Three PSU banks decline info on import of coal, government steps in
Citing customer confidentiality, three state-owned banks, including State Bank of India (SBI), have declined to provide information with their overseas branches regarding transactions by leading power companies which are being probed for alleged overvaluation of coal imports, pegged at Rs 29,000 crore.
Sources in the Finance Ministry said this has prompted Revenue Secretary Hasmukh Adhia to write to these lenders to cooperate with the ongoing investigation.
The government plans to issue letters rogatory seeking help from at least three countries — Singapore, Dubai and Hong Kong — to access documents lying with the overseas branches of SBI, Bank of Baroda and UCO Bank relating to transactions by top power companies, sources said.
A letters rogatory is a formal request from a court to a foreign court, seeking some type of judicial assistance in investigating a foreign entity.
In mid-May, Adhia wrote to chairpersons of the three public sector banks and directed them to submit the documents and cooperate with the ongoing investigation against Indian companies, now being probed by the Directorate of Revenue Intelligence (DRI).
The DRI is investigating 40 companies including six Adani Group firms, two companies of the Anil Dhirubhai Ambani Group (ADAG) and two Essar Group firms for alleged overvaluation of coal imports from Indonesia between 2011 and 2015.
In the first round of investigation, the probe agency is focusing on 25 companies. It has been unable to finalise its case due to lack of cooperation from public sector banks. Two private banks, sources said, have already submitted documents pertaining to similar transactions by other companies in Singapore, Dubai and Hong Kong.
According to people familiar with the developments, the bulk of documents lying with SBI, Bank of Baroda and UCO Bank pertain to transactions of Adani Group firms. The documents that are being sought by the government include copies of invoices raised by the original supplier of coal, bills of lading, letter of credit covering the transactions and the contract signed by the firms with the original supplier.
“The information you have asked for are relating to investigation which cannot be revealed at this stage. I hope you will appreciate it,” Adhia said in an email reply to The Indian Express.
A SBI spokesperson, in an email statement, said: “In the course of our business, we receive queries etc from law enforcement agencies from time to time and each of these is attended to by us as per the laws of respective jurisdictions.”
Emails and phone calls made to Bank of Baroda and UCO Bank did not elicit any response.
In March, the DRI issued a general alert to its field formations across India, outlining the modus operandi of over-invoicing of coal imports from Indonesia. The DRI alleged that money was being “siphoned” outside the country and the electricity generating firms were availing “higher tariff compensation based on artificially inflated cost of the imported coal”.
The DRI alleged that Indonesian coal was directly imported from ports there to India while import invoices were routed through one or more intermediaries based in Singapore, Hong Kong, Dubai and British Virgin Islands to artificially inflate its value.
The agency, according to sources, found that inflated invoices received in India were issued by intermediaries, allegedly subsidiary companies of Indian importers or their fronts. The DRI alleged that in certain cases, the import value of Indonesian coal was artificially inflated by about 50 to 100 per cent by changing test reports which measure the calorific value of coal.
So far, the agency has raided over 80 shipping companies, laboratories and intermediaries across India including those in Maharashtra, Delhi, Gujarat, Karnataka, Odisha, West Bengal, Andhra Pradesh and Kerala to obtain documents that show the real value of imports.
Most power companies currently under the DRI scanner have denied overvaluation of coal imports from Indonesia.
A Reliance Group spokesperson said: “All our coal imports are fully compliant with laid down rules and regulations. The coal was imported only for captive consumption from independent suppliers under long-term contracts. The purchase price of imported coal was on the basis of then prevailing widely globally accepted highly traded coal indices on a year-to-year basis. There is no manipulation of any test report by the company.”
A spokesperson for Essar Power said: “Essar Power Gujarat Ltd strongly denies the information that it has overvalued imports of coal to inflate the power tariff. In fact, Essar Power was the first company to introduce a reverse bidding e-auction process to ensure that coal is procured at the most competitive price in a transparent manner. We also categorically deny that any over-invoicing was done in a bid to inflate the power tariff. The tariff had been fixed at the time when Essar Power Gujarat bid for and won the project. Hence, the coal cost is not a pass-through in the tariff.”
Emails and phone calls to the Adani Group for comments did not elicit any response.