Amid legal battles, Adani rakes in Rs 60,000 crore for Australia project

The project that involves exporting of 60 million tonnes of coal every year is being opposed by groups in both India and Australia

By Anupam Chakravartty
Published: Thursday 20 November 2014

Coal development in the Bowen Basin just east of the Galilee Basin. The area is under threat from coal mining and in particular the loss of the Bimblebox nature reserve--home to the endangered black-throated finch. Aerials show the existing coal developments contrasted with the natural beauty of the area (Courtesy ©Greenpeace/Tom Jefferson)

The controversial mining project of India’s Adani Group in Australia has managed to bag one of the largest loans ever extended by a government-owned bank for an overseas project. Before this, in May this year, the project was denied loan by Deustche Bank (Germany’s largest bank) for further expansion of an overseas mine to ship coal to India.

The State Bank of India will lend US $ 1 billion (Rs 6,000 crore) for the mine that has to be built in Carmicheal region of Central Queensland.

The huge funding, however, is no assurance that the group will be able to execute the long-standing project in the Galilee mine Down Under. The biggest of the hurdles is that Mumbai-based non-profit Conservation Action Trust (CAT) has filed a case against the company in a Queensland court. This is a first ever case to be filed by an NGO against an Indian mining company overseas.

The loan was announced on Monday by group’s chairman Gautam Adani in Brisbane during the G-20 summit. According to a few State Bank of India officials, the loan that has been promised to the company’s Australian subsidiary Adani Mining is subject to certain conditions which are yet to be made public.

Over the next two years, Adani Mining will develop this mine at an investment of US $ 16.5 billion and produce 65 million tonnes per annum (MTPA) of coal to support power plants in India.

Interestingly, according to the company’s quarterly report, the total debt of Adani Group, at present, stands at Rs 74,000 crore. On the other hand, the total turnover registered by the company is only Rs 3,328 crore. Before announcing this loan to Adani Mining, 5 per cent of SBI’s total credit exposure was given to power sector. Of this, 0.9 per cent has been given to coal mining. The exposure includes loans extended to the companies whose coal blocks were recently cancelled by the Supreme Court.

“SBI is a long-term and highly valued partner of Adani Group in its home market. It has for long been a key financier of the company’s job-creating projects in power, infrastructure and other sectors in India and abroad,” Adani said in a statement to the press.

Shunned by Germany’s largest bank

Last year, Deutsche Bank along with a consortium of Australian banks financed about US $1.95 billion to Adani to purchase a 99-year lease for Galilee mines. Later, the German bank refused to provide further credit to the group as United Nations Educational, Scientific and Cultural Organization (UNESCO) had raised concerns about damage to the fragile Great Barrier Reef. UNESCO and other non-profits have been concerned as the group plans to develop Abbott Point, a port terminal in Northern Queensland to transport coal from Galilee Mine and the dredging that will be done to increasing the capacity of shipping is expected to directly impact the site.

Spread over an area of 200 sq km, Adani coal mine is a greenfield project (a project that is not constrained by prior work) in central Queensland. According to Adani Mining, the project will have six open cast mines and five multi-seam underground mines, producing up to 74 MTPA of raw coal that equals to 60 MTPA of thermal coal that will be exported for next 60 years. Incidentally, an analysis by US-based Institute for Energy Economics and Financial Analysis (IEEFA) shows that by the time these mine are operational, the price of one kilowatt hour of electricity generated from imported coal would increase by 40 to 90 per cent. (See story:Green signal for Adanis' mega coal mine project in Queensland)

Not in public interest

Meanwhile, notices have been issued against Adani Mining following the petition filed by CAT. According to Debi Goenka, the convenor of the Mumbai-based trust, a team appointed by the court will be looking at ground impacts of the mine. Goenka has challenged Adani Mining stating that the mine is neither in public interest nor ecologically sustainable. “The 60 MTPA of coal that would come from Carmichael would threaten health and livelihoods of thousands of poor in India,” says Goenka. He further adds that 69 per cent of Indians, over a telephone survey, expressed that they were opposed to proposals to import coal from Queensland. The survey was conducted by Indian firm AZ Research for Australian environmental group Market Forces.

Moreover, according to IEEFA, the coal does not meet the Australian benchmark quality in terms of calorific value and ash content. Therefore, it may lead to more pollution and consumption of water resources for washing the coal. “The strip ratio for overburden removal per tonne of coal produced is 17:1. This means that after removing 17 tonnes of mine waste, one tonne of coal will be recovered,” says the analysis published last year. 

Apart from the Indian non-profit, Coast and Country Association of Queensland, a Brisbane-based environmental group, has also filed a petition in the Queensland Lands court against the company stating that the mines will impact groundwater in the region. The main contention of the group is that the mine is located in one of the world’s best underground freshwater reserves called the Great Artesian Well in the Central Queensland, which will hamper the agricultural activities in the region.

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