In 2013, the environment ministry under the Congress-led United Progressive Alliance government decided to impose a penalty on the Adani Group’s waterfront development project at Mundra in Kutch, Gujarat, of Rs 200 crore, or 1% of the project cost, whichever was higher, for damaging the environment and breaking laws.

In September 2015, with the Bharatiya Janata Party-led National Democratic Alliance in power at the Centre, the environment ministry did a U-turn. It said that under the law, the government could not impose such a penalty. Instead, it ordered that studies be carried out to estimate the cost of the damage. The company would pay to fix any damage to the environment once the studies had been concluded. Violations had indeed taken place, the ministry then said, but those would be dealt with separately later.

A year later, in 2016, when news of this turn-around by the environment ministry surfaced, the ministry argued that scrapping the fine had opened the possibility of the company later paying an amount even higher than Rs 200 crore to restore the damage done to the local ecology.

Records reviewed by show that five-and-a-half-years later, environment ministry officials have internally reported that the project did not violate any regulations or cause any damage to the environment. The officials have said so without awaiting results of the studies that the ministry ordered to assess any damage.

Though the Adani Group has spent Rs 3.16 crore so far on the studies that are supposed to assess its culpability, these are yet to be submitted to the ministry. Instead, the environment ministry is now processing the company’s proposal for expanding the project.

The group company, Adani Ports and SEZ Limited, has consistently claimed since 2013 that it has neither violated any regulations nor broken any laws. reviewed records of the environment ministry on January 9, and sent detailed queries to the Adani Group and the ministry on February 8-9. The company has not replied so far to the queries and to repeated requests from seeking a response. Neither has the environment ministry.

The project

The Adani Group’s waterfront development project in Mundra comprises four ports with berths for dry and liquid cargo, container terminals, yards, a rail siding and 700 hectares for other construction works. It is part of a larger industrial township complex that the company has been setting up on a piecemeal basis in Mundra.

In 2012, when questioned about environmental violations before the Gujarat High Court, the Union environment ministry set up a committee to investigate whether the company had broken green laws and damaged the environment. The committee, headed by environmentalist Sunita Narain concluded that the company had indeed violated several green regulations and caused large-scale damage to the environment.

The committee recommended a ban on one of the four ports. It also recommended that the company should be made to pay either Rs 200 crore, or 1% of the project cost, whichever is higher, to set up an Environment Restoration Fund, which would go towards repairing the damage to the ecosystem. The committee recommended that this money should be over and above what the company spends on Corporate Social Responsibility. The Union government accepted the recommendations and sent a show-cause notice to the company, asking why these penalties should not be imposed on it. The company defended itself.

The company suggested that instead of the Rs 200 crore penalty, “any substantially reduced amount voluntarily keeping in mind its CSR [Corporate Social Responsibility] contributions as well as challenges faced by the infrastructure sector in the current economic scenario” should be imposed.

Even after assessing all responses, senior officials of the environment ministry concluded in January 2014 that the penalty and other restrictions on the project were necessary. But in April 2014, under the United Progressive Alliance government itself, doubts were first raised about the legality of imposing a penalty without judicial proceedings.

By September 2015, the new Bharatiya Janata Party-led government said that making the company create the Rs 200 crore Environment Restoration Fund was not legally sound. It said that further studies would have to be conducted to find out if the project had indeed damaged the environment and if so, to assess the cost to fix it. It also decided to not impose several other penalties on the project and its components. But this U-turn was not made public.

Extract from the September 2015 order of the Union Environment Ministry through which it decided not to impose the Rs 200 crore penalty on the Adani Group's waterfront project. But still found the project in violation of laws.

In June 2016, the Business Standard published a report on the ministry’s decision against imposing the Rs 200 crore penalty. Government records show that the ministry noted internally that the Rs 200 crore Environment Restoration Fund was ultra vires – or beyond its legal powers. But the ministry put out a press release that said, “It is amply clear that the environment ministry has not withdrawn its demand for Rs 200 crore restoration fund. This government has passed an order in a legally correct framework and also imposed more serious responsibility upon the project proponent without any cost limit.”

What has happened since then?

Documents accessed by show that it was the environment ministry that had asked the Adani group to fund the studies supposed to assess the damage it caused, if at all. After passing the orders asking for the studies, the ministry stirred itself again after senior ministry officials raised queries in October 2016 about the company’s proposal for environmental clearance for an extension to the project – to construct a ship-breaking yard with an investment of Rs 146.8 crore.

In contrast to its findings of 2015, ministry officials concluded that the company had not violated any regulations or damaged the environment and that it was in compliance with all environmental conditions. This turn-around was largely based on claims of the company itself and not an independent verification, show documents.

Extracts from the environment ministry's regional office's report certifying in January 2017 that the Adani project has complied with all environmental regulations and has not damaged the environment.

In 2013, the ministry had concluded that there was “evidence of destruction of mangroves” due to construction and operation of the project. This, the ministry said, was a violation of environmental conditions imposed on the project. In 2015, the ministry said these violations would be separately dealt with in the courts as per law. But the ministry’s records dated January 2017 instead say, “PP [Project Proponent] inferred that no mangroves are destroyed during construction or operation of the project activity.”

By August 2017, the ministry’s file on the issue had dropped all references to taking legal action against the company for alleged violations. Instead the ministry officials noted that the company was in compliance with all environmental laws and all conditions ever imposed upon the company since the first green nod in 2009.

Extract of the environment ministry's internal notes giving a clean chit to the Adani group.

By May, the ministry was instead processing the company’s application for the ship-breaking yard. Records show that the yard got a preliminary approval from the ministry’s experts in June. They did so without going through a legally essential procedure of checking if the company had followed all regulations until then. To make up for this procedural lapse, the ministry has asked the experts to revisit their approval for the ship-breaking yard, this time armed with the clean chit the ministry officials have provided. The experts are yet to discuss the matter again.