Karnataka govt's latest legal tangle: Adani Group's KPCL slaps Rs 76 crore notice over unsold Malaysian sand

By Vinaykumar Patil | First Published Nov 19, 2024, 5:49 PM IST

In 2017-18, Karnataka imported over 1 lakh metric tonnes of sand from Malaysia to address shortages. However, unsold stock and unpaid dues led Adani's KPCL to demand Rs 76 crore in compensation. The government plans to auction the remaining sand to mitigate losses.

During the year 2017-18, the Karnataka government imported over 1 lakh metric tonnes of natural sand from Malaysia to tackle the severe shortage of river sand in the state. However, this move has now become a financial liability, with the Adani Group's Krishnapatnam Port Company (KPCL) issuing a legal notice seeking Rs 76 crore in compensation for unsold stocks and unpaid dues.

The state government had brought in 1,03,872 metric tonnes of sand through Mysore Sales International Limited (MSIL) under the commerce and industries department. A consortium comprising KPCL, Poseidon FZE, and Dhanveer Port facilitated the imports, while Oshine Agencies was tasked with transporting the sand from Andhra Pradesh to Karnataka for retail distribution.

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Despite these efforts, only 14,759 metric tonnes of sand were sold due to several challenges. According to MSIL officials, the imported Malaysian sand was significantly costlier than locally available manufactured sand (M-sand). Additionally, the outbreak of COVID-19 disrupted operations and further dampened demand.

“We invested Rs 14.5 crore to import the sand but managed to recover only Rs 4 crore from sales. The remaining 89,113 metric tonnes of sand, worth Rs 10 crore, are still lying unsold at KPCL,” said a senior MSIL official.

The matter escalated when Adani Group took over KPCL in 2020-21, acquiring all port assets, including the stockpile of sand. Claiming unpaid ground rent and other charges for the storage of the unsold sand, KPCL initially issued a notice demanding Rs 84 crore, later revising it to Rs 76 crore.

“We were surprised to receive the notice, as the total value of the unsold sand is only Rs 10 crore. While we tried to contact other partners involved in the deal, there was no response. We immediately approached the court and obtained a stay on the notice,” an MSIL official explained.

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Industries Minister MB Patil discussed the issue with Chief Minister Siddaramaiah, who also oversees the finance department. Following consultations, it was decided to dispose of the unsold sand through open bidding, regardless of financial losses.

Senior marketing officials at MSIL revealed that a few bidders have expressed interest in purchasing the sand, raising hopes of clearing the stock soon.

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