Unravelling the controversy behind Adani’s takeover of Gangavaram port

Visakhapatnam: Has the Andhra Pradesh government sold its most profitable port to Adani at a loss? Questions have now been raised about how Adani was able to take control of the port in such a short period of time. Former Union secretary writing to the CAG requesting an independent investigation into the acquisition has been a hot topic of discussion lately.

Gangavaram port is located near Visakhapatnam and serves as a gateway to the hinterlands of over eight states in India. In a very short time, the port drew substantial business away from the adjacent Visakhapatnam port, becoming India’s third largest non-major port. Though the promoter, D.V.S Raju (co-founder of Satyam Computer Services), insisted at the beginning of 2009 that it would be “complementary in nature” to the Visakhapatnam port and not a competitor, it acquired the first client from Vizag port, Rashtriya Ispat Nigam Ltd., which operates the Vizag Steel Plant.

Adani’s rise to ownership

Only two years ago, in March 2021, Indian conglomerate Adani Ports purchased a 31.5% minority stake in the Gangavaram port from the US-based firm Warburg Pincus for Rs 19.54 billion. Just weeks later, Adani paid Rs 36 billion for D.V.S Raju’s 58.1% stake in the port, bringing its total ownership share to 89.6%. The remaining 10.4% was held by the government of Andhra Pradesh in exchange for its contribution of 1,800 acres in the 2000s.

A few months later, Adani Ports submitted a proposal that they are looking to acquire the remaining 10.4% stake of Andhra Pradesh as well at Rs. 120 per share. According to the Centre’s disinvestment policy, a government has to follow a competitive bidding procedure to sell off its stake. What happened next is interesting.

However, what startled everybody was how the Andhra government sold its stake in Gangavaram port without any competitive bidding procedure. To review the sale, the AP government constituted a six-member Empowered Group of Secretaries. Based on their suggestions, the government agreed to sell its interest for Rs 6.45 billion in September 2021, giving Adani complete ownership of the port.

The controversy

Dr. E A S Sarma (Retd IAS) and former Secretary to the Government of India told NewsMeter, “How can the state government sell off 10.4% of the port for only Rs 6.45 billion? The Andhra government has kept this share in the project for its contribution of 1,800 acres. The port is just 6 kilometres from the RINL steel plant and 19 kilometres from the Vizag port. The market value of the land in this location is high. However, the government sold its entire 10.4% stake for Rs. 644 crores, which means it sold one acre for Rs 35 lakhs in a location where it could get at least Rs. 8–10 crores per acre (around Rs 15,000 crores). They didn’t even use a competitive bidding method, as required by the Centre’s disinvestment standards, thus deliberately allowing the transaction to be non-transparent. I even doubt that promoter D.V.S Raju got more money than the official price of Rs. 120 per share outside the books.”

He added, “RINL Visakhapatnam is the most important client for Gangavaram port as approximately 50 lakh tonnes of coking coal and 2 lakh tonnes of limestone raw materials pass through this port each year. As a result, Adani now has an undue hold over VSP. According to my sources, Adani may take over the Visakhapatnam Steel Plant through subsidiary firms during the disinvestment process. Post-Hindenburg slump, Adani may have decided to go slow on RINL.” He further said that he had written a letter to the CAG asking for an independent audit of the transaction in order to assess the magnitude of the damage to the public exchequer and is awaiting the response.

According to Prof. Nageswar Rao, a former MLC and political analyst, “The true colours of the AP government were revealed. On 21 May 2021, the AP government overwhelmingly passed a motion in the Assembly opposing the total disinvestment of RINL. However, the same Jagan Mohan Reddy government has decided to sell its 10.4% stake in Gangavaram Port Limited (GPL) to Adani Ports, which is located right next to RINL. Also, the price at which its share was sold is a clear indication of political clout.”

Pattabhi Ram, TDP national spokesperson, alleged that Jagan is selling off government assets for his own personal gain. “He sold Gangavaram port to Adani for peanuts. All of a sudden, what motivated him to sell a highly successful Gangavaram port to Adani? He must explain to the public why he was compelled to turn over Gangavaram port without following proper processes. On this, we anticipate a reaction from Jagan and his government. We are convinced that he has connections with corporate executives,” he said.

A senior journalist from Visakhapatnam explained that post-Hindenburg controversy, a huge project worth Rs. 14,634 crores(The Adani Data Centre) is about to be unveiled in Visakhapatnam. “AP Chief Minister Jagan Mohan Reddy will lay the foundation stone, and Gautam Adani will be present alongside. The two’s camaraderie will hopefully become more apparent at tomorrow’s event,” he added.

Despite several requests to reach out to the AP government, including industries minister Gudivada Amarnath, there has been no response from the state.

The tale of Gangavaram port

The administration of Visakhapatnam RINL expected the port to be built in the early 2000s. However, due to a lack of funds, they were unable to materialise. The Visakhapatnam Port Trust, on the other hand, stepped in to build a satellite port at Gangavaram. However, the AP government, led by N. Chandrababu Naidu, refused to cooperate in 2001.

In 2002, under pressure from the TDP and its ally NDA, RINL decided to hand over 1,800 acres of land to the state government for the construction of Gangavaram port. The land was among the 22,000 acres gathered in the 1970s for the planning and construction of a captive port for Visakhapatnam RINL. As a result, the Gangavaram port opened for business in July 2009 with public-private partnership mode. Since then, the port has been profitable, with a reported revenue of Rs. 1,082 crores in 2020.