By Dr. Soma Marla
Forbes, world’s financial news daily declared (September, 2022), Gautam Adani as the second richest in global rich list, with a fortune estimated to be $155.5 billion on Forbe’s Real time billionaire rankings. Then during this week credible American financial investigating firm Hindenburg Research revealed a saga of stock manipulations and accounting frauds of Adani empire, India’s biggest crony capitalist. As result, by 31st January morning Adani group had lost around more than Rs. 5.2 lakh crore( $65 billion) and lost nearly 25 percent of its market value of shares of his biggest companies plummeting steeply following the release of the nearly 160 page long report of Hindenburg Research.
Generous Loans and looting
During the last nine years Modi government has privatized and gifted away several public assets starting from sea ports, airports, highways, coal imports, power plants, cement, gas and solar projects to Adani group at throw away prices even with single tenders away from any potential competetetors. Adani was facilitated with huge funds from public institutions like SBI and LIC to acquire these assets. These public sector banks gave away loans running in to tens and thousands of crores of rupees on mere ‘ GOOD WILL’ of Adani group, without seeking any security guarantees. This became possible on account of Adani’s closest nexus with the Indian regime. Can we imagine the same treatment mooted to a self employed small entrepreneur or farmer seeking a petty crop loan.
The massive fraud potentially can potentially jeopardize the entire financial system of the country. According to media reports, losses running in to thousands of crores of rupees of SBI and LIC which from financed huge projects of Adani group. Of the more than Rs. 2 lakh crore ‘debt’ (based on the estimate of financial year ending March 2022) of Adani, 40 percent is from Indian public sector banks and financial institutions including LIC and SBI. LIC alone had invested Rs. 77,000 crore in the inflated shares of Adani of which Rs. 23500 crore had already been lost within four days By 30th January! State-owned banks have lent twice as much to the Adani Group as private banks. Obviously, the hard-earned savings of millions of Indian depositors are at risk. However, Adani group could not provide substantial answers to point wise charges of Hindenburg and termed them malicious aimed at thwarting rising India success story. It appears Adani is trying to sidetrack the serious fraud and loot by draping national flag under nationalism.
Nexus between Crony Capitalism and BJP regime
Adani bubble, which is based on financial speculation and stock jobbing together with the gobbling up of public wealth and bank money, was further facilitated by his close proximity to state power over the last two decades. In 2001, Adani was a small business man compared with Ambani, whose wealth at that time was 500 times that of Adani. Since then, with patronage from Modi, Adani transformed as India’s biggest corporate and as world’s third richest billionaire. Being a college drop-out, starting his career by setting up a commodity trading business in the 1980s, it was the liberalisation-globalisation regime of the 1990s that enabled Adani to set up the Mundra port in 1995. In 2002, the total worth of the main holding company of Adani was just $70 million. But within a span of just a decade, Adani could gallop his wealth to $ 20000 million (a growth of 300 times), quite unprecedented in corporate history, according to Forbes! In eight years of corporate-saffron regime of Modi Adani’s wealth has reportedly grown by 800 percent. In 2019, for example, the group bought all of a batch of six airports being privatised by the government, after rule changes allowed a company with no prior experience to swiftly become one of India’s largest airport groups. Adani borrowing from banks is based on one business to finance expansion into new ones. Adani developed a port and special economic zone in Mundra, Gujarat, that was to grow into one of India’s largest and a hub of his business empire, with facilities like a coal-to-plastic factory and a copper smelter on site. Adani has pushed heavily into renewable energy, Adani Greens, aligning himself with the government’s ambitious decarbonisation goals, while remaining one of India’s biggest operators of coal-fired power plants.He is collaborating with French firm ‘ Total Energy’ to produce ‘ Green Hydrogen’ with an investment of $ 20 billions.Recently, he acquired a major share in the leading broadcaster NDTV — a move to silence liberal journalism and further shrink freedom of free speech.A blatant act to strengthen cronyism.
Finance Capital and Speculation
Adani, India’s biggest crony capitalist, could very fast balloon his financial corporate empire solely due to Modi regime’s far-right neoliberal policies such as liberal tax, labour and environmental regulations that enabled him to buy up precious national assets including land, natural and mineral resources, factories and stocks at throw-away prices while remaining mainly in the sphere of speculation. He never invested nor involved in manufacturing. All his borrowed investments were in shady companies, speculation and trading in stock markets. Unproductive capital Investments to generate quick wealth is Adani’s Mantra. As finance capital being unproductive is chiefly responsible for financial crises like ‘Housing bubble’ and resulting global economic meltdown in 2007. Today, Adani’s assets are becoming “toxic” in the stock market, and are facing massive selloff.This inturn resulting in huge losses to SBI and LIC. Union government should not try to rescue collapsing Adani group by offering ‘Bail outs’ from Union exchequer. Eventually, the losses would be born by crores of small depositors. Public should strongly oppose any future bailouts to rescue crony capitalism from crisis.
Trade unions and people should fight against neoliberal policies of present government against privatization of public assets at throw prices to crony capitalists to avert possible financial crisises such as present burst of Adani finance bubble to protect economy and common people from resulting shocks.
Dr. Soma Marla,Principal Scientist,ICAR,Delhi
1 February 2023