Business
West Bengal: Why Adani Group Has Walked Away From The Tajpur Port Project
In happier times: the ceremony last year where Karan Adani was handed over the LoI for the Tajpur project.
When Bengal Chief Minister Mamata Banerjee announced at the inauguration of the Bengal Global Business Summit on Tuesday (21 November) that a fresh global tender inviting bids for the Rs 25,000 crore Tajpur deep sea port project would be floated, she was actually scoring a self-goal.
The fresh tender means that Adani Ports, which was handed over a letter of intent (LoI) by the Bengal government last year after the group won a bid to develop the greenfield port about 160 kilometres southwest of Kolkata, has pulled out of the project.
Though Banerjee made the announcement — about the fresh tender — with a smile on her face, the pullout by the Adanis is actually a big blow to her dream project. The Tajpur port project was touted as the single biggest investment in Bengal in the past five decades and was billed as one that would mark an industrial turnaround for the state.
Banerjee told industrialists present at the inauguration that they could also participate in the global tender for the port project.
The LoI for the Tajpur port was handed over to Karan Adani, the CEO of Adani Ports, at a ceremony in Kolkata in October last year. Banerjee was present at the ceremony.
Soon after that, Adani Ports started applying for the necessary permissions and clearances from ministries and agencies of the Union government and other statutory bodies.
The process of obtaining those permissions and clearances was on and Adani Ports was awaiting the letter of agreement (LoA) from the Bengal government. The LoA would have paved the way for commencement of physical work on the project.
But somewhere along the way, the Adani Group realised that the mega project is not economically viable.
Also, the allegations by Trinamool Lok Sabha MP Mahua Moitra against the Adanis, and Mamata Banerjee’s unwillingness to gag her parliamentarian, is also said to have put the Adanis off.
Swarajya spoke to a number of people — senior state government officers, bureaucrats in the Union Ministry of Ports, Shipping and Waterways, senior executives of the Adani Ports and Logistics and other industrialists to know why the Adanis have virtually washed their hands off Tajpur.
According to all those in the know, the primary reason for the Adanis deciding to walk away from the Tajpur project is financial. The conglomerate concluded that the project is unviable for the following reasons:
1. The Dhamra and Paradip ports — both are deep sea ports that can handle capesize vessels — are near the proposed Tajpur port.
Dhamra, operated by the Adanis, is less than 200 kilometres away while Paradip (operated by the Union government) is 290 km away.
Both these ports have excellent infrastructure and are connected by six and eight-lane highways and by rail.
According to the Union Port, Shipping and Waterways Ministry projections, both Dhamra and Paradip can easily add to their existing capacities to handle more traffic in future.
Also, both these ports are located in Odisha where the industrial climate and infrastructure are much better than Bengal.
Dhamra and Paradip are already catering to the mines and industries in Odisha, Jharkhand and Bihar, and there is no chance in future of even some of this traffic being handled by Tajpur.
The Tajpur port would, thus, have had very little traffic to handle. Hence, it will be an unviable project.
2. The Bengal government had announced, and reiterated many times, that the Tajpur port would provide direct employment to 25,000 people and indirect employment to over one lakh.
The state government was pressuring the Adanis to commit themselves to this. But the Adanis were reportedly unwilling to do so. Such a labour-intensive port will never be financially viable, they held.
Adani Ports, for example, employs only a few hundred people at the highly-mechanised Dhamra port.
3. Land acquisition will mar the project. Though the state government has promised 125 acres of seafront and 1,000 acres of land, 5 km away to the Adanis, a lot of the land parcels have encroachments which will be difficult to remove.
Also, the port will require more than the 125 acres on the seafront promised by the state, and the promoters will have to acquire the extra land required on their own.
But Bengal’s notorious land acquisition policy — the state leaves it to promoters of a project to acquire land all on their own without any help — would have made the process extremely difficult and cumbersome.
Though National Highway 116B is 5 km away from Tajpur, and the nearest railhead at Ramnagar is 9 km away, building six or even four-lane roads from Tajpur to the highway and to Ramnagar will be next to impossible.
The narrow road that leads from NH 116B to Tajpur passes through densely populated settlements and acquiring land for such a wide road by the Adanis will prove to be a nightmare.
4. The Adanis wanted to get a first-hand feel of operating in Bengal by operating a berth at the Haldia Dock Complex (HDC).
Adani Ports and Logistics bid for and got a contract to design, build, finance, operate, maintain and manage the bulk terminal at HDC’s berth number 2 for 30 years in mid-September last year.
That, say industry insiders, was part of the group’s plan to test the waters in Bengal. Over the last one year, top executives of Adani Ports and Logistics used the HDC foray to study the industrial climate, work culture, trade union behaviour and political interference in business in Bengal.
They (the Adanis) had decided that they would take a final decision on going ahead with the Tajpur project based on their experience at Haldia.
Unfortunately for Bengal, the experience at Haldia was quite unpleasant for the Adanis. The group discovered that a very poor work culture still plagues Bengal, and rent-seeking politicians hold businesses to ransom with unreasonable demands.
Backed by politicians, trade union leaders also make businesses difficult to operate. And there is constant pressure from the state government as well as politicians to provide employment to people, especially ruling party cadres and supporters, even when more manpower is not required.
The Adanis were also annoyed with Banerjee’s refusal to ask Mahua Moitra to cease her almost daily accusations against them.
Gautam Adani reportedly conveyed to Banerjee that "strident criticism" of and "vicious attacks" on the group "based on false allegations" was not proper since the group was planning to invest heavily in the state.
But Banerjee, for purely political reasons, refused to intervene and issue a gag order. Moitra kept up her accusations against the Adanis. Fed up with this, and also because of the project’s unviability, Gautam Adani decided to step away from the mega project.
By choosing to side with Moitra, Banerjee has once again let political expediency get the better of business that Bengal so badly requires. The Chief Minister has chosen politics over investment, just as she did a little over 15 years ago when she bade the Tata Motors ‘goodbye’ from Singur, thus sealing Bengal’s reputation as a terrible investment destination.
After the Adanis have walked away from the project, it is highly doubtful if any other major group will come forward to invest in the Tajpur project.
Word is spreading fast that the Tajpur project has been evaluated by the Adanis to be completely unviable and that Bengal, despite tall claims by Banerjee, remains a poor and unfriendly investment destination.
Like the departure of the Tatas from Singur, the exit of the Adanis from Tajpur represents a monumental setback for Bengal.
Singur is, today, a stretch of land overgrown with vegetation and dotted with hamlets where poverty is widespread. Tajpur is expected to continue being much the same as it is now — a large expanse of unused land surrounded by human settlements immersed in a sense of hopelessness.
