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With over a dozen law suits pending against the Gautam Adani-promoted Adani Ports and Special Economic Zone (APSEZ), there is gloom hanging over India's largest multi-product economic zone. Spread over 6,473 hectares, it has been taken to court on charges ranging from violation of environmental norms to destruction of natural resources. The SEZ, in Mundra in the Kutch district of Gujarat, encompasses the Mundra Port and the Adani Power Plant that generates 4,620 Mw of power. As a result of the litigations, development of infrastructure are at a standstill now, hurting both the units already operating there as well as APSEZ's plans to expand to over 15,000 hectares.
The Gujarat High Court had held in January that APSEZ neither had a valid environmental clearance nor qualified for a 'deemed environment clearance' as claimed by the company. The court directed units in the SEZ to down shutters. However, the constituents, which are engaged in businesses like chemicals, fertilisers, agri commodities, crude oil, edible oil and coal, approached the Supreme Court. The court has granted them interim relief and allowed them to continue operations, but restricted any expansion or construction. The Supreme Court has also asked the Union ministry of environment and forests to take a decision on the green clearance within a month. The ministry's action is awaited.
Cost of proximity?
The woes have perhaps more to do with politics than the economy or the environment. APSEZ has seen investment of over Rs 38,000 crore since its origin as a port project in 1998, and was providing direct and indirect employment to over 10,000 people till the end of November 2013. However, its growth, as that of the Adani group, has coincided with Chief Minister Narendra Modi's rise to power, leading to accusation by the Congress that Adani has been able to proceed with the project without a green clearance because of his proximity to the Bharatiya Janata Party leader. The party also accuses the Modi government of having allotted land for the SEZ at a throwaway price.
These accusations are compounded by villagers, whose wasteland and grazing land have been allotted to APSEZ, alleging environmental violations by the company that have impacted fishing and led to increasing salinity in the groundwater. They complain that waste water from the power plant is destroying forest land. A committee by the forest and environment minister under environmental activist Sunita Narain upheld the claims.
The company denies all charges of violation of environment laws and destruction of mangroves, and claims, on the contrary, that it has worked aggressively for environmental conservation and has "planted mangroves in over 2,000 hectares of land to ensure eco-restoration and diversity". It also lists "water conservation efforts by creation of check dams and providing subsidised drip irrigation equipment" as an activity that has "improved agricultural production coupled with conservation of water".
Is the series of litigations the price for Adani being close to BJP's prime ministerial candidate? The company refutes the theory. "It is naive to argue in this manner. The litigations and our promoter's relations with Modi are independent of each other and are connected in no manner whatsoever," emphasises a spokesperson for the Adani group. An analyst of a leading credit rating firm concurs and says there is no substance in equating APSEZ with the Adani-Modi relations. As for the impact on business, he argues, "APSEZ's revenue mainly comes from the port business, which is not under litigation. It is likely then that there will be no significant impact of litigation on the overall business of the company." Another analyst says that APSEZ's debt has reduced over the past one year, and with the Supreme Court allowing units within it to continue functioning, the litigations will not further impact the company.
A lot now hinges on the decision that the forest and environment ministry takes on the environmental clearance following the Supreme Court's directive. "This will pave the way for further and faster development. APSEZ is progressing as planned, and will continue to grow as it has in the past," the company says when asked about the prospect of business under such circumstances.
The company spokesperson adds, "All existing units in the SEZ, the power project and the port are functioning normally. There is no impact of litigation on the operational performance of the company as evident from the recent performance. However, large investments in SEZ by prospective investor/companies are eagerly awaiting the resolution of the impasse related to the environment clearance." APSEZ maintains that several large companies plan to set up units at Mundra, but are hobbled by the economic slowdown and the ambiguity over the environment clearance.
Local resistance
While, APSEZ is upbeat over its business prospects notwithstanding the court cases, the villagers are an aggrieved lot. "Despite gross violation of environment laws, APSEZ is being allowed to go scot-free. It should be punished and blacklisted by the state and central governments for destruction of mangroves and natural forests," says Gajendrasinh Jadeja, sarpanch of Navinal village in Mundra. It was on Jadeja's petition that the Gujarat High Court banned construction and development activities in May 2012. Jadeja says that his village, and half a dozen others, is confronted with ecological problems such as destruction of mangroves and the levelling of natural sand dunes, which, in turn, have resulted in ingress of sea water in arable areas. "Till last year the ground water in my fields was sweet, but now it has become saline and unfit for farming," complains Jadeja.
Asked about these allegations, the company spokesperson responds, "Our approach is to take people in confidence and work with them to resolve genuine issues which are likely to affect them. We have always complied with the laws in place and have taken appropriate steps to balance growth with conservation. The Adani Foundation is working closely with the villagers residing in the surrounding area to improve their livelihood." He then describes how the group is working to improve the lives of fishermen by providing them equipment for fishing, temporary shelters and potable water. It has also set up a school at Bhadreshwar to provide free education to the children of fishermen. In addition, says the spokesperson, the group is working on reviving grazing lands for cattle and providing fodder during lean periods to ensure that animal productivity does not suffer.
The fact that Adani has been close to Modi has provided grist to the rumour mills and partly fuelled the controversy over APSEZ too. That the Adani group's meteoric rise from revenue of Rs 3,300 crore in 2000 to over Rs 50,000 crore in 2014 has coincided with Modi's rise to power has not escaped the detractors of the two men. Adani has been sponsoring several state government events like the flagship Vibrant Gujarat business summits and the popular kite and Navratri festivals. Last year in March, there were whispers when the group withdrew its "platinum sponsorship" of the Wharton Indian Economic Forum. The reason? They say it came after Modi was dropped as the keynote speaker at the event following protests in the United States.
EVOLUTION OF APSEZ
1998: Gujarat Adani Port incorporated to develop a private port at Mundra
Oct 2001: The port commences commercial operations
Nov 2003: Mundra Special Economic Zone incorporated to set up SEZ at Mundra
Apr 2006: The SEZ merges with the port and the company is renamed Mundra Port and Special Economic Zone to reflect the nature of business
Nov 2011: Board of the company approves proposal to change company's name to Adani Ports and Special Economic Zone
APSEZ FACT FILE
INVESTMENT
Total*: Rs 38,787.07 cr
Domestic: Rs 38,333.36 cr
FDI: Rs 453.71 cr
BY DEVELOPER/ CO-DEVELOPER
Internal sources: Rs 37,169.37 cr
FDI: Rs 7.82 cr
BY UNITS
Internal sources: Rs 1,163.99 cr
FDI: Rs 445.89 cr
EMPLOYMENT
Total: 10,221
Direct: 3,468
Indirect: 6,753
*as on 30-11-2013
