The order from India for two dredgers in 2015 is just right for shipbuilding company IHC. The company from Kinderdijk made good money in the years before from the sale of pipe-laying vessels for oil extraction at sea in Brazil. But due to the collapse of the oil price, the economy is currently in a slump in that sector. IHC now has to rely on the construction of dredgers.
The shipbuilder has been supplying these vessels since 2005 to Adani, a large, fast-growing company in the port and energy sector in India. Its CEO and owner is Gautam Adani, an Indian oligarch who maintains a close relationship with Indian Prime Minister Modi. With the delivery of two new dredgers to Adani, IHC generates 100 million euros in much-needed turnover. The purchase contract will be signed in Mumbai at the beginning of June 2015, in the presence of Prime Minister Mark Rutte.
IHC then only needs to take out export credit insurance, with which it can cover the financial risks of the delivery of the dredgers. For this policy, IHC turns to Atradius, an agency of the Dutch state. Atradius has often provided IHC with export credit insurance, including for earlier deliveries to Adani.
However, at Atradius, they started to consider dredging projects as sensitive projects in 2015. NGOs are making a fuss at the agency about policies issued to Dutch dredging companies for work in the Brazilian port of Suape and on the Suez Canal in Egypt. Fishing grounds have been destroyed and the local population has been chased away, according to the organizations. Port Mundra in western India, developed by the Adani company, has similar problems. The government has fined the company for destroying creeks and mangroves, and locals complain that fishing and farming grounds threaten to disappear.
In July 2015, one month after signing the purchase contract, Atradius rejected IHC’s application. The export credit insurer considers that there are “unacceptable environmental and social risks” associated with the delivery of the dredgers to Adani, according to documents requested in the context of a Woo request (Open Government Act). The documents also reveal that the Dutch embassy in New Delhi is lobbying to get Atradius’ negative decision off the table. The diplomatic post believes that IHC’s commercial interest should weigh more heavily. She eventually manages to push through the sale of the dredgers.
Free allegations
The Dutch embassy in New Delhi reacts with incomprehension to the rejection of the export credit insurance for IHC. “A major transaction of a Dutch company, concluded in the presence of the highest political level from the Netherlands and India, is in danger of being called off,” a diplomat notes in a note. He is afraid that the order for IHC will go to a Korean company. The embassy also points to the “crucial role” that Adani plays in the government’s policy to make the Netherlands “the hub of exports from India to Europe”. After all, the conglomerate is working to further strengthen its position in the Indian port sector, with the support of Indian Prime Minister Modi.
Atradius is accused by the embassy of making “gratuitous” allegations about Adani. The export insurer’s behavior is “not very professional”, the embassy wrote in a confidential diplomatic message to the various policy departments of the Ministry of Foreign Affairs in early 2016. The mother department in The Hague is also unpleasantly surprised by Atradius’ negative assessment of Adani. “We must do everything we can to find a way that this deal can go ahead,” an official writes in an email. “Every effort must be made not to let IHC fall over.”
The embassy in New Delhi insists that Atradius travel to India to visit the Indian conglomerate. This fact-finding mission will take Atradius in February 2016 to Adani’s headquarters in the western Indian city of Ahmedabad and to the ports of Hazira and Vizhinjam, where Adani is active. It can be concluded from the Woo documents that the Dutch ambassador Fons Stoelinga has a meeting with CEO Gautam Adani at his residence in New Delhi before Atradius’ visit. His embassy concludes that Adani’s bad reputation is mainly due to poor communication by the conglomerate, making it “a target for international NGOs”. Adani’s sustainability policy is “very decent in parts”, the embassy believes. The diplomatic post comes up with the proposal to further coach the conglomerate in the field of corporate social responsibility (CSR). Adani is open to this, the conglomerate is “eager to learn”.
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Doubts
At the end of March 2016, Atradius will issue a new assessment of the Indian conglomerate, which is again negative. But the export credit insurer is now keeping open the possibility of revising that judgment at a later stage. In the meantime, under the leadership of Atradius, the proposed ‘CSR coaching’ of Adani’s management will commence. In mid-2017, a report drawn up by engineering firm Arcadis on behalf of Atradius shows that Adani has made “significant” improvements to its business operations. It would now better comply with social and environmental legislation. The company has also introduced a complaints mechanism for the local population if they feel wronged by Adani.
Atradius is still prepared to provide the export credit insurance. Officials of the Ministry of Foreign Affairs congratulated each other on the success achieved. “A fine example of economic diplomacy,” one of them emails. On 8 January 2018, the two IHC dredgers, the Shanti Sagar 17 and 18, entered the Indian port of Hazira. The Dutch ambassador Fons Stoelinga praises the buyer of the vessels in his speech on the spot. „The credentials for Adani speak for themselves“, he says.
At Atradius, the doubts about the company have not completely disappeared, according to the Woo documents. The agency makes the policy for the delivery of the dredgers subject to the condition that an independent party conducts an annual audit, with recommendations for the CSR policy of the Indian conglomerate. If Adani does not comply, sanctions may be imposed. Citibank, which provides Adani with a loan for the purchase of both dredgers, can then demand an accelerated repayment from the Indians.
So far, Adani has not been imposed that sanction.
The Woo documents report that after arrival in India, the Shanti Sagar 17 and 18 will be used, among other things, at the new port of Vizhinjam, a major infrastructure project that Adani is carrying out on behalf of the Indian government. During the summer from 2022 protests flare up from coastal residents and fishermen against the harbor construction. They block the harbor and start hunger strikes. According to them, the construction of breakwaters at the harbor mouth has washed away kilometers of beach, forcing hundreds of families to move.
The fishermen’s protest is led by the Catholic Church in South India. “There has been no proper research into coastal erosion,” says priest Sujan Amurutham on the phone. He predicts that the demonstrations against Adani will not stop. “More than fifty thousand coastal residents are disadvantaged by the port expansion.” The Indian government and Adani argue that the coastal erosion is the result of climate change and extreme weather. However, a scientific study from August this year also establishes a relationship with the port project.
Read also: ‘Without delivery on credit, everything comes to a standstill‘
Sustainability lessons
Marije Hensen, head of CSR at Atradius, says that recently “things have improved” around compensation to people affected by the Vizhinjam port construction. That compensation is still not properly arranged, but according to her, the Indian government also bears responsibility for this. Adani has also improved working conditions and safety in the port, Hensen said. “That was really out of order.” Adani did not comply with international accident prevention standards.
She believes the company is very slow to make improvements in business operations. Adani’s CSR coaching, which is still running, has not been successful enough. “If an export credit insurance policy is now requested for a delivery to Adani, I do not think I would approve it,” says Hensen. The sustainability lessons are no more than “pinpricks” for the conglomerate, she says.
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A version of this article also appeared in the December 6, 2022 newspaper