India launches investigations into illegal coal imports

KOLKATA (miningweekly.com) - India has launched country-wide investigations into coal importers over-invoicing and resorting to illegal cross-border funds transfers, which have been estimated at around $5.3-billion.

Senior government officials said that over-invoicing of coal imports and illegal non-banking channel funds transfers, known in local parlance as hawala, had been going on for the last three to four years and involved both government and private companies in thermal power, trading houses, power distribution and steel sectors.

While the Department of Revenue Intelligence (DRI), the investigative arm of the Finance Ministry, had commenced scrutiny of all large coal import transactions over the past few years, the Customs Department had been directed to intensify scrutiny of all inward coal shipments and closely inspect import documents, the officials said.

The DRI had been asked to complete its investigations in a timely manner and based on its report, the Finance Ministry would initiate criminal proceedings as per relevant provisions of anti-money laundering laws, the officials added.

While most officials were reluctant to divulge details on the grounds that it would jeopardise ongoing investigations, the broad contours of the modus operandi of all the companies under investigation were similar.

Most of transactions related to coal imports from Indonesia wherein the import price was shown as double the then prevailing international price of coal.

The full inflated price was remitted by the importer through intermediaries in Singapore, Dubai, Hong Kong and the British Virgin Islands. The intermediaries, in turn, made a lower payment to the coal exporter in Indonesia, and the difference was either stashed away in undeclared overseas bank accounts of the importer or routed back into India through illegal fund transfers.

This also enabled several coal importers among thermal power plant operators to benefit from claiming higher electricity tariffs by showing a higher cost of fuel, as several power companies had gotten the sector regulator to agree to electricity price revisions claiming a rise in the cost of Indonesian imported coal.

It was indicated that, from evidence already collected, landed prices of imported coal, inclusive of cost, insurance and freight, during the transaction period, prevailed at around $55/t to $60/t of specific gross calorific value; however, importers had invoiced the consignment at double or more.