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SBI defends $1 billion loan to Adani for Oz coal project, BJP steers clear of controversy

Amid controversy over sanctioning a $1 billion loan (nearly Rs 62,000 crore) to Adani Group, SBI said Thursday it had only signed a preliminary MoU and will disburse the money only after proper due diligence.

business Updated: Nov 20, 2014 22:39 IST
Adani group loan,SBI loan,coal project is Australia

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.

BJP attacks Cong

Steering clear of the loan controversy, the ruling Bharatiya Janata Party (BJP) said the deal was between the bank and the company, and the government had no role.

The BJP said by making such "petty" statements the Congress is lowering the country's prestige and further losing its reputation among the people.

"It is a matter between the bank and the industry and the government has nothing to do with it... If Congress views the visit of the head of the country like this and make petty statements, it is lowering the dignity and prestige of the country," BJP spokesperson Shahnawaz Hussain said.

"If Congress continues to make such baseless allegations, it will further lower its reputation among the people," he added.

The BJP leader said while the whole world was applauding the Prime Minister's recent visit abroad, the Congress was criticising him and was making baseless allegations in its bid to divert the public attention.

First Published: Nov 20, 2014 20:53 IST