DRI scrutiny of coal imports by power generating companies has thrown up data that shows five findings.
First, there exists a sophisticated system for trade-based money laundering. It is industrial in its scale of operation and its typical methods are creation of layers and artificial inflation of landed goods. Thus, two sets of GCV (gross calorific value) test reports were submitted. The lower GCV report was submitted for procures by Indian importers (subsidiaries, intermediary agents etc) from Indonesian suppliers. The higher GCV report was submitted for contracts between Indian importers and power gencos to Indian customs at the time of import. This was the inflated value of the coal. For carrying out this operation, while the coal was directly shipped from Indonesian ports to importers in India, the import invoices were routed through one or more intermediaries based in a third country such as Singapore, Dubai, Hong Kong and British Virgin Islands.
Second, just as in the old days the word ‘mafia’ got suffixed to the management of coal business, (remember the term unique to India – coal mafia), similarly, in the present times over-valuation of coal imports has become a standard for Power Gencos. The statistics show that it is a pervasive phenomenon. 40 power gencos and traders were investigated by DRI for a couple of years and the investigation results show that these entities overvalued coal by Rs 28,247 crore.
Third, it seems the industry collaborated and developed one route for operating this money laundering. All such imports came from Indonesia, shipped directly to Indian ports and invoices were raised in secretive jurisdictions.
Fourth, power gencos stir a storm for compensatory power tariff, all the time flagging high cost of procurement when in reality they are over-invoiced goods.
Fifth, the cleanup of coal imports is important because it is a requirement of the Prevention of Money Laundering Act (PMLA). It will also have power tariff ramifications.
A different kind of power story emerges from Uttar Pradesh. Often we have heard UP users suffering power shortages in blistering heat. Besides long term PPAs, all states have also been buying power from the Power Exchange to meet their deficits, except UP. The peak shortage of the state is at 2000 MW. The discom, UPPCL has not explained why it has not done so prompting the state regulator to slap proceedings. Read what the UPERC has said to the discoms in our story on the subject.
Meanwhile, the RBI has sounded an alert on state finances for development activities on account of provisioning for Uday. The Central Bank, in a study, has said that the discoms debt takeover by States under Uday will lead to capex cuts and adverse impact on growth. While the strain is undeniable, it also needs to be told that fixing the power sector is the main development activity of the states.
