SBI defends $1 billion loan to Adani for Oz coal project, says money disbursal after scrutiny
PTI New Delhi, November 20, 2014
First Published: 20:53 IST(20/11/2014) | Last Updated: 21:03 IST(20/11/2014)
Amid controversy over sanctioning a $1 billion loan (nearly Rs. 62,000
crore at current exchange rates) to Adani Group, SBI said Thursday it
had only signed a preliminary MoU and will disburse the money only after
proper due diligence.
SBI had signed a pact sanctioning $1 billion loan to Adani
Group's coal project in Australia on the sidelines of Prime Minister
Narendra Modi's visit to the country.
"We clarify that this is a memorandum of understanding. This is not a
loan sanction that we have given. It will go through proper due
diligence both on the credit side as well as on the viability side," SBI
chairperson Arundhati Bhattacharya said in Delhi.
"So all of that will be done. The board will take a call and then only loan will be given," she said.
Asked about the exposure of SBI if its board approves the loan,
Bhattacharya said the net exposure would be to the tune of $200 million
as there are some repayments also from the company.
On concerns
being raised by environmentalists over the port of the shipment, she
added, "We also checked with Queensland's government they have clearly
said that there is no environmental issue...the threat to Great Barrier
Reef is much more from the star fish attack.
"It is not from the
Abbot Point port and today Abbot point coal come at $42 fob (free on
board) which is much below better than international prices ruling today
and quality of coal is very good. It is non-polluting in nature."
Meanwhile, the Congress raised concern over the $1 billion loan to the Adani group for the Carmichael coal mine.
"What was the propriety of the SBI giving the loan to Adani, who was
sitting next to Prime Minister during the visit, at a time when some
five foreign banks have denied credit to the group for the project?"
party general secretary Ajay Maken said.
Refuting the charges, a
senior official of Adani Group said, "There are already a couple of
international banks which have already funded our acquisition of mines
in Australia. I don't think it is for public consumption for us to tell
which banks are currently considering the project in different stages of
approval.
The development of the coal mine located at Queensland in Australia
and required infrastructure including railways would cost $7.6 billion.
Australia's federal and Queensland governments are eager to see the
mine built following the loss of more than 4,000 coal jobs over the past
two years, but analysts and project finance experts believe Adani may
have underestimated the challenge of raising funds for the project.
Adani, which is also facing a campaign by anti-coal campaigners, is
counting on lining up funding from South Korea, having named POSCO
Engineering & Construction Co Ltd as the preferred contractor to
build its rail line.
Adani's apparent momentum on the Carmichael project is in stark
contrast to rival Indian firm GVK's slow progress on another huge coal
mine in the Galilee Basin, the Alpha project, which is co-owned by
Australian billionaire Gina Rinehart.
Much bigger coal rivals, like BHP Billiton and Glencore, have also
shelved coal developments in Queensland at a time when a third of
Australia's coal output is making losses.
Carmichael mine: environmental impact will be unknown for years
Government backdown means Indian owners won’t be required to replace
razed critically endangered habitat until two years into the project
The Carmichael mine, to be the largest coalmine in Australia, will be
constructed in the Galilee basin in central Queensland. Photograph:
Andrew Quilty/Greenpeace/AAP
Construction of Australia’s largest ever mine will be well underway
before its impact upon the environment is known, with a requirement to
replace critically endangered habitat razed by the project pushed back
by two full years after a backdown by the federal government.
Documents seen by Guardian Australia show that the government scaled back its initial environmental conditions for the Carmichael mine in central Queensland following a request by Adani, the proponent.
The changes effectively mean the $16.5bn mine’s impact on crucial
groundwater supplies, beyond the 297bn litres it will extract from
aquifers, will be largely unknown until the project is at an advanced
stage.
More than 35,000ha of habitat, containing the endangered black-throated finch and the vulnerable yakka skink,
will be flattened for the mine. Indian firm Adani was initially
required to secure land elsewhere to compensate for this loss prior to
construction, but will now not have to do this until two years after the
project starts.
The Carmichael mine is being enthusiastically backed by the
Queensland government, which has offered to fund part of the project.
The mine, which was approved in July,
will extract 60m tonnes of coal a year for export to India. Emissions
from the burned coal will create an estimated 128m tonnes of carbon
dioxide a year, around four times the annual greenhouse gas output of
New Zealand.
In draft conditions drawn up by the federal Department of the
Environment, Adani was told to submit a groundwater management and
monitoring plan at least three months before commencement of the
project.
The final approval in July, however, changed this to three months
“prior to commencing excavation of the first box cut” – which is the
point where the ground is opened up to begin mining coal.
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This means the full impact upon groundwater will remain a mystery until Adani is poised to commence mining. The Independent Expert Scientific Committee advised the government in May that Adani’s initial attempt at measuring the impact upon water required further work.
The final Department of the Environment assessment, which has to
judge whether proponents are of suitable character, also states: “Adani
Group has a history of responsible environmental and community
management applied to similar projects in other countries.”
This is despite an arm of the company being fined for numerous environmental breaches in India, as well as being accused of violations of workers’ rights.
Adani submitted suggested amendments to 14 of the draft conditions,
largely to bring them in line with an approval already granted by the Queensland government. The company sent the proposed changes on 3 July, with the amended final decision made on 14 July.
Adam Walters, spokesman for Greenpeace, said the final approval pays “lip service” to environmental protection.
“It makes it completely legal for no one to understand the impacts of
the project before it starts and for it to be shoved into a backroom
process with no public scrutiny,” he told Guardian Australia. “The
monitoring of water has been found to be inadequate by an independent
body but rather than force Adani to assess it properly, the government
has given it the green light.
“Groundwater is the lifeblood of that region. There are special
springs near the mine, real oases of life in a very arid area. We won’t
know what the impact on them will be.
“We also have an approval based on the word of Adani that they know
where to get offset habitat, so they are able to destroy valuable
habitat without securing a replacement. There are species that will
suffer a very uncertain future because of this.
“This shows the system is broken, that the government is weak on these issues and didn’t stand up to the miner on this.”
Government documents highlighting the potential “pros and cons” of
the project show that it will contribute $2.97bn each year to the
Queensland economy at full export capacity, creating 3,920 jobs once it
is operational.
However, it states the mine will also cause living costs to rise,
“labour market drain from other sectors into the mining industry”,
increased pressure on community services and “reduced amenity for
landholders.”
The Carmichael mine will transport coal to an expanded port at Abbot
Point by a 388km rail line. On Monday, the Queensland government announced
it will take a “short-term financial stake” in the rail line as part of
a strategy to fund Galilee basin coal projects to ensure they
eventuate.
A raft of international banks, including Citi, Deutsche Bank, Royal Bank of Scotland, HSBC and Barclays, have explicitly ruled out funding Adani’s project. The mine development has raised environmental concerns, due to its impact on climate change and the Great Barrier Reef, as well as financial uncertainty due to the depressed price of coal.
A spokesman for the Department of the Environment said the change to
the groundwater requirements was taken “to better align the timing for
the plan with the expected project stage when impacts to groundwater
will potentially start to occur”.
“The magnitude of the likely impacts on groundwater were taken into
account when the project was approved. The project will be staged over a
number of years, and any impacts on groundwater are expected to occur
after work commences on the bulk earthworks (box cut) required for
underground or open-cut mining.”
The spokesman added that Adani will be expected to “actively manage”
the mining site for endangered species while replacement habitat is
found.
A spokesman for Adani said: “The approval of the Carmichael mine was
the subject of some of the most strict and stringent conditions ever
imposed on a project in this country.
“We welcomed the approval then, and will adhere to its conditions.
The approvals process in place is as stringent, if not more so, than
those that apply in comparable jurisdictions.”
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