How Gautam Adani became a catalyst for policy change

The affable entrepreneur has always managed to get govts to create enabling provisions for his projects


The standard industrialist chooses to grab an industrial licence, and then spends a great deal of time and effort in blocking others from adopting the same growth path.
Gautam Adani’s strategy is to do the opposite.

When Adani set up the Mundra port a couple of years ago, he did so by influencing the Gujarat government to create a vibrant port policy.

Today, this has become the model policy for many states, which, in turn, has allowed many a private port to come up.

To find business for his port, he did not choose to lobby with the government; he opted to purchase large coal mines in Indonesia, and talked to state electricity boards in Gujarat, Rajasthan and Maharashtra. He simply offered them good quality coal at competitive prices.

By last year, Adani was importing around 2.5 million tonnes of coal through Mundra, and has become India’s largest coal importer.

Switch to special economic zones (SEZs): Well before the SEZ policy came about, Adani went about purchasing marshy and non-agricultural land from the state government at prices that were around 30% higher than the prevailing market prices.
By the time the SEZ policy was announced, Adani had already acquired through various entities 15,665 acres officially. No tangles with farmers or private owners.

Once the policy was notified, he could easily earmark 5,000 acres for the SEZ.
To ensure the SEZ had 24 x 7 power, he began setting up a 2,640 mw power plant at Mundra. But instead of just placing orders for boiler-turbine-generators (BTG) for that capacity, Adani ordered for five times that capacity with the Chinese two and a half years ago.

The result: he could place orders for BTGs that were at least 30% cheaper than competitors.

To ensure timely delivery, he even set up an office in China with Chinese staff to monitor work on BTGs.

It was a daring gamble, which received a slight setback when he lost the bid for the 4,000 mw ultra mega power plant earmarked by the Central government at Mundra to the Tatas.

However, instead of looking at the Tatas as competitors, Adani promptly persuaded them to use a dedicated terminal for coal handling that could become the largest in the world with the capacity to handle 40 million tonnes annually (more of that later).
To meet their own coal requirements, the Tatas too have purchased a coal mine, but in Mozambique and Indonesia.

A port’s success depends on how well its linkages are. So Adani, at his own cost, constructed a 65 km railway line from Mundra to a little distance away from the Adipur junction, where the national Indian Railways junction lay.

He then went to the railway ministry and explained to the officials there that he had a port and a private railway line of 65 km and sought the government’s help in crafting a policy to accommodate both for the entire country.

That resulted in the government announcing a policy which allowed all port to national railway grid linkages as private-public-partnerships (PPPs), which then got adopted by every new port being set up across the country. 

He then went about building a captive airstrip at Mundra, which is now capable of becoming one of the largest commercial cargo airports in India.

He has been persuading the government to announce a policy that would allow the country to use such privately owned assets to serve the national cause and build better linkages for trade in India.

The policy is expected soon, and this could see the setting up of almost 200 new airports around India, at no cost to the national exchequer.

But the most impressive policy change that he has initiated appears to be in the area of power generation. And this could be the harbinger of things to come on the power front. But that will be the topic for another column.
rnb@yes2etl.com