No alternative to austerity? That lie has now been nailed

Owen Jones in The Guardian

Ever since the banks plunged the western world into economic chaos, we have been told that only cuts offer economic salvation. When the Conservatives and the Lib Dems formed their austerity coalition in 2010, they told the electorate – in apocalyptic tones – that without George Osborne’s scalpel, Britain would go the way of Greece. The economically illiterate metaphor of a household budget was relentlessly deployed – you shouldn’t spend more if you’re personally in debt, so why should the nation? – to popularise an ideologically driven fallacy.

Greek debt crisis: ‘People can’t see any light at the end of any tunnel’



But now, thanks to Portugal, we know how flawed the austerity experiment enforced across Europe was. Portugal was one of the European nations hardest hit by the economic crisis. After a bailout by a troika including the International Monetary Fund, creditors demanded stringent austerity measures that were enthusiastically implemented by Lisbon’s then conservative government. Utilities were privatised, VAT raised, a surtax imposed on incomes, public sector pay and pensions slashed and benefits cut, and the working day was extended.

In a two-year period, education spending suffered a devastating 23% cut. Health services and social security suffered too. The human consequences were dire. Unemployment peaked at 17.5% in 2013; in 2012, there was a 41% jump in company bankruptcies; and poverty increased. All this was necessary to cure the overspending disease, went the logic.

At the end of 2015, this experiment came to an end. A new socialist government – with the support of more radical leftwing parties – assumed office. The prime minister, António Costa, pledged to “turn the page on austerity”: it had sent the country back three decades, he said. The government’s opponents predicted disaster – “voodoo economics”, they called it. Perhaps another bailout would be triggered, leading to recession and even steeper cuts.

There was a precedent, after all: Syriza had been elected in Greece just months earlier, and eurozone authorities were in no mood to allow this experiment to succeed. How could Portugal possibly avoid its own Greek tragedy?


In 2016 – a year after taking power – the government could boast of a 13% jump in corporate investment

The economic rationale of the new Portuguese government was clear. Cuts suppressed demand: for a genuine recovery, demand had to be boosted. The government pledged to increase the minimum wage, reverse regressive tax increases, return public sector wages and pensions to their pre-crisis levels – the salaries of many had plummeted by 30% – and reintroduce four cancelled public holidays. Social security for poorer families was increased, while a luxury charge was imposed on homes worth over €600,000 (£550,000).

The promised disaster did not materialise. By the autumn of 2016 – a year after taking power – the government could boast of sustained economic growth, and a 13% jump in corporate investment. And this year, figures showed the deficit had more than halved, to 2.1% – lower than at any time since the return of democracy four decades ago. Indeed, this is the first time Portugal has ever met eurozone fiscal rules. Meanwhile, the economy has now grown for 13 successive quarters.

During the years of cuts, charities warned of a “social emergency”. Now the Portuguese government can offer itself as a model to the rest of the continent. “Europe chose the line of austerity and had much worse results,” declared the economy minister Manuel Caldeira Cabral. “What we are showing is that with a policy that restitutes income to the people in a moderate way, people get more confidence and investment returns.”

Portugal has increased public investment, reduced the deficit, slashed unemployment and sustained economic growth. We were told this was impossible and, frankly, delusional. And so British workers endured the longest squeeze in wages since the 19th century, while the coalition did not even come close to meeting its commitment to eradicate the deficit by 2015. Why? In part, because low pay means workers paying less tax, receiving more in-work benefits, and spending less money. Portugal is increasing demand; the Tories suppressed it.

Portugal’s success is both inspiring and frustrating. All that human misery in Europe – and for what? What of Greece, where over half of young people languished in unemployment, where health services were decimated, where infant mortality and suicide increased? What of Spain, where hundreds of thousands were evicted from their homes? What of France, where economic insecurity fuelled the rise of the far right?

Portugal and Britain offer lessons for social democracy too. In the aftermath of the bankers’ crash, social democratic parties embraced austerity. The result? Political collapse. In Spain, support for the socialists fell from 44% to the low 20s as the radical left Podemos ate into their vote. In Greece, Pasok almost disappeared as a political force. In France, the Socialists achieved little over 6% in the first round of this year’s presidential elections. And in the Netherlands this year, the Labour party slumped from a quarter of the vote to less than 6%.

By contrast, the two social democratic parties that have broken with austerity – in Portugal and Britain – are now performing better than almost all their sister parties. Indeed, polls show Portugal’s Socialists now 10 points clear of the country’s rightwing party.

Europe’s austerity has been justified with the mantra “there is no alternative”, intended to push the population into submission: we have to be grownups, and live in the real world, after all.

Portugal offers a powerful rebuke. Europe’s left should use the Portuguese experience to reshape the European Union and bring austerity across the eurozone to a halt. In Britain, Labour can feel more emboldened in breaking with the Tories’ economic order.

Throughout Europe’s lost decade, millions of us held that there was indeed an alternative. Now we have the proof.

Sapiens - Yuval Noah Harari

The myth of the benefits cheat is a sign of unkind times

Zoe Williams in The Guardian

Some things are easier to see from far away, and a collective slide away from empathy and common sense, towards pearl-clutching judgmentalism, is one of them. At the start of August the co-leader of New Zealand’s Green party, Metiria Turei, was forced to resign, following an outpouring of opprobrium that threatened to poleaxe her party’s prospects in September’s elections.

The crime for which this tide of hate would have been proportionate is hard to imagine: in fact, it was spurred by her admission that she committed benefit fraud in the early 90s, a confession she made freely to highlight how hard it was then, and is now, to raise a child as a single parent under New Zealand’s notoriously punitive welfare system.

More than half of all that country’s benefit claimants owe money to their work and income department, in what appears to be a version of Gordon Brown’s working family tax credit overpayments, where you identify the country’s poorest families, pay them slightly more than you intended by a metric you haven’t really explained, then saddle them with a debt they have no hope of repaying. When you get to the point that these debts affect 60% of claimants, this is no longer a glitch in the system: this is the system.


Families on benefits are now 40% short of what a citizens’ jury thinks they need to live a decent life

As the journalist Giovanni Tiso described in a moving essay, “once the blood was in the water, the sharks had to do as nature commanded them” – her admission of guilt was deemed not quite penitent enough. The media set out to “investigate” the extent of her fraud, and found that she had also had support from family members when she was young, so couldn’t possibly have been as destitute as she claims.

The prevailing view landed on the fact that she was a thief: she had stolen from the great, honest taxpayer, that creature of myth who needs nothing, takes nothing, works only to support others lazier than himself. Turei had to go. The fact that she created something miraculous – a stable home for her daughter, a law degree, a performance art troupe, a political career – from a standing start of grinding poverty and no qualifications was overlooked.

An incalculably valuable thing – a person in politics who knows what it is like to rely on the systems politicians create – has been righteously thrown away like contaminated sharps.

And for what? The maintenance of the narrative: benefits claimants are inherently suspect, because if they were better people they wouldn’t be on benefits. You have to watch them like hawks, and if you spend more money on surveillance than you could ever save from the detection of the fiddles you lie awake imagining, so be it – our own Department for Work and Pensions sanctions system is fantastically expensive, a fact of which the government seems perversely proud.

The idea that need should come with a badge of shame is not new: the 1697 Poor Act laid down in law that those in receipt of parish aid should wear some blue or red cloth.

Yet it is relatively recent that a competing theory has been overturned. Even in the darkest days of me-first Thatcherism, the social security conversation hinged on whether or not the dole was enough to provide a decent life. State benefits were compared to the median income, and to similar systems in Europe: the question of fraud rarely came up, because the conditions of the 97% not committing it, living honestly on money to which they were entitled, were thought more important.

Simply by changing the frame, pointing attention towards the dishonest, the government managed to render whole swaths of normal social inquiry – what is life like for those at the bottom? – irrelevant. Ask not what life is like for those at the bottom; ask whether they really are at the bottom, or have a cash-in-hand window-cleaning job that puts them nearer the middle. Ask what mountain of fecklessness prevents their escape from the bottom.

Yet when people engage seriously with the concept of social security, different attitudes emerge. The minimum income standard is a research method where small groups, drawn from every social class, calculate what a person needs to live on: they consider the impact of not being able to afford Christmas presents, as well as council tax. They ponder how often one might need a new toaster. They come up with a ballpark figure that, currently, according to a report released by the Child Poverty Action Group, a huge number of people fall short of.

A household of two adults working full time for the minimum wage is 13% shy of it; a single parent on the same wage, 18%. Families relying on benefits, through a combination of inflation and the benefits freeze, are now 40% short of what a citizens’ jury thinks they need to live a decent life.

When you consider these figures as a lived experience, the picture is bleak: yet there is a thread of optimism in the minimum income standard itself. The ostentatious parsimony of the state has not cut through. People still have a conception of decency that goes well beyond mere sustenance, and wish it for one another. All that remains is that we remember how to fight for it.

Extremism is surging. To beat it, we need young hearts and minds

Scott Atran in The Guardian

The last of the shellshocked were being evacuated as I headed back toward Las Ramblas, Barcelona’s famed tourist-filled walkway where another disgruntled “soldier of Islamic State” had ploughed a van into the crowd, killing at least 13 and injuring more than 120 from 34 nations. Minutes before the attack I had dropped my wife’s niece near where the rampage began. It was deja vu and dread again, as with the Paris massacre at the Bataclan theatre in 2015, next door to where my daughter lived.

At a seafront promenade south of Barcelona, a car of five knife-wielding kamikaze mowed down a woman before police killed them all. One teenage attacker had posted on the web two years before that “on my first day as king of the world” he would “kill the unbelievers and leave only Muslims who follow their religion”.

Mariano Rajoy, the president of Spain, declared that “our values and way of life will triumph” – just as Theresa May had proclaimed “our values will prevail” in March when yet another petty criminal “born again” into radical Islam drove his vehicle across Westminster Bridge to kill and wound pedestrians.

In Charlottesville the week before, the white supremacist attacker who killed civil rights activist Heather Heyer mimicked Isis-inspired killings using vehicles. “This was something that was growing in him,” the alleged attacker’s former history teacher told a newspaper. “He had this fascination with nazism [and] white supremacist views … I admit I failed. But this is definitely a teachable moment and something we need to be vigilant about, because this stuff is tearing up our country.”

The values of liberal and open democracy increasingly appear to be losing ground around the world to those of narrow, xenophobic ethno-nationalisms and radical Islam. This is not a “clash of civilisations”, but a collapse of communities, for ethno-nationalist violent extremism and transnational jihadi terrorism represent not the resurgence of traditional cultures, but their unravelling.
This is the dark side of globalisation. The western nation-state and relatively open markets that dominate the global political and economic order have largely supplanted age-old forms of governance and social life. People across the planet have been transformed into competitive players seeking fulfilment through material accumulation and its symbols. But the forced participation and gamble in the rush of market-driven change often fails, especially among communities that have had little time to adapt. When it does, redemptive violence is prone to erupt.

The quest for elimination of uncertainty, coupled with what social psychologist Arie Kruglanski deems “the search for significance”, are the personal sentiments most readily elicited in my research team’s interviews with violent jihadists and militant supporters of populist ethno-nationalist movements. In Hungary, we find strong support for the government’s call for restoring the “national cohesion” lost with the fall of Miklós Hothy’s fascist regime in the second world war. In Iraq, we find nearly all young people coming out from under Isis rule in Mosul initially welcomed the stability and security it offered, despite its brutality, amid the chaos following the US invasion.
In the world of liberal democracy and human rights, violence – especially extreme forms of mass bloodshed – is generally considered pathological or an evil expression of human nature. But across most history and cultures, violence against other groups is claimed by the perpetrators to be a sublime matter of moral virtue. For without a claim to virtue it is difficult, if not inconceivable, to kill large numbers of people innocent of direct harm to others.
Ever since the second world war, revolutionaries and insurgents willing to sacrifice themselves for causes and groups have prevailed with considerably less firepower and manpower than the state armies and police forces they oppose. Meanwhile, according to the World Values Survey, the majority of Europeans don’t believe democracy is “absolutely important” for them; and in France and Spain we find little evidence of willingness to sacrifice much of anything for democracy – in contrast to the willingness to fight and die among supporters of militant jihad.

How can we resist, compete with, and overcome these strengthening countercultural pressures in the present age? Perhaps, for some, a re-enchantment and communitarian rerooting of our own values of representative government and cultural tolerance provides an answer. Preserving what is left of the planet’s fauna and flora and avoiding environmental catastrophes may offer a new course for others. Or the coming generation, if allowed, may offer whole new ways of understanding.


Young people are viewed mostly as a youth bulge and a problem to be pummelled rather than as a youth boom

Yet no countervailing message will spread in a social vacuum, in the abstract space of ideology or counter-narrative alone. The means of engagement are critical, requiring close knowledge of communities at risk. Most often, people join radical groups through pre-existing social networks. This clustering suggests that much recruitment does not take place primarily via direct appeals or following individual exposure to social media (which would entail a more dispersed recruitment pattern). Rather, recruiting often involves enlisting clusters of family, friends and fellow travellers from specific locales (neighbourhoods, universities, prisons).

Our research into the history of Isis-inspired attacks in western Europe clearly indicates that initial attempts by those directly commissioned by Islamic State, and without involvement from locally pre-existing social networks, mostly failed; however, as that involvement broadened and deepened, attacks became progressively more lethal. In our research, we find loose but wide-ranging connections between jihadist circles in Barcelona and much of western Europe, the Maghreb, the Levant and beyond that stretch back even before the attacks of 9/11.

The necessary focus of engagement must be youth, who form the bulk of today’s radical recruits and tomorrow’s most vulnerable populations. Volunteers for al-Qaida, Isis and many extreme nationalist groups are often young people in transitional stages in their lives – immigrants, students, people between jobs and before finding their life partners. Having left their homes and parents, they seek new families of friends and fellow travellers to find purpose and significance.

We need a strategy to redirect radicalised youth by engaging with their passions, rather than ignoring or fearing them, or satisfying ourselves by calling on others to moderate or simply denounce them. Of course there are limits to tolerance, and dangers of worse violence in appeasement of the intolerable. Our partisan divisions include real differences in values that politicians and pundits hype and ply into existential threats. But there are still vast common grounds in a world where all but the too-far-gone can live life with more than a minimum of liberty and happiness, if given half a chance. It is for this chance that some of our forebears fought revolutions, civil wars and world wars.

The 10 best jokes from the Edinburgh fringe

Paul Fleckney in The Guardian


Robert Garnham: Insomnia is awful. But on the plus side – only three more sleeps till Christmas.

Dan Antopolski: Centaurs shop at Topman. And Bottomhorse.

Paul Savage: Oregon leads America in both marital infidelity and clinical depression. What a sad state of affairs.

Caroline Mabey: I’m very conflicted by eye tests. I want to get the answers right but I really want to win the glasses.

Athena Kugblenu: Relationships are like mobile phones. You’ll look at your iPhone 5 and think, it used to be a lot quicker to turn this thing on.

Evelyn Mok: My vagina is kind of like Wales. People only visit ironically.

Phil Wang: In the bedroom, my girlfriend really likes it when I wear a suit, because she’s got this kinky fantasy where I have a proper job.

Gráinne Maguire: The Edinburgh fringe is such a bubble. I asked a comedian what they thought about the North Korea nuclear missile crisis and they asked what venue it was on in.

John-Luke Roberts: How did the Village People meet? They obviously led such different lives.

Olaf Falafel: If you’re being chased by a pack of taxidermists, do not play dead.

Why the Booker prize is bad for writers

Amit Chaudhuri in The Guardian


There are at least two reasons why almost every anglophone novelist feels compelled to get as near the Booker prize as they can. The first is because it looms over them and follows them around in the way Guy de Maupassant said the Eiffel Tower follows you everywhere when you’re in Paris. “To escape the Eiffel Tower,” Maupassant suggested, “you have to go inside it.” Similarly, the main reason for a novelist wanting to win the Booker prize is to no longer be under any obligation to win it, and to be able to get on with their job: writing, and thinking about writing.


Today, there’s little intellectual or material investment in writers: prizes and shortlists are meant to sell books

The other reason is that the Booker prize is most literary publishers’ primary marketing tool. There are relatively few Diana Athills (Athill was VS Naipaul’s editor) and Charles Monteiths (Monteith was William Golding’s) today: publishers who identify, and are loyal to, novelists in the long term because of commitment to literary merit. Publishing houses were once homes to writers; the former gave the latter the necessary leeway to create a body of work. Today there’s little intellectual or material investment in writers: literary prizes and shortlists are meant to sell books, and, although there’s a plethora of them, the Man Booker is the only one that has a real commercial impact.

The idea that a “book of the year” can be assessed annually by a bunch of people – judges who have to read almost a book a day – is absurd, as is the idea that this is any way of honouring a writer. A writer will be judged over time, by their oeuvre, and by readers and other writers who have continued to find new meaning in their writing. The Booker prize is disingenuous not only for excluding certain forms of fiction (short stories and novellas are out of the reckoning), but for not actually considering all the novels published that year, as it asks publishers to nominate a certain number of novels only. What it creates is not so much a form of attention but a midnight ball. The first marketing instrument is the longlist (this year’s was announced last month): 13 novels arrayed like Cinderellas waiting to catch the prince’s eye. (Those not on the longlist find they’ve suddenly turned into maidservants.)

When the shortlist is announced, the enchantment lifts from those among the 13 not on it: they become figments of the imagination. Then the announcement of the winner renders invisible, as if by a wave of the wand, the other shortlisted writers. The princess and the prince are united as if the outcome was always inevitable: at least such is, largely, the obedient response of the press. And the magic dust of the free market gives to the episode the fairytale-like inevitability Karl Popper said history-writing possesses: once history happens in a certain way, it’s unimaginable that any other outcome was possible. 

What is astonishing is the acquiescence with which the value system I’ve just described is met with by most writers. Most will feel that it doesn’t speak to why they’re writers at all, but few will discuss this openly. Acceptance is one of the most dismaying political consequences of capitalism. It informs the literary too, and the way publishers and writers “go along” with things. The Booker now has a stranglehold on how people think of, read, and value books in Britain. It has no serious critics. Those who berate its decisions about individual awardees (James Kelman’s prize back in 1994 prompted one judge to say it was “frankly, crap”) ritually add to its allure. After all, the attractiveness of the free market has to do with its perverse system of rewards – unlike socialism, which said everyone should be moderately well off, the free market proposes that anyone can be rich.

The Booker’s randomness celebrates this; it confirms the market’s convulsive metamorphic powers, its ability to confer success unpredictably. In literature, it has redefined terms like “masterpiece” and “classic”.

‘Virginia Woolf didn’t wake up in the morning and think, ‘I wonder if Mrs Dalloway will be longlisted for the Booker?’’ Photograph: George C. Beresford/Getty Images

Few writers, though, display any prickliness. Instead, we end up with the acceptance characteristic of capitalism – which, lately in politics, has led to deep alienation and monstrous alternatives like Donald Trump. I was shocked to run into a novelist who used to regularly rant against the Booker soon after he’d finally won it. It seemed like a part of his personality had gone. Docilely, he was doing the promotional rounds, as if he had been administered a massive sedative. He was robbed of the crusading bitterness that once animated him, and had become a case study of the memory-erasing contentment that capitalism provides.

I’m not saying that the Booker shouldn’t exist. I’m saying that it requires an alternative, and the alternative isn’t another prize. It has to do instead with writers reclaiming agency. The meaning of a writer’s work must be created, and argued for, by writers themselves, and not by some extraneous source of endorsement. No original work is going to be welcomed with open arms by all, and the writer is not doing their job if they don’t make a case for their idea of writing through argumentation, debate, and fervour.

Virginia Woolf didn’t wake up in the morning and think, “I wonder if Mrs Dalloway will be longlisted for the Booker?” She wrote instead her essay, Mr Bennett and Mrs Brown, questioning prevailing forms of valuation in the establishment. Her reformulation of what the novel could be or do, its impact on the reader, and, crucially, the ways in which we value or ignore its possibilities, is as pressing – as political – now as it was then.

DH Lawrence, TS Eliot and Henry James too had to argue, in and outside their creative work, for their idea of the literary, because the question of why literature was important hadn’t been settled. It isn’t settled today.

But, as in other walks of life under capitalism, there has been a loss of initiative among writers: a readiness to let others decide why their work is significant while they busy themselves at literary festivals. 

There has been, largely, an abjuring of the critical debates that should, at any given moment, define literature. In British academia, this loss of control over what constitutes value, especially in the humanities, has had its counterpart in what the UK government equivocally calls impact. “Impact” is judged not by gauging the importance of new scholarly work to other scholars, but to the market.

In emollient governmental language, impact is described as “an effect on, change or benefit to the economy, society, culture, public policy or services, health, the environment or quality of life, beyond academia”. As academics have discovered, “beyond academia” is, fundamentally, the market. In other words, the significance of scholarly work will not be judged by the impact it has on the field, but outside it.

The reason why very few question the Booker is, of course, that they will be accused of sour grapes or speaking inappropriately. That’s all right. Woolf was speaking inappropriately when she wrote against the grain of the prevailing decorousness; she suffered from sour grapes, on behalf of her gender and her craft. But her questions needed to be raised, and expressed with pertinence. Only rarely is silence a useful riposte.

Adani mining giant faces financial fraud claims as it bids for Australian coal loan

by Michael Safi in The Guardian


Exclusive: Allegations by Indian customs of huge sums being siphoned off to tax havens from projects are contained in legal documents but denied by company 


 

Men wearing masks of Australian prime minister Malcolm Turnbull and Adani chairman Gautam Adani protest outside Parliament House in Canberra. Photograph: Lukas Coch/AAP


A global mining giant seeking public funds to develop one of the world’s largest coal mines in Australia has been accused of fraudulently siphoning hundreds of millions of dollars of borrowed money into overseas tax havens.

Indian conglomerate the Adani Group is expecting a legal decision in the “near future” in connection with allegations it inflated invoices for an electricity project in India to shift huge sums of money into offshore bank accounts.

Details of the alleged 15bn rupee (US$235m) fraud are contained in an Indian customs intelligence notice obtained by the Guardian, excerpts of which are published for the first time here.

The directorate of revenue intelligence (DRI) file, compiled in 2014, maps out a complex money trail from India through South Korea and Dubai, and eventually to an offshore company in Mauritius allegedly controlled by Vinod Shantilal Adani, the older brother of the billionaire Adani Group chief executive, Gautam Adani.


Vinod Adani is the director of four companies proposing to build a railway line and expand a coal port attached to Queensland’s vast Carmichael mine project.

The proposed mine, which would be Australia’s largest, has been the source of years of intense controversy, legal challenges and protests over its possible environmental impact.

 Abbot Point, surrounded by wetlands and coral reefs, is set to become the world’s largest coal port should the proposed Adani expansion go ahead. Photograph: Tom Jefferson / Greenpeace

Expanding the coal port to accommodate the mine will require dredging an estimated 1.1m cubic metres of spoil near the Great Barrier Reef marine park. Coal from the mine will also produce annual emissions equivalent to those of Malaysia or Austria according to one study.

One of the few remaining hurdles for the Adani Group is to raise finance to build the mine as well as a railway line to transport coal from the site to a port at Abbot Point on the Queensland coast.

To finance the railway Adani hopes to persuade the Northern Australia Infrastructure Facility (Naif), an Australian government-backed investment fund, to loan the Adani Group or a related entity about US$700m (A$900m) in public money.


While it awaits the decision on the loan, in Delhi the company is also expecting the judgment of a legal authority appointed under Indian financial crime laws in connection to allegations it siphoned borrowed money overseas.

The Adani Group fully denies the accusations, which it has challenged in submissions to the authority.

The investigation

News of the investigation was first reported in India three years ago, but the full customs intelligence document reveals forensic details of the workings of the alleged fraud which have not been publicly revealed.

The 97-page file accuses the Adani Group of ordering hundreds of millions of dollars’ worth of equipment for an electricity project in western India’s Maharashtra state using a front company in Dubai.

To read the pdf click here.

The Dubai company allegedly sold the exact same equipment back to Adani Group-controlled businesses in India at massively inflated prices, in some instances said to be eight times the sale price.

According to the allegations in the file, the effect of these transactions was that the Adani Group spent an average 400% more for the materials. That money was allegedly paid to a company Indian authorities allege was owned through a series of shell companies leading to a Mauritius trust controlled by Vinod Adani.

If true, one effect of the alleged scheme would have been to move vast sums of money from the Adani Group’s domestic accounts into offshore bank accounts where it could no longer be taxed or accounted for.

Because tariffs for using electricity transmission networks are determined partly by what they cost to build, if the DRI’s accusations are correct, the overvaluation of capital goods would have been likely to have led to higher power prices for Indian consumers.

 Adani Power company thermal power plant at Mundra, India. Photograph: Sam Panthaky/AFP/Getty Images

A significant proportion of the money the Adani Group allegedly siphoned out of India was provided by taxpayers in the form of loans from the publicly-owned State Bank of India and ICICI, a private bank. There is no suggestion either bank was aware of or involved in any illegal activity.
‘We are cooperating with investigating agencies’

The Adani Group said in a statement to the Guardian on behalf of itself, its subsidiaries, and Vinod Adani that it “strongly denies the allegations of overvaluation”.

Government loan to Adani could be tainted by interference, economists say



“It is a standard procedure for the group to follow international competitive bidding route for major capital expenditures to ensure transparency and competitiveness in the process. All our transactions are always conducted within the framework of extant regulatory guidelines and provisions,” it said.

“The fact that our projects have incurred the lowest cost across central, state and private utility players has gone to establish the robustness of the processes followed by our group.

“It may be noted that Mr Vinod Adani who is the elder brother of Mr Gautam Adani has been a non-resident Indian for about 30 years and has his own established business interests outside India,” the statement said.

“Adani Group is aware of the investigations being conducted by the DRI, and has fully cooperated, and shall continue to cooperate with the investigating agencies.”
The Australian loan

The Adani Group, or a linked entity, has reportedly been granted “conditional approval” for the US$700m (AU$900m) concessional loan from Naif, the Australian government investment fund.


But due to secrecy around the operation of the investment fund, it is not clear whether the loan application discloses the existence of the DRI notice or the ongoing legal proceedings, or whether the applicant is required to do so under the Naif’s anti-money laundering provisions.

  Adani Group chairman Gautam Adani meets with Queensland premier Annastacia Palaszczuk in 2016. Photograph: Cameron Laird/AAP

Adani Group did not clarify whether it had informed Naif about the allegations when asked by the Guardian.

Naif’s investment mandate includes a clause preventing it from “act[ing] in a way that is likely to cause damage to the commonwealth government’s reputation, or that of a relevant state or territory government”.

Vinod Adani is currently listed as the sole director of four Singapore-based companies which, through their Australian subsidiaries, are proposing to build the railway line using the government loan. The companies also control a project to expand the Abbot Point port.

All four entities are ultimately owned by Atulya Resources Limited, an Adani-controlled company in the Cayman Islands.

Status of the Indian investigation

The Guardian understands the allegations of over-invoicing have been passed from the DRI to the Enforcement Directorate (ED), an Indian agency tasked with investigating financial crimes.

The Adani Group says the case is currently before a legal authority, the Adjudicating Authority, indicating that Indian officials are pressing either to seize assets they regard as being connected to money laundering or to levy a fine up to three times the sum allegedly siphoned overseas.

The company declined requests to clarify what if any penalty the authorities are seeking, but a spokesman said a decision was expected shortly. “We follow the process of corporate governance and comply with the applicable laws,” he said.

“All our transactions are always conducted within the framework of law. We have already submitted our detailed reply. Adjudication process on the subject is going on and we expect the order in near future.”

The Guardian is publishing excerpts from the DRI file in the interests of ensuring Naif, as well as the public, have access to as much relevant information as possible in assessing whether Adani or linked companies would be suitable recipients of public money.


In a separate case last year, six Adani subsidiaries were listed among 40 other companies being investigated for allegedly running a similar price-inflation scheme. The companies are accused of inflating the price of coal imports from Indonesia to hide profits in overseas tax havens.

The DRI and the ED did not respond to a request to clarify the status of the investigations.
The alleged money trail

India is electricity-starved. More than 240 million Indians – enough people to form the fifth-largest country on Earth – lack access to regular power.

In the early 1990s, to encourage power companies to build electrical infrastructure, the Indian government eliminated import tariffs on technical equipment such as reactors and transformers. Profit margins on these projects increased overnight.

Adani saw the business opportunity. In 2010, the Maharashtra Eastern Grid Power Transmission Company Limited (MEGPTCL), a wholly owned subsidiary of Adani Enterprises, was granted a license to develop two electricity transmission networks in the north-east of the state.

The company used another Adani subsidiary, PMC Projects, to source the equipment it would need to build the networks. In turn, PMC, subcontracted the work to a company in Dubai.

According to the investigators’ report, bank records suggest that that company, Electrogen Infra FZE (EIF), charged significant – and to Indian authorities, suspicious – markups on the equipment it sold to PMC.

In one of the 57 invoices cited in the report, EIF is alleged to have ordered equipment from Hyundai Heavy Industries in South Korea. Bank records allegedly show the company paid Hyundai about US$65m.

According to the DRI, it sold the same equipment to PMC for about US$260m – a mark-up of nearly 400%.

Extract from page 14-15 of the Directorate of Revenue Intelligence file on Adani Group. Photograph: The Guardian

“[This] appears to be an abnormal and gross inflation, contrary to ordinary economic logic and prudence,” investigators concluded.

In total, the report alleges EIF made about 26 orders from Hyundai Heavy Industries and sold them onto PMC for an average mark-up of more than 400%, making a profit margin of US$189m.


There is no suggestion Hyundai Heavy Industries or any other supplier was aware of or involved in any illegality.

Extract page 19-20 of the DRI file, section 4.1.16. Photograph: The Guardian

EIF allegedly purchased another 25 shipments of equipment from three companies in China. According to the report, these were sold to the Adani Group for an average markup of about 860%.

Investigators calculated the total assessable value of the allegedly marked-up invoices to be nearly 15bn rupees.

  Extract from page 78-79 of the DRI file, section 15.4. Photograph: The Guardian

“Given the scale and extent of invoice inflation, it is apparent that it [was done] with fraudulent intent of siphoning money from India,” the DRI said.
Who controls the companies?

Key to the alleged fraud, according to investigators, is that EIF, the company subcontracted to purchase the equipment from manufacturers in South Korea and China, was directly controlled by the Adani Group and its associates.

Investigators claim EIF was partly staffed by ex-Adani Group employees who had recently left the company.

According to a letter from the company to an Indian bank that is cited in the notice, EIF was owned by another company called Electrogen Infra Holding Pvt Ltd (EIH). The trail of ownership eventually leads to a trust based in Mauritius – headed by Vinod Adani.

  Extract from page 21-22 of the DRI file, section 4.2.3. Photograph: The Guardian

Investigators concluded: “From the above information given to the bank by EIF, it appears that Vinod Adani had a direct control over the activities of EIF through the Asankhya Resources Family Trust.”

Vinod Adani is also listed as having been the director of EIH between January 2010 and May 2011, though the notice states he told investigators he had no involvement in the day-to-day running of the company.

Investigators also claim to have discovered that an employee of the Adani Group subsidiary PMC had been granted permission by EIF staff to sign multimillion-dollar supply contracts on its behalf.

“All these go to show that there is no distinction between PMC and EIF, they are only working for common interest as part of a large modus-operandi for siphoning off money from India by invoice inflation,” investigators concluded.
The DRI and the ED were both contacted for comment. Attempts were made to contact EIF but the company could not be reached on its listed email or phone number.

Hyundai Heavy Industries did not respond to a request for comment.

It is unclear when the allegations of invoice inflation will be resolved in Delhi other than the Adani spokesman saying that they expected an order “in near future.” In Queensland, Naif’s decision on whether to grant Adani the nearly A$1bn loan is expected by the end of this year.