Explaining Adani: why would a billionaire persist with a mine that will probably lose money?

That’s the title of my latest piece in The Conversation, republished on the ABC website. Possible answers

So what could be going on? Perhaps Gautam Adani is willing to lose a large share of his wealth simply to show he can’t be pushed around. Alternatively, as on numerous previous occasions, his promises of an imminent start to work may prove to be baseless.
The third, and most worrying, possibility is that the political pressure to deliver the promised Adani jobs will lead to a large infusion of public money, all of which will be lost.
The $900 million Adani sought from the Northern Australia Infrastructure Facility in 2017 would be enough to keep the project going for a couple of years, without the need for Mr Adani to risk his own money. It now appears that a similar sum might be sought from the Export Finance and Insurance Corporation.

32 thoughts on “Explaining Adani: why would a billionaire persist with a mine that will probably lose money?

  1. From JQ’s The Conversation article “Then there’s insurance. Faced with rejection by every major bank in the world, Adani announced it would fund the project from its own resources. But now insurers, including nearly all the big European firms and Australia’s own QBE, are saying the same sort of thing as the financiers…”

    Linked from there is:

    https://www.afr.com/news/insurers-shun-adanis-carmichael-coal-mine-says-activist-group-market-forces-20181219-h19ale

    “Ten of the world’s top insurance companies, including Australian groups Suncorp and QBE and global insurer AXA, say they won’t insure Indian energy group Adani’s controversial $2 billion Carmichael coal mine in Queensland, an activist group says.

    Market Forces, an anti-fossil fuel activist group backed by Friends of the Earth…”

    That may be, but six financial/insurance companies are currently shown at Market Forces as already working with Adani.

  2. Gore says that (i) in general renewable electricity is cheaper to make than coal-fired electricity, therefore (ii) it makes no financial sense for Adani to mine coal and turn it into electricity.

    But even if (i) is true, (ii) doesn’t follow. Adani probably could not give a fat rat’s clacker about the generalities. What matters to them is whether their specific mine combined with their specific power stations and, especially, their specific electricity contacts, make financial sense to them.

  3. A lengthy detailed article below holding little to nil hope for those doubting the Adani ability to self-finance the Carmichael mine through scams given the doubly contingent “perhaps” and “may” concluding bottom line..

    https://www.newsclick.in/exclusive-adani-power-rajasthan-gains-%E2%82%B92%2C500-Crore-consumers-expense
    02 Jun 2019
    How Adani Power Rajasthan Gains ₹2,500 Crore At Consumers’ Expense
    Regulatory authorities have interpreted rules in ways that have resulted in mounting losses for public sector electricity distribution companies while users are paying higher tariffs.

    …Alleged Over-Invoicing of Imported Coal
    The third issue of significance in the AIPEF applications relates to the allegations of over-invoicing of coal imported from Indonesia that have been raised against companies in the Adani group—among other companies—by the DRI, which these authors have covered extensively elsewhere. These allegations are the subject of a public interest litigation (PIL) petition currently pending in the Delhi High Court. … At present, the DRI’s investigation has run into a roadblock of sorts. (!!! Directorate of Revenue Intelligence) …

    Conclusion

    The April 2017 judgment by the Supreme Court––that had barred payment of compensatory tariffs to power companies on account of a rise in the prices of imported Indonesian coal and had emphasised the principle that the risk of changes in the costs of coal should have been taken on by companies when they chose to bid for the establishment of an electricity generation project and could not later be passed on to power consumers––had then been hailed by one of these authors as having “raised the bar for the Indian power sector.”

    In the two years that have followed, this judgment has in our view been thoroughly undermined by the country’s power generating companies with the complicity of government authorities and regulatory bodies. The Gujarat government set up a panel to examine how the costs of Indonesian coal could still be passed on to consumers despite the Supreme Court’s order. The panel duly did so. These authors had broken the news of its draft formula which was recently ratified by the Central Electricity Regulatory Commission (CERC). Among the beneficiaries is the ultra-mega power plant at Mundra in Gujarat. Now, other power plants that also use Indonesian coal, such as the ones at Kawai in Rajasthan and Tiroda in Maharashtra, have been granted compensatory tariffs using the same Supreme Court judgment as a justification. Incidentally, all these three power plants are owned by the Adani group.

    There is little doubt that if the compensatory tariff order of the RERC is upheld by APTEL, this case will also land up at the Supreme Court. Perhaps at that stage, the highest court of the land may get an opportunity to defend the spirit of its own April 2017 judgment.

    Adani will have to be stopped here then as India is in the bag for Adani. Mainstream politics and finance here or in India won’t do it, so it will be down to people power here.

  4. Afterthought: a business that can use its crony connections to secure subsidies at the consumption end, and a different set of crony contacts and agitprop to secure subsidies at the priduction end, can escape market logic entirely.

    Levitation by corruption opens limitless vistas to the skilled transnational grifter. Perhaps we can look forward to writing large cheques to Adani ventures into supersonic aircraft, nuclear reactors, nutrition supplements, and cold fusion.

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