NEW DELHI, Jan 28 (IPS) - Through Enron Corp.'s troubles in India
stalled three billion dollar power project, the power giant's
executives never tired of warning the government that how it
project would be a litmus test for this country's decade-old
The former U.S. energy giant's executives were right -- but not
the way they intended.
Discredited internationally for greasing politicians abroad and
cooking the books at home, the company has itself managed to
biggest blow yet against liberalisation.
According to Jayati Ghosh, who teaches economics at the
University, Enron was more than just another transnational
(TNC). ''It was in fact the symbol of and even a model for
activity in India and across the world.''
In 1996, Enron collected 200 million dollars in political risk
for its power project at Dabhol, western Maharashtra state, from
Overseas Private Investment Corporation (OPIC), which funds U.S.
But Enron fared very well against the successive changes of
at the state and centre, as well as in dealing with India's
Given the revelations of Enron's political connections at home
United States, in the wake of its collapse this month, critics say
now little doubt that Enron won friends and influenced people in
time-honoured way of these parts -- bribery.
Enron's former chief executive Rebecca Mark once glibly
28 million dollars as having been spent on an ''education fund''
politicians, while emphasising that U.S. laws were tight on graft
her company would not dream of it.
Whether or not Enron actually greased palms to penetrate
state-run energy sector and survive successive changes of
industrialised Maharashtra state is now for a one-man commission
S P Kurudkar to determine and pronounce on. The panel began its
But quite apart from the 28 million dollar education fund that
benefited people in a Congress party government run by former
minister Sharad Pawar, there is the curiously changed attitude
project by his political opponents -- the Bharatiya Janata Party
its close ally, the Hindu fundamentalist Shiv Sena (God's Army).
Pawar and the Congress party were voted out of power in 1995,
the result of a relentless campaign by the BJP-SS combine
scrapping of a power purchase agreement that the Maharashtra state
government had with Enron in 1993. That was India's first major
But far from making good its election promise of ''throwing
the Arabian Sea'', the BJP-SS combine actually renegotiated the
purchase agreement after a visit by Rebecca Mark to the home of SS
This resulted in far more favourable terms for Enron at the
cost of the
state utility, the Maharashtra State Electricity Board (MSEB).
When the right-wing nationalist BJP led by Prime Minister Atal
Vajpayee first came to power at the national government in 1996,
in power for only 13 days after failing to win a confidence motion
But in that space of time, Vajpayee signed an iron-clad
counter-guarantee that vastly benefited Enron.
When Vajpayee and the BJP returned to power at the head of a
cohesive multi-party coalition, they defended the deal by saying
India's state-owned power sector badly needed investment and
that could only come from abroad and that the utilities were
deeply in debt.
Vajpayee said he was only following structural policy changes
by the previous Congress party government in 1991, limiting
control over industrial licensing and opening the country to
investment while abandoning decades of socialist-style
The government ignored charges by local and international
that local residents who protested against environmental
devastation in the
area around Dabhol, caused by the building of the massive plant,
brutally suppressed by police.
Even the National Human Rights Commission (NHRC), a statutory
criticised the heavy-handedness with which the BJP-SS government
Maharashtra beat and victimised activists who included eminent
So good was the new deal for Enron that it threatened to
only the Maharashtra State Electricity Board, but the government
Maharashtra itself when the first phase of the project generating
megawatts went online in 2000.
Not surprisingly, Maharashtra's Congress party chief minister --
BJP-SS combine was voted out in 1999 -- quickly declared the power
agreement financially unviable. The chief minister, Vilasrao
prepared to face all manner of legal action by Enron, including
of the central government's counter-guarantee.
According to studies carried out by Prayas, a group of young
professionals based in Pune city in Maharashtra, once the second
on stream in 2002, the Maharashtra electricity board would have
Enron 52 percent of its revenues to add less than 20 percent to
installed capacity of 10,000 megawatts.
Prabir Purkayastha of the Delhi Science Forum, an independent
scientists and engineers based here, said that the only way out
been for the Maharashtra electricity board to hand over its entire
''In order to pay for power from a 2,192-megawatt power
Maharashtra would have to hand over its generating assets for
megawatts,'' Purkayasha said.
The economics of it was simple. The Maharashtra electricity
forced, under the terms of the power agreement, to shut down its
to buy power from Dabhol -- at seven times the price for
In reaction to the expected high price of power, industries
fleeing Maharashtra for other states.
According to Purkayastha, the deal stank mainly because Enron
was to be
paid for its power in U.S. dollars rather than in Indian rupees.
and Coca Cola can sell their products in rupees, why should Enron
in dollars and that when the rupee is sliding steadily against the
Enron, basically an energy trader, demanded that its plant be
imported naphtha or liquefied natural gas (LNG), which it said
imported from its fields in the Middle East when India had vast
Even the World Bank questioned the project's economic
high costs of importing LNG from Qatar as contracted by Enron.
Even shutting down the plant (as what finally happened six
is hurting India more than Enron. In spite of the talk of foreign
investment, in return for deregulation Indian financial
forced to put up 1.4 billion dollars for the project against the
billion dollars Enron actually brought in.
Enron holds 65 percent stake in Dabhol, and its U.S. partners
Electric and Bechtel Corp. own 10 percent each. Their combined 85
stake is expected to be put up for competitive bidding as part of
settlement after the project's suspension. The Maharashtra
board owns the remaining 15 percent.
According to Mohan Guruswamy, a former adviser to Finance
Yashwant Sinha, the price that is paid for the 85 percent foreign
will reflect the actual cost of building Dabhol, which is likely
to be half
of what Enron claimed it did.
Meanwhile, Dabhol has been sent a notice by the Indian customs
department for moving away valuable and critical components that
imported into the country on concessional duty for the Enron
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