The Adani-Hindenberg Issue

Context

• In a little over a week since New York-based investor research firm Hindenburg Research has accused industrialist Gautam Adani-led conglomerate of “brazen stock manipulation and accounting fraud scheme over the course of decades”.
• This edition of the Burning issue will elaborate on the Hindenberg research issue and other factors coming out of the issue.

About the Hindenberg group and its report

• Hindenburg Research is a company that specializes in forensic financial research.
• It especially looks for accounting irregularities; undisclosed related-party transactions; illegal/ unethical business or financial reporting practices; and undisclosed regulatory, product, or financial issues in companies.
• In late January, Hindenburg Research, which specializes in short selling, published a report critical of the group’s finances.
• The research firm, which has short positions in Adani companies through US-traded bonds and non-Indian-traded derivative instruments, said key listed companies in the group had “substantial debt” which has put the entire group on a “precarious financial footing”.

Outcome of the report

• The seven listed firms have still lost about half their market value – or more than USD 100 billion combined – since the US-based short-seller last week questioned the group over its debt levels, Reuters reported. The listed Adani firms now have a combined market value of USD 108 billion, versus USD 218 billion before Hindenburg’s report.
• Political storm: The report has also caused a political storm in the country with opposition stalling the parliament and demanding a JPC or Supreme court led investigation of the allegations against the Adani Group on the basis of the Hindenburg report.

UPSC exam perspective

• Since the issue is still evolving and both sides are claiming them to be true, the actual truth remains unknown.
• Therefore, this article will tell about both facets of the issue.

The Brighter Picture

Importance of Billionaires for a Nation

• Development of industries: Companies established by these billionaires invest in the development of industries in a nation which in turn helps in the development of the nation. The Reliance group’s telecom giant Jio, Reliance petrochemical plants and Adani Ports, energy are to name a few.
• The face of nation: billionaires represent the face of their nation. Bill Gates, Elon musk, Jack Ma, Mukesh Ambani are well-known billionaires recognized around the world.
• Brings investment: the companies of these billionaires attract a huge amount of foreign investments which help a lot in bringing new technologies and also capital in the domestic economy. For example- Google has paid ₹33,737 crores to Jio Platforms Limited, a subsidiary of the Mukesh Ambani-owned Reliance Industries Limited (RIL).
• Reduce import dependence: With the coming of new technologies or establishing industries for the manufacturing of the products not produced in the country, companies of these billionaires help in reducing imports of the nation. For example, the TATA group, Reliance and Adani have established their defense manufacturing companies which are helping in reducing defence imports and indigenization of defence products.
• Represent face of emerging India– Oxfam India’s latest report which was released on the opening day of the World Economic Forum in Davos, Switzerland reveals that the total number of billionaires in India increased from 102 in 2020 to 166 billionaires in 2022. It’s an indication of the growing economy in India.

• High taxes to government: The billionaires and their companies pay high amounts of taxes to the government, therefore, helping the nation grow. According to an estimate, A 2% tax on the top 100 billionaires would give the government enough money to raise health expenditure to 3% of the GDP.
• Philanthropy: Billionaires in India are well known for their philanthropy. Billionaires Gautam Adani, HCL Technologies’ Shiv Nadar, and Happiest Minds Technologies’ Ashok Soota are the three Indians who have been named in the 16th edition of Forbes Asia’s Heroes of Philanthropy list.

The case of Adani group and its contribution to India’s growth

• Adani Group is one of India’s largest conglomerates and is involved in a wide range of industries and activities, including energy, infrastructure, logistics, resources, agribusiness, and real estate.
• Adani has been instrumental in the development of India’s energy security, with the Adani Group owning and operating the world’s largest solar power plant in Gujarat. Additionally, Adani’s efforts have resulted in the development of numerous infrastructure projects across India, such as ports, airports, roads, and highways.  His company is also involved in activities such as mining, power generation, and transmission, and is a major player in the renewable energy sector.
• In addition to his business accomplishments, Adani has also been involved in several philanthropic initiatives, such as the Adani Foundation, which provides education and healthcare services to underprivileged communities.

The Darker Picture

• Leads to crony capitalism: A political-economic system in which success in business depends on close relationships between business people and government officials, rather than on merit and competition. Adani Group (CAG report highlighted “undue benefits” that the Gujarat government gave to Adani Ports by waiving waterfront and other charges); The 2G spectrum scam; Coalgate Scandal etc. Also, India was ranked in 9th position in crony capitalism where crony sector wealth accounted for 3.4% of Gross Domestic Product (GDP)
• Creates Distrust in the economy: The revelation of facts, such as by the Hindenberg Report, creates distrust in the economy leading to decreased capital inflows and thus investments.
• Stock market crashes: Such a report causes economic loss to companies as happened recently with Adani company’s stocks.

• Propaganda against India: such reports are also claimed to be part of the propaganda to tarnish India’s image at the global level. The timing of the release of the Hindenburg report is susceptible- just before release of Rs 20,000 crore FPO by Adani group and the Budget session of Indian parliament.

Ethical issues with billionaires

• Tax Avoidance: Many billionaires take advantage of loopholes and offshore accounts to avoid paying taxes on their income, depriving governments of much-needed revenue.
• The exploitation of Workers: Billionaires often employ workers from developing countries, paying them low wages and subjecting them to poor working conditions.
• Political Power: Some billionaires use their wealth to influence politicians and governments, creating a system of unequal power and privilege.
• Concentration of Wealth: The vast wealth of billionaires is often seen as morally wrong when so many people in the world live in poverty.

Conclusion

• The ultimate major loser in this row is the investors in Adani Group who suffered losses after the short-seller Hindenburg Research’s report. Thus, currently, there is a need to safeguard the investors.
• The Securities and Exchange Board of India (SEBI) should suggest measures to ensure the protection of Indian investors after the short selling.
• Simultaneously, the allegations against Adani Group must be verified by SEBI through an independent inquiry along with the role of Hindenberg Research in the whole issue.

 

ISRO’s first launch of 2023

In its second development flight on 10 February 2023 morning, the Small Satellite Launch Vehicle (SSLV-D2) was launched successfully from the first launch pad at the Satish Dhawan Space Centre SHAR, Sriharikota, Andhra Pradesh. It will place the Indian Space Research Organisation (ISRO) earth observation satellite EOS-07 and two co-passenger satellites — Janus-1 and AzaadiSat2 — developed by start-ups, in a 450-km circular orbit around the Earth.

What’s the aim of the launch?

1. The new vehicle was developed to capture the emerging small and micro satellite commercial market, with launches offered on demand.
2. The rocket can be assembled by a small team in only a few days, compared to the six months and around 600 people it takes for ISRO’s workhorse PSLV.
3. The launch vehicle uses three solid stages followed by a liquid-fuel-based Velocity Trimming Module (VTM) to place satellites in orbit.
4. The vehicle’s first development flight that took place last August after repeated delays due to the pandemic, failed to place the satellites in precise orbit.

What is Janus-1?

1. Janus-1 is a technology demonstrator satellite built by United States-based Antaris and its Indian partners XDLinks and Ananth Technologies.
2. Janus-1, which weighs only 10.2 kg, is a six-unit cube satellite with five payloads on board — two from Singapore, and one each from Kenya, Australia, and Indonesia.
3. The entire satellite was built in 10 months, less than half the time it usually takes to manufacture satellites of this size, according to Gandupalli.

What is AzaadiSat2?

1. The payloads have been built by 750 girl students from across India. A similar satellite by SpaceKidzIndia was launched aboard SSLV-D1 in August last year.
2. The payloads remain the same — LoRa amateur radio, a sensor to measure radiation levels in space, and sensors to measure the health of the satellite such as temperature, reset count, and inertial data — but this second satellite has an additional feature.
3. SpaceKidzIndia — which aims to promote space awareness among children — has made the satellite expandable: the 8-unit satellite will have a spring mechanism-based external frame, which will open up once the satellite is in orbit. After the frame opens up, the satellite will become four times its size.
4. The satellite will also carry the G20 logo to space and the NCC song to celebrate 75 years of the organisation.

 

 

 

 

Online platforms blocked under Section 69(A) of IT Act

The Ministry of Electronics and Information Technology (MeitY) issued orders to block 138 online betting platforms and 94 money lending apps on an “urgent” and “emergency” basis under Section 69(A) of the Information Technology Act, 2000. The decision was based on a recommendation of the Ministry of Home Affairs (MHA), which had received inputs from central intelligence agencies that some of the sites and apps were allegedly linked to China and contained “material prejudicial to the sovereignty and integrity of India”.

What is Section 69 of the IT Act?

1. Section 69 of the IT Act allows the government to issue content-blocking orders to online intermediaries such as Internet Service Providers (ISPs), telecom service providers, web hosting services, search engines, online marketplaces, etc.
2. However, the Section requires the information or content being blocked to be deemed a threat to India’s national security, sovereignty, or public order.
3. If the Centre or state government are satisfied that blocking the content is “necessary” and “expedient” on grounds of “sovereignty or integrity of India, defence of India, security of the State, friendly relations with foreign States or public order or for preventing incitement to the commission of any cognizable offence relating to above or for investigation of any offence,” it may, for reasons to be recorded in writing, direct any agency “to intercept, monitor or decrypt or cause to be intercepted or monitored or decrypted any information generated, transmitted, received or stored in any computer resource,” the law says.

What is the procedure to block such apps?

1. Since 2009, the MeitY has possessed blocking powers similar to those of the Ministry of Information & Broadcasting.
2. Although MeitY derives these powers from the IT Act, it is the Information Technology (Procedure and Safeguards for Blocking for Access of Information by Public) Rules, 2009 or the IT Rules, 2009, which explain the process to issue such orders.
3. The IT Rules include provisions such as review committees, the opportunity for a fair hearing, strict confidentiality, and maintenance of records by designated officers.
4. However, there are no recorded instances of the MeitY providing individuals with pre-decisional hearings even while blocking non-emergency content.

What have the courts said?

1. In a landmark 2015 ruling, the Supreme Court in “Shreya Singhal vs Union of India” struck down Section 66A of the Information Technology Act of 2000, which entailed punishment for sending offensive messages through communication services, etc.
2. “Section 66A of the Information Technology Act, 2000 is struck down in its entirety being violative of Article 19(1)(a) and not saved under Article 19(2),” the Court held.
3. The plea had also challenged Section 69A of the Information Technology Rules 2009, but the SC held this to be “constitutionally valid”.

4. It will be noticed that Section 69A unlike Section 66A is a narrowly drawn provision with several safeguards. First and foremost, blocking can only be resorted to where the Central Government is satisfied that it is necessary to do so.
5. Secondly, such necessity is relatable only to some of the subjects set out in Article 19(2).
6. Thirdly, reasons have to be recorded in writing in such blocking order so that they may be assailed in a writ petition under Article 226 of the Constitution,” the Court noted.

5thRegional Dialogue on Afghanistan

India reiterated its call for an “inclusive and representative” government in Afghanistan, declaring that the people of Afghanistan were among India’s “foremost priorities”. The ‘5th Regional Dialogue on Afghanistan’ is being held in Moscow.  India’s “historical and special relationship” with Afghanistan and said that the “well-being and humanitarian needs of the people of Afghanistan” would “continue to guide” India’s policy towards Kabul.

Threat

1. It highlighted the heightened threat of terrorism because of the presence of terror groups like Daesh, Lashkar-e-Taiba and Jaish-e-Mohammed in the Af-Pak region and sought security cooperation between the member states in the dialogue.
2. It is emphasized that Afghan territory should not be used for terrorism and that the natural resources of Afghanistan should be utilized “first for the welfare of Afghanistan”.

‘Representative regime needed’

1. India has not recognized the Taliban administration in Kabul. But a technical team stationed at the Indian embassy in the Afghan capital has been overseeing the humanitarian assistance that India has been providing over the past year.
2. His remarks came days after India’s Union Budget presentation, which allocated ₹200 crore for the development and humanitarian needs of the Afghan people. The meeting was also attended by NSA’s  from Iran, Kazakhstan, Kyrgyzstan, China, Russia, Tajikistan, Turkmenistan and Uzbekistan.
3. The third round of the dialogue had been held in Delhi under the chairmanship of Mr. Doval in November 2021.

‘Stay vigilant on terror’

1. The Russian President said that Moscow was in contact with the Taliban rulers in Kabul, that large economic projects are underway in Afghanistan that could “stabilize the situation in the economy”.
2. The world should be vigilant for terror groups that are trying to use Afghan territory for international terrorist activities.
3. “International terrorist organizations are stepping up their activities, including al-Qaeda which is building up its potential.

U.S. Will Not Sanction India For Buying Russian Oil, Say Senior American Officials

• Recently, U.S. Assistant Secretary for Energy Resources, Geoffrey Pyatt, made it clear that America was not looking to sanction India for its purchases of Russian oil.
• In recent months, Indian purchases of Russian oil have increased steadily with Moscow displacing traditional heavyweights like Iraq and Saudi Arabia to become India’s top supplier of oil.

What are the comments of senior American officials?

• U.S. Assistant Secretary for Energy Resources Geoffrey Pyatt stated that Western sanctions, along with the $60 oil price cap established by the G-7 nations, have had a significant impact by reducing Russia’s ability to sell its oil at premium prices, thereby impacting its revenue and economic stability.
• He said that even though India is not a member of the price cap coalition.It has leveraged its negotiating power to purchase Russian Ural crude oil at prices below the $60 cap.
• This has helped the United States achieve its dual objectives of ensuring adequate oil supply and preventing Russia from receiving high prices for its exports.
  • EU, G7 and Australia (the “Price Cap Coalition”) came to agreement on a maximum price of $60 per barrel for seaborne Russian-origin crude oil.
  • Price cap aims to reduce Russia’s ability to finance its war in Ukraine

Divergence-Ukraine

• In relation to Russia and Ukraine, U.S. Assistant Secretary for Energy Resources Geoffrey Pyatt, said that India and the U.S. “may not always have the same policy views,” but both nations are dedicated to “upholding the international rules-based order that is built on respect for territorial integrity and sovereignty.”
• The Indian government has frequently stated that it will purchase oil from “wherever” it is necessary, despite several requests to reduce its reliance on Russian oil imports.
• Indian imports of Russian Ural oil have increased by 30 times since last January, when they were just about 40,000 barrels per day (bpd), according to the most recent data for January.
• Russia, which was formerly India’s 17th largest oil supplier, has just risen to the top exporter position.
• Since the Russian invasion of Ukraine, it has increased from just 0.2% of India’s total oil imports to over 28% now.
• When questioned, American officials rejected Oleksandr Merezhko’s calls for secondary sanctions against nations like China and India that are “financing the Russian economy and the Russian military machine.
• Oleksandr Merezhko is a senior Ukrainian lawmaker and the chairman of the country’s foreign relations committee.
• The Indian position was described as “painful” by Mr. Merezhko on a visit to Washington.
• Karen Donfried, U.S. Assistant Secretary for European and Eurasian Affairs, responded by stating that the US was not aiming to sanction India, and US’s engagement with India is one of its consequential relationships.

• The United States described India’s stance towards Russia, notably its failure to condemn Russia’s activities in Ukraine, as “extremely disappointing” in March of last year.
• However, given Russian budget deficits over the sale of Ural crude to India at about $56 per barrel, which is more than $30 less than the transatlantic pool of Brent crude and other world oil markets, the U.S. officials briefing the media made it clear that Washington is now “comfortable with the approach that India has taken”.

Conclusion

• The US’s stance on India’s purchase of Russian oil highlights the significance of the relationship between the two countries. Despite differences in policy approaches, the US recognizes that the two nations share a commitment to the international rules-based order.