Three days after Prime Minister Narendra Modi cautioned the country on the role of shell companies which divert funds to tax havens in his Independence Day address, Congress on Friday dared the PM to order a court monitored CBI inquiry into alleged over-invoicing by Adani Power.
The Directorate of Revenue Intelligence, which reports to the Finance Ministry, accused a subsidiary power company of Adani Enterprises Ltd. of siphoning off ₹1,500 Crore to a shell company in Mauritius by a company set up for the purpose in Dubai.
Electrical equipment was purchased from a network of off-shore companies at highly inflated rates, often at rates as high as 860% of the original value of the product. The payments were remitted to M/S Electrogen Infra FZE in UAE, apparently controlled and managed by the Adani Group through its representative firms and personnel.
While this Dubai based firm is accused of paying the actual invoice value to the suppliers, the difference between the actual and the inflated value were were allegedly routed to the Mauritius account of the parent company.
Over three years after the DRI filed its findings, the investigation has still not reached its logical end. On the contrary Gautam Adani, an accused in the ongoing investigation, is often seen accompanying the Prime Minister on his visits.
The DRI report accessed for the first time by The Guardian ‘mapped out a complex money trail from India through South Korea and Dubai, and eventually to an offshore in Mauritius.
While the DRI’s investigation pertained to only one power unit in Maharashtra of Adani Power, allegations of over-pricing have been levelled against the Group in the past as well. Involvement of an intermediary in the UAE, alleged to be a front company of the Group, was suspected in money laundering and notices were served by the DRI in 2014 itself.
But the cases are yet to be adjudicated by the competent Customs authorities though the notification for adjudication was issued in 2015.
An indirect but inevitable effect of the over-invoicing and inflating the cost of power plants is in pushing up the power tariff. And Indian consumers are believed to be paying a higher rate estimated to range between 50 Paise and two Rupees per unit.
“In other words, the Adani Group has been purchasing power plant equipment from its own company at an extremely high price and recovering the cost from the ordinary consumer in India”.
The total scam, if all the power plants of the Group are found to have been guilty of the unfair practice, is suspected to be worth ₹50,000 Crore.