Watch: AAP Leader Ashish Khetan Alleges “Massive Scam” Involving Adani, Ambani and Essar

Almost all the companies named in the DRI's investigation have followed a similar process of questionable transactions to siphon off public money, the AAP leader claims.

Note by Ashish Khetan

In light of the subsequent legal developments, I am retracting my assertions in this interview. Since the cases in question are sub-judice and at various stages of adjudication before different legal fora including the Supreme Court, I have faith that judicial determination will ascertain the truth of the matter.

February 15, 2021

Citing an investigation conducted by the finance ministry’s lhipartment of Revenue Intelligence (DRI), Ashish Khetan, vice-chairman of the Dialogue and Development Commission of Delhi, has written to Prime Minister Narendra Modi demanding swift action in what he says is a massive scam in which major Indian power companies have been siphoning off public money offshore. Khetan claims that the report was leaked to him by a whistleblower, but has not given further details.

The detailed investigation report, accessed by The Wire, names companies of the Adani group, Ambani group, Essar group and even public sector companies like the National Thermal Power Corporation Limited. It accuses influential players in the power sector of hatching “a conspiracy to siphon off money abroad by way of indulging in over-valuation in imports for projects subject to low or nil rate of Customs duty, so that the incidence/burden of duty on the over-valued amount i.e cost of fund transfer is minimal.” It also includes original invoices and contracts from all involved parties.

Modus operandi

Almost all the companies named in the DRI investigation appear to have engaged in a similar process of questionable transactions. While the imports were shipped directly from Original Equipment Manufacturers (OEM) to India, the invoice was routed through intermediary front companies usually based in tax havens to make it appear as if the goods were supplied by these intermediary agents instead of the OEMs, to enable inflation in invoices. These front companies were allegedly set up by the power manufacturers themselves in countries like Dubai, British Virgin Islands, Hong Kong, and Malaysia. Back-to-back contracts signed between the OEMs and the invoicing agents, and these agents and the contractors, have been included in the report. The report has also found that these contracts were signed by the same person, and that these were sham transactions planned and conceived in India itself.

Adani docs

Table from DRI report: Electrogen Infra FZB (EIF) is an intermediary invoicing agent created by the Adani group in the UAE. PMC is an Ahmedabad based contractor owned by the Adani group, and HHICL is the OEM.

The DRI report dated 15th May, 2014 which concluded that “various entities of Adani group were indulging in gross over-valuation of imported goods (zero or low duty rated) to siphon off money abroad from public listed companies,” details the modus operandi as follows:

“…for power sector imports (Power generation: – Zero % duty and Power transmission: – 5%o Basic Custom Duty), while the goods from various vendors (mostly South Korean & Chinese) are sent directly to India, the documents are routed through an intermediary entity created by them in the UAE, viz. M/s. Electrogen Infra FZB, u’ho raised inflated invoices (inflating the values in original invoices of OEM several times) on the Indian company, against which money is remitted to UAE. The activities of M/s Electrogen Infra FZE, UAE are apparently controlled and managed by the Adani Group through one or more of its representative firms and/or personnel. Intelligence further suggested that from UAE, while the actual invoice value is remitted to respective OEMs, the extra amount is routed to the Mauritius account of the parent company of M/s Electrogen Infra FZE t.e. M/s Electrogen Infra Holding Pvt. Ltd.”

The over invoicing of imports, including equipment and machinery, was done so that the difference between legitimate cost and cost to public could be passed on to power consumers. Power is eventually consumed by common people and they pay for the charges that these energy companies claim.

“Double-whammy” for the common man?

All power companies are bankrolled by public sector banks. All their imports are financed by these banks, and hence it’s the money of the common man saved in these banks that goes into these transactions, says Khetan. As a result of over-invoicing, the power companies are also able to inflate tariff rates which in turn becomes an additional burden on the consumer as they have to pay more every month.

Khetan says that Gautam Adani’s brother Vasant S Adani, whose name appeared in the Panama papers leak, needs to be probed. He alleges that officials of public sector companies were involved in this scam and that he has written to Modi informing him that all relevant papers are with the CBI, which had also registered a preliminary enquiry into the matter.