Stop this deafening silence, agree to JPC on Adani Group

As Parliament reconvenes on March 13, it is essential for the Narendra Modi-led Union government to see the merit in ordering a JPC into the allegations against Adani Group

On February 23, our worst fears came true as the value of LIC’s holding in Adani companies dropped below the purchase price. The Bharatiya Janata Party (BJP)-led Union government has been consistently defending this exposure of LIC and PSU banks to stocks in various companies of the Adani Group, and have gone to the extent of defending the imprudent decision of LIC to pledge public money for the now scrapped FPO (Follow on Public Offer) of Adani Enterprises.

As Parliament is set to reconvene on March 13 for the second leg of the Budget session, the big question remains on whether there will be an investigation into the dealings of the Adani Group.

When the Harshad Mehta scam rocked India in 1992, the Opposition threw dagger after dagger at the ruling dispensation on grounds of corruption, incompetence, lack of accountability, and the like. Today, as the Adani-Hindenburg controversy rages on, a similar charge could be levelled against the Narendra Modi government vis-a-vis its refusal to acknowledge the same in Parliament, or outside. It has adopted a two-step manoeuvre: sidestep the elephant in the room, and aim diatribes against the Opposition.

Perhaps for the first time in India’s history, a startling paradox is playing out — where nationalism and patriotism are being used as a shield to protect black money and its various sources.

Not A Rarity

The recent controversy has served to highlight, among other things, the lack of transparency in the financial affairs of some Indian companies. Curiously, Hindenburg Research’s report unveiling of gross irregularities in the conduct of the Adani Group in terms of both stock manipulation and unsustainable debt levels is not an exception to the norm.

Putting aside the ‘intentions’ of the Hindenburg Research, Vinod Shantilal Adani has been heading shell companies as per various revelations since 2016, including (but not limited to) the Panama Papers and the Pandora Papers released by the International Consortium of Investigative Journalists (ICIJ). Interestingly, in the 1957 Mundhra scandal and many subsequent cases, the guilty were brought to justice; but the BJP-led National Democratic Alliance (NDA) government at the Centre seems to have developed cold feet. This gives the impression that Adani is beyond the reach of any inquiry.

Section 45E of the Reserve Bank of India (RBI) Act, 1934 stipulates that any credit information contained in statements submitted to or furnished by the RBI shall be treated as confidential. The details of top defaulters are thus concealed from the public eye; even the number of accounts corresponding to the amount of written-off loans is not maintained by the RBI. Corporate giants, private individuals, and industrialists benefit from this absence of accountability, and transparency.

The revelations by the Hindenburg Research report have only served to shine the spotlight yet again on the menace of shell companies, and the flow of investment from offshore tax havens — which is now staring in the face of the government since it raises a larger concern about the integrity of India's financial sector, and the effectiveness of existing regulation.

A Deafening Silence

Through Budget 2023, Finance Minister Nirmala Sitharaman announced relief for salaried employees in the form of higher rebate limits under the new income tax regime. A few days prior to Sitharaman’s presentation, on January 15, Oxfam India’s report titled ‘Survival of the Richest: The India Story’ revealed that 64.3 percent of the total GST collection in FY 2021-22 came from the bottom 50 percent of the Indian demography, whereas ~4 percent of it came from the top 10 percent. Not only has the number of billionaires gone up from nine in 2000 to 166 in 2022, but their combined wealth now surpasses the Union Budget for FY 2018-19! This tarnishes the rosy picture being painted through deliberate misinterpretation of figures, even as it is being claimed that per capita income has more than doubled, touching Rs 1,97,000. The truth is that the rich get richer, and all we do is watch.

In the immediate aftermath of releasing what is evidently a pre-poll Budget, one would expect the Union government to take a firm stand on the allegations levelled against the Adani Group, given the high exposure of crucial institutions such as LIC and the State Bank of India (SBI) to the groups stocks — institutions in which rests the life savings of hundreds of thousands of ordinary working-class Indians.

The Hindenburg Research report has effectively punctured the high moral pedestal adopted by the BJP since 2014, which catapulted Modi to power on promises of weeding out black money. The government’s silence on this issue can be seen as its failure on this front.

Our only hope now is for the Securities and Exchange Board of India (Sebi) and the RBI to come to the rescue, particularly on two counts — the first being round-tripping, and the second being the possibility of shell companies being funded by adversary nations/non-State actors to take control of India's strategic infrastructure. As the chief regulator of the securities market and protector of investors’ interest, Sebi holds the power to investigate cases of violation such as price rigging, circular trading, insider trading, etc. Through its Market Surveillance Division it monitors the market movements of stock exchanges and detects malicious elements. The accusations of financial malfeasance against the Adani Group warrant such action.

Tall Claims, Empty Promises

Even as the government claims that banks are insulated from any such breaches, a close perusal will show how taxpayers’ money is being drained to prop up public sector banks for lending out to bigwigs who loot them. In February 2018, the Punjab National Bank (PNB) raised Rs 5,500 crore from the government by selling its shares at Rs 163 apiece. The market price was Rs 113, and still falling. This simply means that public money was showered as a Rs 50 bonus to meet the difference — and it didn’t stop there. Now PNB’s share price is a Rs 50. So, for every share, a taxpayer had to shell out Rs 113 for the greed of absconding businessman Nirav Modi.

One of the many functions of the RBI is to keep an eye on the activities of commercial banks with special focus on lending and borrowing. With respect to defaulters, the RBI’s own guidelines state that non-performing assets (NPAs), including inter-alia, those in respect of which full provisioning has been made on completion of four years, are removed from the balance sheet of the bank(s). In an answer tabled by the Ministry of Finance on December 13, 2022, it was conveyed that a staggering Rs 1,74,966 crore was written off by scheduled commercial banks in FY22, whereas the recovery of defaulted amount in written-off loans during the same period was a mere Rs 33,534 crore. What this implies is a trend of bad debt and severe mismanagement.

Further, the total number of wilful defaulters having outstanding loans of Rs 25 lakh or above was 12,439 in public sector banks and 2,447 in private banks as on June 30, 2022. The Enforcement Directorate has also informed that 515 fraud cases including those related to wilful defaulters have been recorded in the last five years under the provisions of Prevention of Money Laundering Act (PMLA), 2002.

A JPC Needed

It is curious to note how the rise of the Adani Group has occurred in parallel to Modi’s meteoric rise in national politics. A similar political analogy comes to mind, when Congress leader Rajiv Gandhi was at the helm of Indian politics with three-fourth of a majority in Parliament in the mid-80s; his alleged association with a business group drew flak and political heat on him and the Congress.

One hopes that history does not have to repeat itself for the current regime to wake up and make amends before it is too late. Only by conducting a high-level inquiry through a joint parliamentary committee or a judicial probe will the various parties involved be compelled to depose and render evidence, thus allowing the present scenario to meet its rightful conclusion.

There is also a pressing need to amend the RBI Act to publish the details of borrower-wise credit information in the public domain, thus infusing greater transparency and public confidence in the fiscal management of the nation. If there’s one thing that truly does bring bad name to India, it is our own shortfall in managing public funds and stimulating public trust — the twin pillars of a modern democratic State.

John Brittas is Member of Parliament, Rajya Sabha. The views expressed above are the author’s own. They do not necessarily reflect the views of DH.