A proposal to transfer partial ownership of a terminal at India’s busiest Mundra port in Gujarat to a Chinese company is now under the scanner of the Ministry of External Affairs (MEA) and the Ministry of Home Affairs (MHA), after an agreement between the Adani Group’s French joint venture partner CMA Terminals and the China Merchants Group (CMG), a Chinese state-owned enterprise. While the Adani Group has clarified that it has not filed the application itself, the proposal could see red flags from the government’s security agencies that have already put other Chinese acquisitions on hold for the last few months.
According to the application submitted by CMA Terminals of France on May 21 this year, the company that is a joint venture partner of Adani Ports and Special Economic Zone Limited (APSEZ), engaged in “developing, operating, maintaining terminal CT-4 at Mundra Port”, wants to turn over its 50% stake to the CMA-CGM group, under a joint venture between the French company and the China Merchants Group (CMG). Effectively, the transaction would result in a China Merchants Group subsidiary taking an indirect, minority stake of 24.9% in the Adani-CMA Mundra Terminal .
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Senior government officials who confirmed receiving the application told The Hindu that the deal has “not been cleared as of now”. The application has been forwarded to the MEA, MHA, Reserve Bank of India and the Ministry of Shipping by the Commerce Ministry’s Department for Promotion of Industry and Internal Trade (DPIIT).
When contacted, the Adani Group said that it was not involved in the applications process filed by its French partner.
“We are not the applicant. We partner with CMA-CGM for the terminal in Mundra Port. We are the operator of the terminal as well as the port at Mundra port,” a senior official of the Adani group told The Hindu .
“CMA-CGM is the third largest shipping company in the world and they are our partner in Mundra,” he said, adding that the permissions would have been sought in accordance with the requirements of Indian law.
APSEZ, which is India’s largest private port operator, entered into the Indo-French joint venture with CMA Terminals for the Mundra port in 2014, and the container terminal at Mundra was commissioned in 2017. On December 20, 2019 CMA-CGM announced it was going to sell stakes in 10 terminals worldwide to its venture with China Merchants Group for $968 million. The list included the Mundra port in India, and others in China, Vietnam, Thailand, Singapore, Netherlands and other countries.
Last week, the Nikkei Asian Review journal reported that two of the 10 terminals, including the ones in India and Vietnam, had held up the deal, quoting a CMG official who said that “because of the influence of the epidemic, as the examination and approval process of the local governments was delayed”.
The MEA and the MHA declined to comment officially on the matter, and officials at the Shipping Ministry, which oversees ports, did not respond to calls. In 2017, intelligence agencies had flagged security concerns over the acquisition by Russian oil major Rosneft of the Essar refinery project, citing its proximity Gujarat’s Vadinar port, military installations and Pakistan. The government cleared the project eventually, which was announced by Prime Minister Narendra Modi and Russian President Vladimir Putin as one of the biggest such deals. Despite the Adani Group’s considerable importance in the infrastructure business, however, it is unlikely the proposal for a Chinese stake in the Mundra port would be given swift clearance, said officials who did not wish to be named, citing the heightened tensions between Delhi and Beijing at present.
As The Hindu had reported in July, about 200 investment proposals from China are awaiting security clearance from the MHA after new rules were notified in April, making prior government approval mandatory for foreign direct investment (FDI) from countries which share a land border with India. Adding to that, in the Mundra case, will be the fact that the China Merchant Group, a multinational state-owned corporation of the People’s Republic of China based in Hong Kong that operates in transport, finance and property sectors, took over Sri Lanka’s Hambantota port on a 99-year lease, amongst other Belt and Road Initiative (BRI) projects.
( With inputs from Vijaita Singh )
