Simon Mohsin – Political and International Affairs Analyst
Gautam Adani, a 62-year-old businessman and head of the world’s largest conglomerate, is again in the spotlight. In 2023, the Hindenburg investment company accused him of being involved in “the largest con in corporate history.” As a close friend of Indian Prime Minister Narendra Modi, Adani is now facing scrutiny from the American justice system.
On November 20, Adani was indicted by a federal court in New York on fraud and corruption charges. The allegations suggest that he paid over $250 million in bribes to Indian officials to secure lucrative public contracts within the solar energy sector. The political opposition in India is calling for the immediate arrest of the billionaire and has accused Prime Minister Modi of “protecting” his associate. While the Prime Minister has not issued any statements regarding the situation, the news represents a significant setback. The two individuals have collaborated closely for more than two decades, leading the opposition to label them “Modani” due to their strong alliance.
The Narendra Modi administration has downplayed the allegations of bribery involving Adani, characterizing them as a ‘legal matter concerning private individuals and entities, as well as the US Department of Justice’s jurisdiction.’ This stance lacks sincerity, especially in light of historical precedents where Indian authorities have intervened against corporations implicated by US authorities for bribery activities within India. Notable examples include the cases involving Louis Berger and Cognizant, which serve as relevant precedents for governmental action in similar contexts.
The Adani Group, which is recognized as one of India’s largest and most influential conglomerates, has emerged as a fundamental player in the nation’s global economic aspirations. Its diverse portfolio encompasses various sectors, including power projects in Sri Lanka, mineral extraction in Australia, and a port operation in Israel, demonstrating Adani’s extensive international presence. Adani Group’s expansion has notably bolstered India’s economic relations with neighboring nations such as Bangladesh and Sri Lanka. This development aligns with India’s strategic economic diplomacy to reinforce its influence within the South Asian region, particularly as it navigates the competitive dynamics with China for regional supremacy. However, the expansion of this conglomerate, which maintains close ties to India’s ruling Bharatiya Janata Party (BJP), has elicited concerns regarding its potential implications for India’s foreign policy and overall reputation on the international stage.
Adani’s journey as a successful businessman closely follows Prime Minister Narendra Modi’s rise in Indian politics. Their paths to success align in ways that suggest there is more than just coincidence behind their achievements. Until recently, Gautam Adani was the second richest person in the world, just behind Elon Musk, according to the Bloomberg Billionaires Index. However, everything changed when a short-selling firm released a Hindenburg report on January 24, 2023. This report accused Adani’s companies of manipulating stock prices, leading to a significant crisis for his business empire. Just a few months earlier, in September 2022, Adani’s wealth had reached $146.8 billion, but since the allegations emerged, the Adani Group has lost about $100 billion in value.
Adani has benefited from numerous significant projects and government support over the years. The company has been awarded various projects and trade deals with Sri Lanka and Bangladesh, allegedly due to Prime Minister Narendra Modi’s interventions. In 2015, Modi visited Bangladesh, during which Adani Power and Reliance Power Ltd. signed separate memorandums of understanding (MOUs) with the Bangladesh Power Development Board (BPDB) to implement power projects in the country. Later, in August 2015, Adani signed another MOU with the BPDB to generate thermal power in India and supply it to Bangladesh. Subsequently, Adani established the Godda thermal power plant in Jharkhand, using land from local communities, allegedly with support from the police and the bureaucracy under the state’s BJP government. The Union government, led by Modi, amended laws to permit standalone power projects like Adani’s Godda power plant to operate within a Special Economic Zone. According to a report by The Washington Post, the contract between the government of Jharkhand and the Adani Group is expected to result in a loss of approximately $240 million per year for the state. In comparison, Adani could gain more than $1.1 billion.
The Adani Group’s trajectory is marked by serious allegations, including stock manipulation, environmental violations, and an array of conspiratorial actions, culminating in recent claims of investor and securities fraud. The latest controversy surfaces a year after a report from the Organized Crime and Corruption Reporting Project (OCCRP) suggested that the Adani family had been leveraging offshore funds as of August 2023. In January 2023, Hindenburg Research, a U.S.-based short-seller, accused the conglomerate of engaging in stock manipulation, executing an accounting fraud scheme, improperly utilizing offshore tax havens, and maintaining levels of debt deemed unsustainable. Historically, the Group has also faced scrutiny for alleged preferential regulatory treatment and significant environmental degradation.
The Adani Group’s close ties with the Indian government are facing increasing controversy due to allegations of corruption and lack of transparency in its international dealings. In Sri Lanka, renewable energy contracts awarded to Adani have led to protests, with accusations that India pressured the Sri Lankan government. Critics suggest these contracts are linked to Sri Lanka’s debt repayment to India. The group faced criticism in Kenya over a $1.8 billion bid to expand Jomo Kenyatta International Airport, leading to accusations of violating public-private investment laws. As a result, Kenyan President William Ruto announced the cancellation of these contracts, damaging Adani’s reputation further.
Similar concerns have arisen about the Adani Group’s $1.7 billion power project in Godda, Jharkhand, which supplies electricity to Bangladesh. The project’s pricing is significantly higher than domestic alternatives, leading to criticism from the Bangladeshi government and the public. There are questions about the selection of Adani for the project, which is speculated to be politically motivated. Bangladesh has reduced its power purchases from Adani due to lower winter demand and disputes over outstanding payments. The agreement for power supply, established in 2017 under former Prime Minister Sheikh Hasina, is part of a 25-year contract for a $2 billion power plant.
The agreement between Adani and a governmental body was finalized in 2017 during the administration of Prime Minister Sheikh Hasina, who was recently removed from office following a popular uprising and allegations of extensive corruption. The 1,600-megawatt power plant, which relies on costly imported coal, commenced operations last year, contributing approximately 10% to Bangladesh’s overall energy consumption. An interim government committee in Bangladesh is investigating the Adani contract and six additional power agreements to ensure the inquiries are robust enough for acceptance in international negotiations and arbitration. Despite these challenges, Bangladesh will continue to meet its payment obligations for the electricity imported from Adani. The company recently reduced its supply by half due to payment delays.
The power agreement between India’s Adani Group and Bangladesh is expected to encounter heightened scrutiny shortly, particularly in light of a recent indictment issued by U.S. authorities against Gautam Adani and several high-ranking officials within the Adani Group. This legal development may raise concerns regarding compliance and geopolitical risks associated with the partnership. The geopolitical drawback is more extensive than just within South Asia.
India’s foreign policy currently faces a challenge. On one side, Adani’s growth overseas boosts India’s economic power and geopolitical strategy, particularly in South Asia, where India wants to counter China’s influence. Conversely, the Indian government’s links to Adani’s controversial activities abroad could harm India’s global reputation. If foreign governments and citizens start seeing Indian economic expansion as linked to corruption and political manipulation, it could deter future investments and damage India’s image as a trustworthy partner in global trade. As Adani’s business expands, India must find a way to use the company’s global reach while managing the political and reputational risks tied to its controversial growth.
