom. Those accused were reportedly acting on behalf of Dubai-based gangster Irfan Goga.

Rehman has been named as the prime accused in several other high profile extortion cases in Ahmedabad, Delhi and Mumbai, most of them involving businessmen and industrialists. However, he remained out of the clutches of the law after he shifted his base to Dubai. In August 2006, the Delhi police arrested him from Bihar at a place near the India-Nepal border.

Gautam Adani currently heads a group of companies which comprises India's biggest private operator of ports as well as the country's largest private producer of electricity. In addition, the Adani group has substantial interests in a variety of sectors: coal mining, oil and gas exploration, gas distribution, transmission and distribution of electricity, civil construction and infrastructure, multi-modal logistics, international trade, education, real estate, edible oils and food storage.

His companies currently trade in over 30 commodities with at least 28 countries. Over the period of a year till September 2014, the market capitalisation of companies in the Adani group (or the prevailing market price of the companies' equity shares multiplied by the total number of shares) zoomed by more than 250 per cent! The Ahmedabad-based businessman had a personal wealth of $ 7.1 billion (or ? 43,000 crore) at the end of September 2014, according to Forbes magazine.

More than his undoubtedly impressive record of corporate conquests, what has attracted considerable attention to Adani is his proximity to Prime Minister Modi. This is hardly surprising. One needs to just search the internet to find a picture that told the proverbial story of a thousand words, a photograph that was splashed across India's newspapers and websites on 22 May 2014.

The photo depicted Modi leaving Ahmedabad, the biggest city in Gujarat, the state where he had been Chief Minister for nearly 12 years from October 2001 onwards, to travel to New Delhi to be sworn in as Prime Minister of India. His stretched hand waving (presumably to an adulatory home crowd), the colourful logo of the private aircraft he was about to enter was clearly visible in the picture. It said: Adani.

Gautam Adani's impressive rise as a businessperson has largely coincided with Modi's stewardship of the state. This close relationship was forged on a matrix of mutual interests which also became a template of sorts for Modi’s vision for economic development through an industry-led network of corporate-government interactions, often called the "Gujarat model".

Over a period of 12 months from the time Modi was officially declared the Bharatiya Janata Party's prime ministerial candidate on 13 September 2013, the market price of the share of an important group company, Adani Enterprises, jumped from ?5 to ?786 or a whopping 265 per cent. Over a decade, the Adani group's turnover rose more twenty-fold from ?3,741 crore in 2001-02 to ?75,659 crore in 2013-14.

This special Modi-Adani bond, chronologically charted , can be traced back to 2002, the year Gujarat witnessed gruesome communal riots between Hindus and Muslims. After certain businesspersons affiliated to the apex chamber of commerce, the Confederation of Indian Industry (CII), criticised Modi, a group of local businessmen led by Adani, established a rival organisation called the Resurgent Group of Gujarat (RGG) and threatened to leave the CII.

Adani pledged a sum of ?15,000 crore for the first Vibrant Gujarat summit (that took place in September-October 2003). He thereafter cemented his association with Modi and became his ardent supporter, lobbying for him in India and abroad.

In March 2013, after it became evident that Modi would be unceremoniously dropped as a keynote speaker at a public function organised at the Wharton School of Business in the United States because of pressure from academics and students opposed to him, the Adani group, one of the main sponsors of the event, withdrew its financial support.

Critics of Modi allege that the cosy relationship between him and Adani has enabled the latter to bag many lucrative deals in Gujarat. When Modi was Chief Minister of Gujarat, large tracts of land were given to his group at throwaway prices (ranging between ?one to ?16 per square metre) to set up India's biggest private port at Mundra on the west coast in violation of environmental norms. Media reports that have not been challenged point out that the Adani group won 30-year-leases for getting 7,350 hectares around Mundra for as little as one cent a square metre and then re-let the land for $11 per sq.m.

The area also hosts one of India's biggest special economic zones (SEZs) which is supported by the country's largest private railway network. The land in the area was re-sold and/or leased by the Adani group to various other companies, including public sector undertakings like the Indian Oil Corporation (IOC), the Oil and Natural Gas Corporation (ONGC) at rates in excess of ?600 per sq metre. The group was also exempt from payment of all stamp duties for the thousands of acres of land it acquired for the SEZ.

Despite Adani's political connections, law enforcing agencies have periodically sought to initiate action against companies in his group. On 2 January 2014, the Economic Times reported that the Mumbai unit of Directorate of Revenue Intelligence (DRI) had started an inquiry into allegations of "over-valuation" of capital equipment that had been imported for power projects.

The agency, part of the Ministry of Finance, is reportedly "investigating gross overvaluation of import of equipment and machinery by various entities of (the) Adani Group from a (United Arab Emirates) UAE-based intermediary", according to an internal report of the DRI that had been prepared in December 2013. This report alleges that "an amount of ?2,322.75 crore has been siphoned off abroad by (the) Adani Group by resorting to over-valuation of imports in the name of various group firms " .

The Press Trust of India (PTI) reported on 18 May 2014 (two days after the results of the general elections were announced) that the DRI had slapped a ?5,500-crore show-cause notice on companies in Adani group for alleged over-valuation of imports of capital equipment. The show-cause notice was issued against three companies in the group: Adani Power Maharashtra, Adani Power Rajasthan and Maharashtra Eastern Grid Power Transmission Company, besides a contracting firm.

On the day the results were declared and it became known that the BJP led by Modi had won a majority of seats in the Lok Sabha, on 16 May 2014, Gautam Adani had proudly announced that a company in his group, Adani Ports, had agreed to acquire a port at Dhamra, Odisha, for the equivalent of $0.92 billion or nearly ?6,000 crore.

The construction of the port at Dhamra (which was earlier being built by a joint venture between the Tata group and Larsen & Toubro) has been opposed by environmental activists, including those affiliated to Greenpeace, for threatening mangroves and the nesting ground of hundreds of thousands of endangered turtles.

The Adani group had earlier been censured for paying bribes to gain undue favours for its iron ore mining interests in Karnataka. In July 2011, in his report exposing illegal mining in Karnataka, the then Lok Ayukta (or people's ombudsman) of the state Justice Santosh Hegde had indicted Adani Enterprises for having paid "bribes for getting undue favour for illegal exports:.

Adani Enterprises has port facilities in Karnataka which, the report alleged, were used for illegally exporting iron ore. The Lok Ayukta accused the company of forging permits to transport iron ore. On 30 July 2011, following media reports about the Lok Ayukta’s adverse remarks, the market capitalisation of Adani Enterprises fell by over a fifth or ?22,177 crore in two and half hours of trading. That day, the prices of the shares of two other group companies, Adani Power and Mundra Port & Special Economic Zone (MPSEZ), fell by over 11 per cent and over 7 per cent respectively.

On 24 November 2014, E.A.S. Sarma, who retired from the Indian Administrative Service as Secretary, Economic Affairs, in the Ministry of Finance and who is now a noted anti-corruption crusader, wrote a letter to the heads of various central investigating agencies (including the Central Vigilance Commission, the DRI and the Central Bureau of Investigation) asking them to investigate allegations of money laundering against companies in the Adani group.

Sarma pointed out that since the Supreme Court appointed Special Investigation Team on black money is investigating the allegations, the SBI should not have signed the MoU to advance a loan of $one billion loan to the group. He pointed towards several newspaper reports in India and Australia that had raised questions about the ownership structure of Adani group companies (that are meant to execute the project) and their links to offshore accounts.

Earlier, on 30 March 2012, a report of the Comptroller and Auditor General (CAG) of India was tabled in the Gujarat legislative assembly that pulled up a state government company, Gujarat State Petroleum Corporation (GSPC), for extending undue benefits to Adani Energy. The report said that poor management by GSPC had led to a loss of over ?5,000 crore to the exchequer.

The Gujarat government company had bought natural gas from the open market and sold it to the Adani company at a price lower than the purchase price. The CAG estimated that Adani Energy had received "undue benefit" to the tune of ?70.54 crore in the process.

Then, on 26 July 2014, the CAG again slammed the Gujarat government in five different reports for severe mismanagement of the state's financial resources. The reports highlighted financial irregularities amounting to more than ?25,000 crore, including undue benefits worth ?1,500 crore to certain companies, one of which is in the Adani group. The CAG said the non-monitoring "of the construction quay in phase 1 of Adani Group-owned Mundra port led to short recovery of ?118.12 crore."

On 27 February 2010, The Hindu had reported that the anti-corruption branch of the CBI in Goa had arrested Rajesh Adani, Gautam’s brother and Managing Director of Adani Exports Limited in Ahmedabad in connection with a criminal case alleging undervaluation of imports of naphtha and furnace oil in 2005-06 that had caused a loss of ?1.07crore to the exchequer.

A criminal case was registered against ten officials of the customs and central excise departments working in Goa. They were accused of being part of a conspiracy to deliberately undervalue the imports.

For Part II see: http://www.thecitizen.in/NewsDetail.aspx?Id=3378&The/Incredible/Rise/and/Rise/of/Gautam/Adani:/Part/Two