Even as Gautam Adani-led Adani Industries is being touted as BJP prime ministerial candidate Narendra Modi’s “favorite” industrial group, the conglomerate continues to face roadblocks from the outgoing UPA government.
Earlier this month, the finance ministry objected to its Rs 4,000 crore joint venture project with the Gujarat government for a liquefied natural gas (LNG) terminal within Adani-promoted Mundra Special Economic Zone (SEZ).
As a direct fall out of this objection, the Board of Approval (BoA) for SEZ in its meeting held on April 3, has kept the final approval to the proposal “in abeyance”. This comes at a time when the stock valuation of the Adani group has touched an all-time high.
Documents of the IMG (inter-ministerial group) with The Indian Express show that the Adani group had requested co-developer status for the Gujarat government-led Gujarat State Petroleum Corporation (GSPC) Ltd for establishing an LNG terminal, storage and re-gasification facilities.
At the BoA meeting, the revenue department pointed out that project work has already started without its approval, which is mandatory since BoA gives all sanctions to SEZs. The department of revenue (DoR) wrote to the BoA saying, “Undertaking any activity in an SEZ without prior approval of the board tantamount to be unauthorised operation and BoA may like to look into this aspect.”
Besides, DoR has also raised objections about the proposal saying that the SEZ benefits are used by Adani to sell the gas outside SEZ, without any actual export.
The finance ministry has cited a February 2014 letter from Adani, informing that they are “executing the work by paying duties to avoid loss of time. Out of the total capacity of 5 MMTPA, 3.8 MMTPA will be supplied to different SEZs.”
The finance ministry, explaining its stand on the business model, said, “There appears no justification for providing duty concessions on inputs or capital goods that will be used for these operations…the proposal does not envisage any physical export out of the country…further, the location of the SEZ, whether in processing or non-processing area, has also not been clarified…therefore, any decision of the BoA must address these issues in relation to the proposal.”
Previously, the expert appraisal committee of the ministry of environment and forest (MoEF) had given consent to the project in February 2014.
The Adani group and GSPC had entered an agreement in August 2013 for establishing a 2.95 lakh square meter facility; the proposal was also cleared by Cabinet Committee on Investments.