Adani in Sri Lanka

This year, Sri Lanka entered a power purchase deal with Adani Green Energy Ltd. In terms of the agreement, the country will purchase electricity from the company over 20 years. The Adani Green Energy project received cabinet clearance from the previous government to produce 484MW of wind power in two facilities the company would build in Mannar and Pooneryn and invest more than US$442 million in its projected life span of 20 years.

Adani Green Energy would be paid $0.0826 per kWh of power produced. The deal was relentlessly pushed, defended and ultimately signed by the previous Sri Lankan government. The mandatory tender process was not followed indicating inbuilt and rampant corruption and vested interests at the time.

The project is now under litigation in the Supreme Court of Sri Lanka over the violation of fundamental rights. The main issues raised by the petitioners deal with environmental concerns surrounding the project and the woeful lack of transparency in the awarding process that led to the granting of the deal to Adani.

The petitioners also argue that the agreed upon per unit cost is a significant loss to the country and ideally this rate should be set at $0.005 kWh. The deal, its approval and the final granting process were mired in controversy even before litigation.

In 2022, the then Chairman of the Ceylon Electricity Board, M M C Ferdinando told the parliamentary panel, the Committee on Public Enterprises (COPE), that the deal was offered based on a request from Indian Prime Minister Narendra Modi to then Sri Lankan President Gotabaya Rajapaksa.

Ferdinando later retracted his statement and resigned from his post under pressure from the then government. In May 2023, the then Minister of Foreign Affairs, Ali Sabry observed flippantly in an interview with The Hindu that Adani projects in Sri Lanka were a ‘government-to-government kind of a project’. He noted that it was the Indian government that selected the Adani group for infrastructure development projects including the Sri Lankan wind power project.

Reading between the lines, Sabry’s public observations indicated a clear backdoor and informal Indian state involvement in the project. Despite the notoriety that Adani companies had already acquired across the world, Sabry had the nerve to say that his government was “very very confident” that the Adani Group’s companies had considerable capital.

Adani actually saw a the $140 billion drop in share values after the publication of a negative report by US research company Hindenburg accusing the company’s top leader Gautam Adani of getting away with the ‘largest con in corporate history’.

Another investigation by the Organised Crime and Corruption Reporting Project also documented serious malpractices by Adani companies. All this is in addition to The Guardian and Financial Times also reporting on Adani family’s surreptitious investments in the company’s shares.

It is against this background that the flamboyant and utterly inexperienced former Sri Lankan Minister of Energy attempted to convert the agreement with Adani Green Energy Limited in August 2023 into a formal government-to-government deal.

In reality no such formal state to state level agreement existed between India and Sri Lanka. It is therefore hardly surprising that the Adani power deal has ended up in litigation in the Sri Lankan Supreme Court. The new Sri Lankan government needs to carefully and comprehensively revisit the power deal.

Malpractices evident in the local awarding process needs to be considered as well as the role of local power brokers who made it happen and evident corruption that enveloped the entire project needs to be investigated.

The project also needs to be evaluated in light of the global evidence against the Adani Group. In October, the Kenyan High Court suspended a $736 million agreement between the state-owned Kenya Electrical Transmission Company and Adani Energy Solutions to build and operate power facilities, including transmission lines.

In a lawsuit, the Law Society of Kenya argued that the deal was ‘a constitutional sham and tainted with secrecy’. It also argued that the Kenyan state entity and Adani Energy Solutions did not carry out mandatory public participation focused on the project properly, which is a requirement under Kenya’s Public Private Partnerships Act. These conditions sound alarmingly similar to the Sri Lankan case.

In 2023, accusations were made in India’s Gujarat State against Adani Power Mundra Limited that it had charged an excess of INR 39,000,000,000 over a period of five years under two power purchase agreements. An opposition politician in the state noted the case was a “textbook case of corruption, money laundering, loot of public money and above all, the classic case of cronyism that the Prime Minister and his government represent.”

The issue here was that the rate at which coal for power production that was purchased by Adani Power Mundra was significantly higher than market rates at which coal was being traded in Indonesia, the source of the purchase. This meant that the state-owned Gujarat Urja Vikas Nigam Limited, a Gujarati state entity in the energy sector had to pay much more for the overall electricity supply. Gujarat Urja Vikas Nigam Limited has now written to Adani Power Mundra Limited asking that the excess amount charged be repaid.

As a presidential candidate, President Anura Kumara Dissanayake assured that if he won, the National People’s Power would cancel the Adani energy project because it posed a threat to Sri Lanka’s energy sector sovereignty.

The controls placed by Adani Power on its power supply to Bangladesh is a classic example of Bangladesh’s energy sovereignty being utterly compromised at a very crucial time in the country’s history. In real terms, Adani Power has slashed its supplies to Bangladesh by about 60% due to unpaid bills exceeding $800 million. Sri Lanka could also find itself in a similar situation if it compromises its power supply and energy sovereignty by going ahead with the Adani project.

In October President Dissanayake informed the Supreme Court that it would reconsider the approval given by the previous regime to the Adani Group projects. The government must now expect considerable pressure from vested parties, in this case both the Adani Group and the Indian government, more generally. But it is essential to be mindful that we are not dealing with a project in an Indian state.

We cannot be endlessly languishing in the depths of poverty simply because of the corruption of our own leaders of the recent and not-too-recent past, and business magnates of the region. The Adani case is a good starting point to roll back mega corruption and illegality in the country.

Sasanka Perera is the founding professor of the South Asia University's Department of Sociology. This commentary was first published The Island Online.