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Enron Mail |
Vince,
From the sound of the articles, it appears ENE is ready to exit India, or a= lternately to get into an arbitration battle. I have scheduled some time with you at 10.30 to discuss. Regards, Sandeep. ---------------------- Forwarded by Sandeep Kohli/ENRON_DEVELOPMENT on 04/2= 3/2001 07:59 AM --------------------------- Nikita Varma 04/23/2001 07:20 AM To:=09Nikita Varma/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT cc:=09 (bcc: Sandeep Kohli/ENRON_DEVELOPMENT) Subject:=09From The Enron India Newsdesk - April 23rd newsclips April 23, 2001, http://www.financialexpress.com/fe20010423/fed3.html Godbole's report unearths absurd calculations , Maharashtra could use this = to wriggle out of the Dabhol project=20 Sucheta Dalal ---------------------------------------------------------------------------= ------------------------------------------------------------- April 23, 2001, http://www.financialexpress.com/fe20010423/news1.html = =20 DPC board set to authorise president, Enron MD to issue notice of terminati= on, Sanjay Jog =20 Scrapping of Power Purchase Agreement ---------------------------------------------------------------------------= ------------------------------------------------------------- Monday, April 23, 2001, http://www.business-standard.com/today/corp8.asp?Me= nu=3D2 DPC seeks OK to exit power project , Tamal Bandyopadhyay & S Ravindran=20 ---------------------------------------------------------------------------= ------------------------------------------------------------- April 23, 2001, http://www.cybernoon.com/index.html Enron winding up operations in India?=20 ---------------------------------------------------------------------------= ------------------------------------------------------------- State for consolidating all DPC arbitration notices, Sanjay Jog =20 Monday, April 23, 2001, http://www.financialexpress.com/fe20010423/news3.ht= ml ---------------------------------------------------------------------------= ------------------------------------------------------------- Monday, April 23, 2001, http://www.economictimes.com/today/23econ04.htm Maharashtra to set up experts panel on Enron=20 The article also appeared in the following newspaper BUSINESS STANDARD April 23, 2001, http://www.business-standard.com/today/state3.asp?Menu=3D32 Maharashtra to set up expert panel on Enron=20 ---------------------------------------------------------------------------= ------------------------------------------------------------- April 23, 2001, http://www.economictimes.com/today/23econ07.htm 'Enron is a national problem' ---------------------------------------------------------------------------= ------------------------------------------------------------- April 23, 2001, http://www.cybernoon.com/index.html CM takes Enron to Delhi today=20 ---------------------------------------------------------------------------= ------------------------------------------------------------- Monday, April 23, 2001,http://www.outlookindia.com/full.asp?fname=3DEnron+%= 28F%29&fodname=3D20010430&sid=3D1 The Real Story Of Dabhol If a judicial probe, suggested by the committee, i= s ordered into the Enron deal, it could embarrass three governments RANJ= IT BHUSHAN ---------------------------------------------------------------------------= ------------------------------------------------------------- Monday, April 23, 2001, http://www.business-standard.com/today/state2.asp?M= enu=3D32 MSEB revenue collections up at Rs 968 crore in March , Renni Abraham=20 ---------------------------------------------------------------------------= ------------------------------------------------------------- THE FINANCIAL EXPRESS,April 23, 2001=20 Godbole's report unearths absurd calculations , Maharashtra could use this = to wriggle out of the Dabhol project , Sucheta Dalal It is finally Quit India time for Enron. Though the controversial multinati= onal has denied plans to sell its stake in Dabhol Power Company (DPC), info= rmed sources say that it has sent feelers to China Light & Power and others= to offload its majority holding.Getting out of India may be the best cours= e for Enron. Though it has threatened a fight and invoked political force m= ajeure, the Energy Review Committee headed by Madhav Godbole will certainly= weaken its case. The committee points out that the many "infirmities" in t= he DPC approval process brings into question the "propriety of the decision= s". It is clear that the $20m that Enron spent on educating India's policy-mak= ers and bureaucrats did not even teach them the basics of techno-economic a= ppraisal or due procedure with regard to large international contracts. The= committee says it is "troubled with the failure of governance that seems t= o have characterised almost every step of the decision making process on ma= tters relating to DPC. The failure of governance has been broad, across dif= ferent governments at different points of time, at both the state and the c= entral level, and across different agencies associated with examining the p= roject and at both the administrative and political levels. It strains beli= ef to accept that such widespread and consistent failure to execute assigne= d responsibilities is purely co-incidental". Though the committee decided that it is not the proper forum to investigate= these infirmities, its two key members, Mr Godbole, and former secretary i= n the Ministry of Finance, EAS Sarma, have asked for a judicial inquiry int= o the process of clearing the DPC project. Other members felt a judicial in= quiry would delay the negotiation process and "not serve any purpose". Ther= e may be some merit in an argument against a further delay in renegotiating= tariffs or facilitating Enron's exit, but the report certainly provides th= e Central Vigilance Commission (CVC) with all the grounds that it needs to = start an investigation. CVC N Vittal has already received innumerable requests to investigate the d= eal, especially the beneficiaries of its education campaign. Though the pol= itical establishment may be reluctant to set up a judicial inquiry, the CVC= can establish whether there are lapses on the part of "government function= aries including political executives" and ensure "appropriate action" again= st them. If it is indeed able to establish "undue influence" in signing the= contract, then Maharashtra may be able to get out of a deal patently again= st the public interest without any monetary liability. The Godbole committee has vindicated the stand of anti-Enron activists who = have been opposed it since negotiations began in 1994. It establishes that = Enron power is expensive per se, and the project needs to be re-negotiated,= regardless of the causes for the Maharashtra State Electricity Board's (MS= EB) financial distress. Also that DPC's extortionate tariffs are not merely= because of the steep rise in petro-product prices and rupee depreciation, = but mainly on account of its sweetheart deal with the state government. Enr= on's contract is clearly one-sided; it deliberately uses expensive raw mate= rial (ignoring World Bank warnings), has worked on fanciful demand-supply e= stimates and several legal requirements and permissions. In fact, the committee has found that the MSEB has been paying Enron Rs 930= crore more than it should every year. This comprises overcharging of Rs 25= 3 crore on account of the large regassification plant of which only 42 per = cent of the capacity is used for DPC. There's also a Rs 100 crore extra bil= ling to the MSEB for shipping and harbour charges although the cost of thes= e facilities had been included in the capital recovery charge. By charging = more than twice the operations & maintenance rate stipulated by the governm= ent of India, Enron collects approximately Rs 246 crore extra every year. I= t has also been collecting Rs 332 crore every year through inflated fuel co= nsumption claims. Enron has been charging at 1878 kcal/kwh under the power = purchase agreement (PPA) although the equipment manufacturer has guaranteed= it a much lower consumption rate. This gives it a fat fuel arbitrage oppor= tunity at the cost of the people of Maharashtra.=20 The committee has also pointed to the strange practice of using four differ= ent exchange rates for different aspects of the project negotiation: a rate= of Rs 32 per dollar was assumed for calculating debt service of rupee loan= s, Rs 34.5 per dollar as reference rate for Phase-I, Rs 39.35 per dollar as= reference rate for Phase-II and a curious Rs 42 per dollar for calculating= Government of India tariff. Forcing a reduction of these excessive charges= has nothing to do with contract cancellation. All it needs is tough negoti= ation and public pressure on the political establishment.=20 The Godbole committee has established that DPC's tariffs can easily be halv= ed if excess payments are eliminated and unfair conditions such as the doll= arisation of payments, the take-or-pay clause and escrow facility (which is= in fact hampering MSEB's reform particularly in power distribution) are sc= rapped.The security of future payments to DPC under the restructured tariff= would be based on increased cash flows from a reformed distribution system= . The committee also gives Enron a difficult escape route. It says that if = the multinational finds the conditions for restructuring too onerous, it sh= ould free MSEB from its contractual obligations and find buyers outside Mah= arashtra. The committee has tried to establish another precedent on all pro= jects negotiated by government: "The public has a right to know what is bei= ng contracted on their behalf" and has recommended that all documents, incl= uding contracts related to all Independent Power Projects (IPPs), particula= rly DPC, should be published by the Maharashtra government within two month= s. Also, having established that demand-supply estimates by the state governme= nt were fanciful, the committee has asked MSEB to defer all negotiations wi= th power producers until demand levels in the state permit full absorption = of power generation from such IPPs. It recommends that such negotiations sh= ould be in accordance with the least-cost plan spelt out by the report. Thi= s should also end the hectic lobbying by Reliance (Patalganga), Mittals (Bh= adravati), the BSES (Saphale) and others to set up IPPs in Maharashtra. ---------------------------------------------------------------------------= -------------------------------------------------------------THE FINANCIAL = EXPRESS, April 23, 2001 =20 DPC board set to authorise president, Enron MD to issue notice of terminati= on, Sanjay Jog =20 Scrapping of Power Purchase Agreement The board of directors of Dabhol Power Company (DPC), which has already tak= en an aggressive posture, has proposed to authorise the Enron India managin= g director K Wade Cline and DPC president and chief executive officer Neil = McGregor to issue notices for the termination of power purchase agreement (= PPA) and transfer of Dabhol project in view of continuing default by the st= ate and Central governments and Maharashtra State Electricity Board (MSEB). The board of directors, which would meet on April 25 in London, also plans = to appoint Mr Cline as its "true and lawful Attorney-in-fact" and authorise= him to represent the company in the negotiation of all project contracts a= nd financing agreements and their amendments and modifications.Top sources = told The Financial Express that DPC would authorise Mr Cline and/or Mr McGr= egor to serve the preliminary termination notices and transfer notices to t= he state and Central governments and MSEB under clause 17 and schedule 11 o= f the PPA. "In response to the continuing default by the MSEB of its payment obligatio= ns under the PPA, the failure of the Government of Maharashtra to honour ob= ligations under its guarantee and state support agreement and failure of th= e Government of India to honour obligations under its counter guarantee, th= e company has sought recourse to dispute resolution and has initiated conci= liation and arbitration proceedings," the company resolution said. "Consist= ent with this recourse to contractual remedies, the company now seeks the a= uthority to serve preliminary termination notices and transfer notices purs= uant to clause 17 and schedule 11 of the PPA from time to time and at any t= ime upon the occurrence of an event giving rise to its right to serve such = notices as determined by the company," the resolution added. According to the resolution, the directors, the company secretary and offic= ers of the company and each of them acting individually, are authorised and= empowered to execute and deliver such documents and instruments and take s= uch other actions as they deem fit to effect the purpose of the resolution,= in the name and for and on behalf of the company. Against this backdrop, t= he state government and MSEB have been exploring the possibilities of issui= ng termination notice to the DPC for its failure to meet the contractual ob= ligations under the PPA. The state government and MSEB sources said that su= ch a notice could be served by the MSEB as DPC has not paid the rebate (pen= alty) of Rs 409 crore for misdeclaration and default on the availability of= power on January 28 and February 13. The state government and MSEB, which reviewed its position on Saturday at a= meeting convened by the Chief Minister Vilasrao Deshmukh, are of the view = that they have a strong case and substantial grounds to slap the terminatio= n notice to the DPC. The DPC's move to appoint Mr K Wade Cline as its "true= and lawful Attorney-in-fact" deserves importance especially when the state= government proposes to set up a negotiating committee to cut the per unit = cost and gauge the possibility of sale of Dabhol power to the power deficit= states. Mr Cline would also be authorised to dispose of equipment that is worn out = or obsolete or other equipment or fuel no longer expected to be used in the= ordinary course in amounts exceeding Rs 64 crore or the equivalent in fore= ign currency in any financial year. Furthermore, Mr Cline would be in a pos= ition to enter into contracts and take any other actions for purpose relati= ng to the day-to-day operation of the company's business or exercise its ri= ghts and discharge its obligations under the project contracts and the fina= ncing agreements ---------------------------------------------------------------------------= -------------------------------------------------------------BUSINESS STAND= ARD, Monday, April 23, 2001 DPC seeks OK to exit power project , Tamal Bandyopadhyay & S Ravindran=20 The Enron-promoted Dabhol Power Company (DPC) is seeking the approval of it= s 25 lenders to pull the plug on the $3 billion power project in Maharashtr= a tomorrow (April 23).The meeting has been convened in London at the initia= tive of the company. The meeting is crucial as the DPC board is meeting on = April 25 in London to discuss the issue of serving a termination notice to = the Maharshtra State Electricity Board (MSEB). =20 DPC cannot go ahead with this unless it gets the go ahead from the lenders.= While bankers said the lenders' meeting is about the second phase of the p= roject, which is still under construction, state government officials clari= fied that since there is only one PPA covering both phases of the project, = the lenders' decision will be applicable to the existing Phase I also. The = second phase of the project involves 1,444 MW generation capacity, whereas = Phase I of 740 MW is already operational."According to the loan agreement, = even if only four per cent of the lenders agree to terminate the contract t= hen DPC can do so," highly placed sources in the lenders' consortium said f= rom London.=20 This in effect means that only one lender has to agree for DPC to serve a p= reliminary termination notice.Following the notice, there is a cooling off = period of six months for both parties (the MSEB and DPC) to find a mutually= acceptable solution, which may take the form of a re-negotiated PPA, sourc= es added. Sources also said that there are two separate meetings scheduled = with lenders. The Monday meeting will be attended by all the lenders includ= ing multilateral funding agencies like Japanese Exim Bank and OPIC. The sec= ond round of meetings schedule for Tuesday will be only with the global loa= n arrangers ANZ Investment Bank, CSFB, ABN -AMRO, Citibank and the State Ba= nk of India (SBI).Two representatives each from the Indian lenders, IDBI, I= CICI and SBI have already left for London.=20 ---------------------------------------------------------------------------= ------------------------------------------------------------- AFTERNOON, April 23, 2001 Enron winding up operations in India?=20 Marred by controversies since inception, the US-based energy major Enron-pr= omoted Dabhol Power Company (DPC) board will meet this Wednesday, April 25,= in London to decide the fate of its 2,184 MW project in Dabhol, including = winding up of its operations. "The top most item on the agenda is to empowe= r DPC Managing Director Neil McGregor to wind up operations in the country,= " state government sources told PTI on Saturday. When contacted, DPC spokes= person declined to comment on the agenda of the London meeting and added, "= I will not like to comment on speculations."=20 Sources said a team comprising three top officials of Maharashtra State Ele= ctricity Board (MSEB) including chairman Vinay Bansal would attend the high= -profile board meet. Bansal told PTI that MSEB has decided to give a "fitti= ng reply" and present its case concerning the Rs. 401 crore penalty that th= e loss-making board slapped on DPC on February 28, for not generating requi= red power within the stipulated time as per the Power Purchase Agreement (P= PA).=20 This London meet comes two days after the international and domestic financ= ial institutions sit together (April 23) to discuss DPC's future course of = action in the wake of non-payment of dues to the tune of Rs. 223 crore by M= SEB and also to take into account the aforesaid penalty.Over the payment of= dues of December 2000 and January of Rs. 102 crore and Rs. 111 crore respe= ctively, sources said, both the state government and MSEB had offered to ma= ke a "protest" payment as per the PPA, but DPC, India's first fasttrack pow= er project, refused to accept on that condition.=20 Currently, Enron India holds 65 per cent in the US $900 million DPC project= , which includes MSEB's 15 per cent while General Electric and Bechtel hold= 10 per cent each. The controversial "now on now off" project began in 1992= but ran into rough weather after the Shiv Sena-BJP came to power and was s= crapped only to be revived after renegotiating the PPA. Fresh trouble arose= in October last when MSEB began defaulting over the "enormous" billing fol= lowing which DPC invoked the state and centre's counter guarantee and also = recently sent three international arbitration notices and invoked the polit= ical "forced majeure" implying inability to conform towards any financial c= ommitment. =20 DPC had yesterday stated that it had no plans to reduce its stake below 50 = per cent but according to Enron Corp's Chief Executive Officer Jeff Skillin= g the company would be interested in talking to potential buyers for its st= ake. Skilling, according to an international financial daily, said the mult= inational continues to see strong growth in North America, Europe and Austr= alia indicating a possibility of exiting from India ---------------------------------------------------------------------------= ------------------------------------------------------------- THE FINANCIAL EXPRESS, Monday, April 23, 2001 State for consolidating all DPC arbitration notices, Sanjay Jog =20 The Maharashtra government has decided to appeal to the Centre for consolid= ating all arbitration notices served DPC for the "continuous default of con= tractual obligations" and name a common arbitrator for the state government= , the Centre and MSEB.The Maharashtra government team led by the chief mini= ster Vilasrao Deshmukh, at its meeting with the union finance minister Yash= want Sinha and union power minister Suresh Prabhu on Monday, also proposes = for the appointment of a non-Indian arbitrator with a view to cutting the c= ost substantially. During arbitration proceedings initiated by the DPC after the repudiation o= f Dabhol phase-I by the previous Shiv Sena-BJP government in 1995, a non-In= dian arbitrator, Mr Kumara Swami was appointed as an arbitrator after a sug= gestion by a senior counsel Fali Nariman. State government sources told The= Financial Express that it would write a letter to the DPC regarding arbitr= ation proceedings after Monday's meetings. The state advocate general Goola= m Wahanwati will be suggesting a suitable arbitrator for the state and cent= ral government and MSEB.=20 The advocate general will also suggest solicitors and Queens Counsel, who m= ay be engaged in London for this purpose. Incidentally, Mr Prabhu, who was = present at the "janata darbar" organised by the Thane branch of Shiv Sena, = told reporters that the Centre would provide necessary assistance to the Ma= harashtra government to find a solution to the Dabhol imbroglio.Furthermore= , the state government would formally appeal to the Centre to nominate its = representative on the proposed committee to negotiate with the DPC in a ser= ious bid to reduce the per unit cost and assess the possibility of sale of = Dabhol power to deficit states. The government has suggested the names of H= ousing Finance Development Corporation chairman Deepak Parekh and former un= ion energy secretary EAS Sarma, who were members of the Godbole energy revi= ew committee.=20 ---------------------------------------------------------------------------= ------------------------------------------------------------- THE ECONOMIC TIMES, Monday, April 23, 2001=20 Maharashtra to set up experts panel on Enron=20 =20 IN order to resolve the imbroglio over payment crisis between the Maharash= tra State Electricity Board and US energy major Enron-promoted Dabhol Power= Company, Maharashtra will set up an expert committee for negotiations even= as the multinational is contemplating winding up of its operations in the = country. "We are now going for negotiations and will form an experts commit= tee in which Maharashtra expects the Centre to participate," chief minister= Vilasrao Deshmukh told reporters after attending a condolence meeting to p= ay tributes to late Nasscom president Dewang Mehta here on Sunday. "All the= four parties -- namely the state, Union government, Enron and MSEB -- shou= ld come together for negotiations; otherwise it cannot be a complete exerci= se," he added.=20 Deshmukh and the MSEB team are scheduled to meet Union finance minister Yas= hwant Sinha and power minister Suresh Prabhu on Monday in New Delhi to disc= uss the stalemate and find a acceptable solution for the same. "I am meetin= g Sinha and Prabhu to request them to take an initiative and send represent= atives for the negotiations committee," he said. Deshmukh's meeting with th= e Centre comes at a crucial stage as DPC's lenders would be meeting in Lond= on, on the same day, to decide upon the future finances of the controversy = marred 2,184-mw project in Dabhol.=20 Moreover, the DPC board is also scheduled to meet on April 25 in London to = decide the fate of its $900 million project in Dabhol, including winding up= of its operations. The meeting would discuss the topmost item on the agend= a, which was to empower DPC managing director Neil McGregor to wind up oper= ations in the country. DPC has already slapped one conciliation notice on t= he Centre and three arbitration notices on the state government over non-pa= yment of dues amounting to Rs 213 crore plus interest towards the bills due= for the months of December 2000 and January 2001.=20 Asked whether the Centre had send any feel over a possible clubbing togethe= r of the arbitration and conciliation processes, Deshmukh replied in the ne= gative. Deshmukh said MSEB chairman Vinay Bansal along with two senior offi= cials would attend DPC's board meeting in London. Bansal had said on Sunday= that MSEB would present its case concerning the Rs 401-crore penalty that = the loss-making board slapped on DPC on February 28, for not generating req= uired power within the stipulated time as per the PPA. Currently, Enron Ind= ia holds 65 per cent in the $900-million DPC project, which includes MSEB's= 15 per cent, while General Electric and Bechtel hold 10 per cent each. (PT= I)=20 ---------------------------------------------------------------------------= -------------------------------------------------------------THE ECONOMIC T= IMES, April 23, 2001=20 'Enron is a national problem' =20 UNION power minister Suresh Prabhu on Sunday said the Centre would render a= ll possible help to resolve the Enron crisis faced by Maharashtra which is = "haunting the entire country". Prabhu said he would meet the state chief mi= nister Vilasrao Deshmukh in New Delhi tomorrow to discuss stalemate over th= e payments due to the US energy major-promoted Dhabol Power Company by the = Maharashtra State Electricity Board. Referring to Godbole committee report'= s finding that DPC was keen on offering MSEB's 15 per cent stake to the Nat= ional Thermal Power Corporation, Prabhu said: "The Centre has not received = any such proposal regarding participation of the central power utility." (P= TI)=20 ---------------------------------------------------------------------------= -------------------------------------------------------------AFTERNOON, Apr= il 23, 2001=20 CM takes Enron to Delhi today=20 =20 Chief Minister Vilasrao Deshmukh will discuss the Enron imbroglio with Unio= n Finance Minister Yashwant Sinha and Union Power Minister Suresh Prabhu in= Delhi today. He will request the Centre to appoint a representative to the= committee that the state government is setting up to carry on discussions = and negotiations regarding the Dabhol Power Project of the US-based Enron P= ower Company. Today, a special meeting of representatives of all those fina= nicial institutions which have extended loans to the Dabhol Power Project i= s also being held in London. A meeting of its directors will be held on Wed= nesday to discuss the fate of the $900 million project which has been under= a cloud ever since its inception.=20 Yesterday, Mr. Prabhu declared at a 'Janata Darbar' in Thane that the Centr= e would extend all help to solve the Enron crisis. This is in the backdrop = of pending bills to the tune of Rs. 213 crore which the state fowarded to t= he Centre against payments for the months of December 2000 and January 2001= . Confirming that there was no proposal from the state government to handov= er the project to the Centre, Mr. Prabhu said that the situation of the ele= ctricity boards in the country was precarious. The Centre had decided to as= sist Maharashtra upto Rs. 250 crore every year to improve customer services= .=20 ---------------------------------------------------------------------------= -------------------------------------------------------------OUTLOOK, Monda= y, April 23, 2001 The Real Story Of Dabhol If a judicial probe, suggested by the committee, i= s ordered into the Enron deal, it could embarrass three governments RANJ= IT BHUSHAN "The Committee has prima facie found infirmities in several decisions taken= in respect of the Enron project at different points of time by successive = governments and agencies in the Centre and state." --Energy Review Committee headed by former home secretary Madhav Godbole This could well be the real Enron story A five-member high-powered committee headed by Madhav Godbole-and including= former Union economic affairs secretary E.A.S. Sarma, hdfc chairman Deepak= Parekh, teri chairman RajendraPachauri and Maharashtra government official= Vinay Mohan Lal-has recommended a judicial probe into the entire Enron pow= er project deal saying it signified "the utter failure of governance that s= eems to have characterised almost every step of the decision-making process= relating to the Dabhol project". The report, which was submitted to the Ma= harashtra government last fortnight and has been acquired by Outlook, is se= verely critical of former chief minister Sharad Pawar (with the Congress th= en), the 13-day bjp-led Union government which reworked the deal in 1996, S= hiv Sena supremo Balasaheb Thackeray and his government in Maharashtra head= ed by Manohar Joshi "The utter failure of governance seems to have characterised almost every s= tep of decision-making relating to the Dabhol project." Madhav Godbole Comm= ittee Report An investigation, if ordered, could embarrass at least these three governme= nts The report clearly upholds the allegations of money being paid by Enron= to politicians and bureaucrats for clinching the deal. According to the co= mmittee, the deal reveals failure of governance, both at the Centre and sta= te, and across different agencies. "It strains belief to accept that such w= idespread and consistent failure to execute responsibilities is purely coin= cidental," the report said, proposing a set of measures to be implemented i= f something of the project was to be retrieved. Godbole and Sarma also felt= that the panel should categorically recommend the government of India to o= rder a judicial inquiry. This was finally adopted by it. Says a Congress le= ader: "Enron could well become the biggest political issue in Maharashtra a= nd put to question liberalisation, particularly in the power sector." The proposal has already struck panic. Says ncp's Praful Patel: "If the Enr= on decision has at all been detrimental, it is because of the haste with wh= ich phase 2 was cleared by the Shiv Sena-bjp government. Now with the state= having already entered into an agreement with Enron, the important thing i= s to resolve it amicably. A judicial inquiry will be an eyewash because it'= s not an issue of corruption but that of perception."=20 Pro-market Congressmen privately admit that it was their governments at the= Centre and the state which invited Enron, even though the second phase was= cleared by the bjp-Shiv Sena combine. Says Congress spokesperson Jaipal Re= ddy: "Right now we're too involved with the Parliament deadlock over Tehel= ka." Pro-liberalisation Congress MPs also fear that such witch-hunting coul= d send wrong signals to foreign investors. Non-Congress MPs from Maharashtr= a, meanwhile, claim that the Godbole Committee was instituted with the expr= ess purpose of politicising the Enron issue. "I think I know Vilasrao Deshm= ukh's gameplan," says an MP from the state. But some MPs like Congress' Pri= thviraj Chavan question the cloak of secrecy that's surrounded the deal: "I= 've maintained for long that there should be a judicial committee to examin= e this". The committee report also says that had the Enron project been subjected to= a techno-economic appraisal, as envisaged under provisions of the Electric= ity supply Act of 1948 and related legislations, the infirmities could have= been avoided.Since this wasn't done, questions about a concerted effort to= wards exercising undue influence at every stage of the project are bound to= arise, the exhaustive 93-page report points out. "I'd highlight the speed with which the 13-day Vajpayee government cleared = the project minutes before it quit," says Congress MP Prithviraj Chavan.=20 The Enron project had been held out as an exemplar of the impending liberal= isation in the early '90s and, despite several controversies, is now an est= ablished power project at Dabhol, 150 km south of Mumbai. In July 1992, Enr= on signed an MoU with the Maharashtra State Electricity Board (mseb) to set= up a 2,550 MW station as part of the government's 'fast track' projects. Subsequently, when the Shiv-Sena-bjp came to power in Maharashtra it filed = a writ against the project. This curiously led to renegotiations with Enron= . The committee has quoted a Bombay High Court order on the renegotiated de= al. "Once it (GoM) decided to revive the project, it acted in the very sam= e manner its predecessors in office had done. It forgot all about competiti= ve bidding and transparency. The speed with which the negotiating group stu= died the project and made its proposal for renegotiatons, which was accepte= d by Dabhol, is unprecedented." Says Chavan: "I would particularly like to = highlight the speed with which the 13-day Vajpayee government at Centre end= orsed the renegotiated project minutes before it resigned." Since the commissioning of the plant in May 1999, the mseb has paid Rs 1,60= 7 crore for the power it has bought from Dabhol. If the same watttage of po= wer had been bought from Indian-built power plants fired by indigenous coal= , the payment would have been approximately Rs 736 crore. In the first year= -and-a-half of its operation itself, the dpc had drained the Maharashtra ex= chequer of nearly Rs 1,000 crore. The Central Electricity Authority (cea), in fact, pointed out that the Dabh= ol plant was not the least costly option. The mseb had other inexpensive al= ternatives like the four units of Kaparkheda, but they were in a preliminar= y stage. The report notes: "...if the mseb had made efforts to seriously pu= rsue these projects, they might not have remained in their preliminary stag= es". It adds that the members were of the opinion that "the mseb and the Ma= harashtra government erred seriously, based on information available at tha= t time, in proceeding with the dpc as a base-load factor even when its capa= city was reduced." The failure seems to have been compounded by the laxity = of the Union power ministry, finance ministry and the cea. It quotes the ce= a as saying that since the Union finance ministry found the tariff reasonab= le, no further examination was required Strangely, Bal Thackeray's Shiv Sena, when it came to power together with t= he BJP in Maharashtra, filed a writ in the court and then renegotiated the = deal.=20 After the new Shiv Sena-bjp government took over, its CM, Manohar Joshi, ap= pointed a renegotiating committee in 1996 which made the right noises, actu= ally managing to reduce the tariff. But certain things remained inexplicabl= e. No fresh clearances were required from the cea, which also said that "si= nce no cost increase was involved...fresh formal clearance wasn't necessary= ." Says the committee: "This only adds strength to the suspicion that the c= ea didn't consider the economic aspects of the project at all. Indeed, give= n the non-availability of any official record of the meeting on June 24, 19= 94, with the Committee and the nature of this letter dated December 23, 199= 4, the Committee is doubtful whether the economic aspects of dpc were discu= ssed at all.'' The credibility of the Shiv Sena-bjp government has been seriously question= ed. "The Committee finds it unexplicable (sic) why there was no mention of = any reduction in capital cost of the project from $2,828 million to $2,501 = million as agreed by dpc in the summary report of the renegotiating committ= ee," the panel observes.Says lawyer Prashant Bhushan: "It is strange that t= he Shiv Sena-bjp government first filed a writ in the court and then coolly= renegotiated the deal." The committee further spells out the losses incurr= ed through the deal. "Subsequent to the commissioning of the dpc, the finan= cial deterioration of mseb has been rapid. While the mseb was in profit in = 1998-99, it plunged into huge losses of Rs 1681 crore in 1999-2000."=20 Significantly, the World Bank in 1993 had predicted the system's inherent w= eaknesses. In a letter written to the then power secretary, R. Vasudevan, a= top bank official had said that "after a detailed review of the analytical= framework and costing assumptions, we reconfirm our earlier conclusion tha= t the Dabhol project, as presently formulated, is not economically justifie= d" and that in "our assessment the project is too large to enter the mseb s= ystem in 1998. The proposed base-load operation could result in uneconomic = plant dispatch, as already existing lower variable cost coal power would be= replaced by the higher cost lng power." Enron's persistence and the 'gullibility' of the Indian side can be gauged = from high-ranking Enron official Joe Sutton's letter to a key Indian offici= al, Ajit Nimbalkar: "I recently met with the World Bank and have been follo= wing the articles in the India papers. I feel that the World Bank opinion c= an be changed. We'll engage a PR firm and hopefully manage the media from h= ere on. The project has solid support from all other agencies in Washington= ." The key question in the Enron deal is whether a developed state like Mahara= shtra needs outside intervention in the power sector at all? For the first = time the Godbole committee has raised objections about the viability of suc= h a project. According to the report, the mseb has been one of the better p= erforming boards in the country and has, despite a faulty transmission and = distribution (T and D) system, managed to consistently earn net revenue sur= pluses on an accrual basis. Maharashtra accounts for nearly one-fourth of the gross value of India's in= dustrial sector. It's one of the few states to achieve 100 per cent electri= fication. Since '95, the mseb has been adding to its generation. "This impr= ovement, which has been largely due to renovation and modernisation underta= ken by the mseb, exceeded its own expectations at a time when the dpc was b= eing considered," the report points out. Following a policy of cross-subsid= y, roughly nine out of its ten users are subsidised. But the gap between the average cost of supply and average realisation hasn= 't been much. In fact, the subsidy claim decreased from Rs 630 crore in 199= 5-96 to Rs 355 crore in 1998-99, until in 1999-2000 it increased nearly fiv= e-fold to Rs 2,084 crore due to the sudden increase in the gap by 26 paise = per unit-from 15 to 41 paise-an increase of 173 per cent. "The increase in = the subsidy claim by Rs 1,729 crore is due to the increase in the gap princ= ipally because of the increase in power purchase costs," says the committee= , adding: "Without the dpc and without problems of T and D loss, the mseb c= ould be financially healthy." But can that happen now since Enron is here to stay? The committee has come= up with some far-reaching recommendations: make public all Dabhol-related = documents and agreements, restructure the Dabhol project itself to bring do= wn the cost of power, restructure dpc financially, allow sale of dpc power = outside Maharashtra, re-examine ppas in accordance with least-cost plans, a= nd thoroughly reform the mseb.The committee know this can become reality on= ly with political consensus and through forming of public opinion. The ques= tion is, can that be achieved in an unstable political environment? With Priya Sahgal=20 Making Of A Scam=20 ?=091992: Centre invites Enron to set up 'fast track' power project=20 ?=09Dec 1993: First PPA signed with MSEB=20 ?=091994: Enron starts construction=20 ?=091995: Sena-BJP govt scraps Enron=20 ?=091996: State govt renegotiates project=20 ?=091996: 13-day Vajpayee govt approves counter-guarantee=20 ?=09May 1996: State cabinet clears PPA=20 ?=09May 13, 1999: Phase I commissioned=20 ?=09Jul 1999: Financial closure for Phase II=20 ?=09Oct 2000: MSEB defaults on payment, subsequently stops paying monthly b= ills=20 ?=09Feb 6, 2001: Enron invokes Central government's counter-guarantee ---------------------------------------------------------------------------= -------------------------------------------------------------BUSINESS STAND= ARD, Monday, April 23, 2001 MSEB revenue collections up at Rs 968 crore in March , Renni Abraham=20 The Maharashtra State Electricity Board's (MSEB) revenue collections in Mar= ch 2001 stood at a record Rs 968 crore. This was largely due to the disconn= ection drive on defaulter connections -- pegged at nearly 20,000 disconnect= ions a month -- which resulted in compliance by consumers. With the Dabhol = Power Company (DPC) monthly financial burden issue now a topic of discussio= n among arbitrators on the negotiating table, the MSEB has turned to puttin= g its house in order.=20 As if to ward of any criticism of its fiscal condition that could be termed= as the facilitator to the entire DPC tariff crisis, the state electricity = board has put matters relating to its performance on record. For instance, = MSEB has recorded the highest power generation in the year ended March 31, = 2001, at 45930 units, compared with the previous year's 45582 units, making= it the top SEB of the country in this respect. Similarly its power station= s recorded the highest availability percentage at 86.1 up from 84.6 per cen= t last fiscal. Plant load factor is up to 72.78 per cent, compared with 71.= 7 per cent in 2000.=20 The Parli power station has recorded the highest ever generation in the ten= years of its life time in 2000 at 4545 million units, which made it eligib= le for the meritorious productivity award under the eligibility guidelines = issued by the Government of India carrying a cash award of Rs 12.5 lakh. Al= l other power stations in the state, without exception, also fulfill the el= igibility criteria for the cash award, a senior MSEB official said. Similar= ly, the Chandrapur power station became the first power station of any stat= e electricity board to get the ISO 9002 certification.=20 A senior MSEB official said: "Earlier MSEB was suffering from too much inte= rference in its day to day functioning. The agriculturists were touted as t= he major reason for its deteriorating accruals, while theft of electricity = during the transmission and distribution stage was conveniently camouflaged= under this head. In the recent past, the government has authorised MSEB to= take steps to curb this misuse of power by its own officials, many of whom= , including a chief engineer have suffered suspensions
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