Adani ripples in the neighbourhood

FOR several decades of the 20th century, American diplomacy in its neighbourhood was identified with a US multinational called the United Fruit Company (UFC). How the UFC influenced the economies of Central America and even orchestrated a coup with the CIA in Guatemala to protect its interests is a story of ‘banana republics’ too well-known to recount here. India now has its own version of this story, with a twist in the tale.

Over the last few years, as the Adani juggernaut struck deals in the neighbourhood, apparently with help from the topmost echelons in Delhi, the government shook off the controversies and saw this as a no-brainer in a tough region where it has to rival China for influence and money power. The deals were controversial. Their review in Dhaka and Colombo after dramatic changes of government in both capitals, with the US indictment of Gautam Adani and others in his companies on charges of bribery strengthening public and political sentiment against them, should make it clear they were never cool.

In Bangladesh, Adani Power Jharkhand Ltd, which sends electricity to that country from a coal-fired thermal plant in the specially created Special Economic Zone (SEZ) in Godda (Jharkhand), has been in the eye of a storm since December 2022. Seven years earlier, during his June 2015 visit to Dhaka, PM Narendra Modi pushed to “widen the cooperation” between the two countries in the power sector. According to the joint statement from the visit, Modi, lauding the efforts of Sheikh Hasina, then Bangladesh PM, to achieve a higher installed power capacity, “conveyed that India can be a major partner in achieving this goal and many Indian corporates have the capacity to cooperate with Bangladesh in this endeavour”. He requested Hasina to facilitate “the entry of Indian companies in the power generation, transmission and distribution sector of Bangladesh”.

Gautam Adani was in the PM’s delegation. In August 2015, Adani Power Limited signed a Memorandum of Understanding (MoU) with Bangladesh Power Development Board (BPDB) for exporting 1,600 megawatts of electricity. In 2017, the deal was finalised and signed in Bangladesh under the Quick Enhancement of Electricity and Energy Supply (Special Provisions) Act, 2010, enabling Dhaka to bypass the requirement of floating tenders.

In India, Jharkhand silenced local protest to ‘secure consent’ from landowners across several villages in Godda district. Two months ahead of the 2019 elections, the Central Government fast-tracked approval for the SEZ, which would enable Rs 14,000 crore to export the electricity generated at the plant. When Hasina visited India in August 2022, Adani called on her at Delhi, tweeting later that the plant would begin the transmission of 1,500 MW from Bijoy Dibosh, December 16, Bangladesh’s liberation anniversary.

With the terms of the agreement shrouded in secrecy, the Adani-BPDB agreement was hardly known until a Washington Post report revealed that Bangladesh would purchase Adani electricity at an exorbitant price. Outrage at the one-sided agreement fed into the public anger against Hasina. Ahead of the 2024 elections, some media reports projected Hasina’s agreement to the deal as quid pro quo for the Modi government’s continued support. Inevitably, it was one of the first bilateral deals to come under the scanner after Hasina’s ouster.

In Sri Lanka, Adani made a trip to Colombo in October 2021 to meet then President Gotabaya Rajapaksa soon after Adani Ports signed a deal to develop and run Colombo Port’s West Container Terminal. By then, Sri Lanka’s economic woes had surfaced, and the President was being advised by insiders, including his brother Basil, to reach out to India for assistance. Gotabaya recorded the Adani visit as a meeting with “an old Indian friend”. The head of the Ceylon Electricity Board announced that the visiting Indian tycoon was interested in green energy investments. Adani was flown to the north-western Mannar district in a Sri Lanka Air Force plane to inspect a wind farm.

Six months later, in March 2022, Sri Lanka’s The Sunday Times was the first to report that the country had signed an MoU to set up two renewable energy projects in Mannar district and at Pooneryn in Killinochi district. The terms of the agreement, signed between the Lankan Government and the Adani Group on March 12, were not made public. The MoU was signed at a time when the Sri Lankan economy was in meltdown, the streets were filled with protesters and India was helping Colombo with credit lines and other financial assistance to tide over a full-blown crisis. In a down-and-out country, news of the Adani deal added to the public sentiment that India’s assistance came with a price tag. Later in 2022, that sentiment got a new wind when the Ceylon Electricity Board chairman revealed that he was ordered by President Rajapaksa to sign off on the unsolicited project because “he [Rajapaksa] was under pressure from Modi”. Rajapaksa denied the statement attributed to him. The official retracted the statement and resigned, but the matter was hardly forgotten.

In 2023, more outrage followed the Sri Lankan Government's announcement that it would convert the project into a ‘government to government’ agreement to get around the rule of competitive bids for such projects. Earlier this year, then President Ranil Wickremesinghe's government announced a 20-year $440-million agreement with the Adani Group for the proposed wind farms. However, environmentalists and local residents have petitioned the Supreme Court against the project, citing a lack of transparency in awarding the project and high tariff rates.

Prior to his election, President Anura Kumara Dissanayake had declared that he would scrap the project. At the last court hearing on October 15, he requested that the hearings be put off until after the parliamentary elections, when his government could review the deal. The next hearing is reported to be in March 2025. Meanwhile, last week’s damaging indictment may hurt Adani’s Colombo port project too. The US Development Finance Corporation, which had announced in 2023 an investment of $550 million in the West Container Terminal, has said that it is still “conducting due diligence” of the project.

For India, the damage is more than just reputational. Instead of strutting in lockstep with a businessman, Delhi mandarins should have seen the risks of nurturing an Indian ‘United Fruit Company’ to the country’s national interest, especially its strategic objectives in the neighbourhood. Instead, they shrugged their shoulders and called it a win-win. Many in India believe that the Modi government can do a deal with Trump that will let Adani off the hook. Maybe, though what it will cost India is not clear. The reckoning, as it unfolds in the neighbourhood, will be even more difficult.