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Enron Mail |
Vince,
From the sound of the articles, it appears ENE is ready to exit India, or= =20 alternately 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=20 04/23/2001 07:59 AM --------------------------- Nikita Varma 04/23/2001 07:20 AM To: Nikita Varma/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT cc: (bcc: Sandeep Kohli/ENRON_DEVELOPMENT) Subject: From The Enron India Newsdesk - April 23rd newsclips April 23, 2001, http://www.financialexpress.com/fe20010423/fed3.html Godbole=01,s report unearths absurd calculations , Maharashtra could use th= is to=20 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=20 termination, Sanjay Jog =20 Scrapping of Power Purchase Agreement ---------------------------------------------------------------------------= --- ---------------------------------------------------------- Monday, April 23, 2001,=20 http://www.business-standard.com/today/corp8.asp?Menu=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=3D200104= 30&sid=3D 1 The Real Story Of Dabhol If a judicial probe, suggested by the committee, i= s=20 ordered into the Enron deal, it could embarrass three governments RANJIT= =20 BHUSHAN ---------------------------------------------------------------------------= --- ---------------------------------------------------------- Monday, April 23, 2001,=20 http://www.business-standard.com/today/state2.asp?Menu=3D32 MSEB revenue collections up at Rs 968 crore in March , Renni Abraham=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------- THE FINANCIAL EXPRESS,April 23, 2001=20 Godbole=01,s report unearths absurd calculations , Maharashtra could use th= is to=20 wriggle out of the Dabhol project , Sucheta Dalal It is finally Quit India time for Enron. Though the controversial=20 multinational has denied plans to sell its stake in Dabhol Power Company=20 (DPC), informed sources say that it has sent feelers to China Light & Power= =20 and others to offload its majority holding.Getting out of India may be the= =20 best course for Enron. Though it has threatened a fight and invoked politic= al=20 force majeure, the Energy Review Committee headed by Madhav Godbole will=20 certainly weaken its case. The committee points out that the many=20 =01&infirmities=018 in the DPC approval process brings into question the = =01&propriety=20 of the decisions=018. It is clear that the $20m that Enron spent on educating India=01,s=20 policy-makers and bureaucrats did not even teach them the basics of=20 techno-economic appraisal or due procedure with regard to large internation= al=20 contracts. The committee says it is =01&troubled with the failure of govern= ance=20 that seems to have characterised almost every step of the decision making= =20 process on matters relating to DPC. The failure of governance has been broa= d,=20 across different governments at different points of time, at both the state= =20 and the central level, and across different agencies associated with=20 examining the project and at both the administrative and political levels. = It=20 strains belief to accept that such widespread and consistent failure to=20 execute assigned responsibilities is purely co-incidental=018. Though the committee decided that it is not the proper forum to investigate= =20 these infirmities, its two key members, Mr Godbole, and former secretary in= =20 the Ministry of Finance, EAS Sarma, have asked for a judicial inquiry into= =20 the process of clearing the DPC project. Other members felt a judicial=20 inquiry would delay the negotiation process and =01¬ serve any purpose= =018.=20 There may be some merit in an argument against a further delay in=20 renegotiating tariffs or facilitating Enron=01,s exit, but the report certa= inly=20 provides the Central Vigilance Commission (CVC) with all the grounds that i= t=20 needs to start an investigation. CVC N Vittal has already received innumerable requests to investigate the= =20 deal, especially the beneficiaries of its education campaign. Though the=20 political establishment may be reluctant to set up a judicial inquiry, the= =20 CVC can establish whether there are lapses on the part of =01&government=20 functionaries including political executives=018 and ensure =01&appropriate= action=018=20 against them. If it is indeed able to establish =01&undue influence=018 in = signing=20 the contract, then Maharashtra may be able to get out of a deal patently=20 against the public interest without any monetary liability. The Godbole committee has vindicated the stand of anti-Enron activists who= =20 have been opposed it since negotiations began in 1994. It establishes that= =20 Enron power is expensive per se, and the project needs to be re-negotiated,= =20 regardless of the causes for the Maharashtra State Electricity Board=01,s (= MSEB)=20 financial distress. Also that DPC=01,s extortionate tariffs are not merely= =20 because of the steep rise in petro-product prices and rupee depreciation, b= ut=20 mainly on account of its sweetheart deal with the state government. Enron= =01,s=20 contract is clearly one-sided; it deliberately uses expensive raw material= =20 (ignoring World Bank warnings), has worked on fanciful demand-supply=20 estimates and several legal requirements and permissions. In fact, the committee has found that the MSEB has been paying Enron Rs 930= =20 crore more than it should every year. This comprises overcharging of Rs 253= =20 crore on account of the large regassification plant of which only 42 per ce= nt=20 of the capacity is used for DPC. There=01,s also a Rs 100 crore extra billi= ng to=20 the MSEB for shipping and harbour charges although the cost of these=20 facilities had been included in the capital recovery charge. By charging mo= re=20 than twice the operations & maintenance rate stipulated by the government o= f=20 India, Enron collects approximately Rs 246 crore extra every year. It has= =20 also been collecting Rs 332 crore every year through inflated fuel=20 consumption claims. Enron has been charging at 1878 kcal/kwh under the powe= r=20 purchase agreement (PPA) although the equipment manufacturer has guaranteed= =20 it a much lower consumption rate. This gives it a fat fuel arbitrage=20 opportunity at the cost of the people of Maharashtra.=20 The committee has also pointed to the strange practice of using four=20 different exchange rates for different aspects of the project negotiation: = a=20 rate of Rs 32 per dollar was assumed for calculating debt service of rupee= =20 loans, Rs 34.5 per dollar as reference rate for Phase-I, Rs 39.35 per dolla= r=20 as reference rate for Phase-II and a curious Rs 42 per dollar for calculati= ng=20 Government of India tariff. Forcing a reduction of these excessive charges= =20 has nothing to do with contract cancellation. All it needs is tough=20 negotiation and public pressure on the political establishment.=20 The Godbole committee has established that DPC=01,s tariffs can easily be h= alved=20 if excess payments are eliminated and unfair conditions such as the=20 dollarisation of payments, the take-or-pay clause and escrow facility (whic= h=20 is in fact hampering MSEB=01,s reform particularly in power distribution) a= re=20 scrapped.The security of future payments to DPC under the restructured tari= ff=20 would be based on increased cash flows from a reformed distribution system.= =20 The committee also gives Enron a difficult escape route. It says that if th= e=20 multinational finds the conditions for restructuring too onerous, it should= =20 free MSEB from its contractual obligations and find buyers outside=20 Maharashtra. The committee has tried to establish another precedent on all= =20 projects negotiated by government: =01&The public has a right to know what = is=20 being contracted on their behalf=018 and has recommended that all documents= ,=20 including contracts related to all Independent Power Projects (IPPs),=20 particularly DPC, should be published by the Maharashtra government within= =20 two months. Also, having established that demand-supply estimates by the state governme= nt=20 were fanciful, the committee has asked MSEB to defer all negotiations with= =20 power producers until demand levels in the state permit full absorption of= =20 power generation from such IPPs. It recommends that such negotiations shoul= d=20 be in accordance with the least-cost plan spelt out by the report. This=20 should also end the hectic lobbying by Reliance (Patalganga), Mittals=20 (Bhadravati), the BSES (Saphale) and others to set up IPPs in Maharashtra. ---------------------------------------------------------------------------= --- ----------------------------------------------------------THE FINANCIAL=20 EXPRESS, April 23, 2001 =20 DPC board set to authorise president, Enron MD to issue notice of=20 termination, Sanjay Jog =20 Scrapping of Power Purchase Agreement The board of directors of Dabhol Power Company (DPC), which has already tak= en=20 an aggressive posture, has proposed to authorise the Enron India managing= =20 director K Wade Cline and DPC president and chief executive officer Neil=20 McGregor to issue notices for the termination of power purchase agreement= =20 (PPA) and transfer of Dabhol project in view of continuing default by the= =20 state and Central governments and Maharashtra State Electricity Board (MSEB= ). The board of directors, which would meet on April 25 in London, also plans = to=20 appoint Mr Cline as its =01&true and lawful Attorney-in-fact=018 and author= ise him=20 to represent the company in the negotiation of all project contracts and=20 financing agreements and their amendments and modifications.Top sources tol= d=20 The Financial Express that DPC would authorise Mr Cline and/or Mr McGregor = to=20 serve the preliminary termination notices and transfer notices to the state= =20 and Central governments and MSEB under clause 17 and schedule 11 of the PPA= . =01&In response to the continuing default by the MSEB of its payment obliga= tions=20 under the PPA, the failure of the Government of Maharashtra to honour=20 obligations under its guarantee and state support agreement and failure of= =20 the Government of India to honour obligations under its counter guarantee,= =20 the company has sought recourse to dispute resolution and has initiated=20 conciliation and arbitration proceedings,=018 the company resolution said.= =20 =01&Consistent with this recourse to contractual remedies, the company now = seeks=20 the authority to serve preliminary termination notices and transfer notices= =20 pursuant to clause 17 and schedule 11 of the PPA from time to time and at a= ny=20 time upon the occurrence of an event giving rise to its right to serve such= =20 notices as determined by the company,=018 the resolution added. According to the resolution, the directors, the company secretary and=20 officers of the company and each of them acting individually, are authorise= d=20 and empowered to execute and deliver such documents and instruments and tak= e=20 such other actions as they deem fit to effect the purpose of the resolution= ,=20 in the name and for and on behalf of the company. Against this backdrop, th= e=20 state government and MSEB have been exploring the possibilities of issuing= =20 termination notice to the DPC for its failure to meet the contractual=20 obligations under the PPA. The state government and MSEB sources said that= =20 such a notice could be served by the MSEB as DPC has not paid the rebate=20 (penalty) of Rs 409 crore for misdeclaration and default on the availabilit= y=20 of power on January 28 and February 13. The state government and MSEB, which reviewed its position on Saturday at a= =20 meeting convened by the Chief Minister Vilasrao Deshmukh, are of the view= =20 that they have a strong case and substantial grounds to slap the terminatio= n=20 notice to the DPC. The DPC=01,s move to appoint Mr K Wade Cline as its =01&= true and=20 lawful Attorney-in-fact=018 deserves importance especially when the state= =20 government proposes to set up a negotiating committee to cut the per unit= =20 cost and gauge the possibility of sale of Dabhol power to the power deficit= =20 states. Mr Cline would also be authorised to dispose of equipment that is worn out = or=20 obsolete or other equipment or fuel no longer expected to be used in the=20 ordinary course in amounts exceeding Rs 64 crore or the equivalent in forei= gn=20 currency in any financial year. Furthermore, Mr Cline would be in a positio= n=20 to enter into contracts and take any other actions for purpose relating to= =20 the day-to-day operation of the company=01,s business or exercise its right= s and=20 discharge its obligations under the project contracts and the financing=20 agreements ---------------------------------------------------------------------------= --- ----------------------------------------------------------BUSINESS STANDARD= ,=20 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=20 25 lenders to pull the plug on the $3 billion power project in Maharashtra= =20 tomorrow (April 23).The meeting has been convened in London at the initiati= ve=20 of the company. The meeting is crucial as the DPC board is meeting on April= =20 25 in London to discuss the issue of serving a termination notice to the=20 Maharshtra State Electricity Board (MSEB). =20 DPC cannot go ahead with this unless it gets the go ahead from the lenders.= =20 While bankers said the lenders=01, meeting is about the second phase of the= =20 project, which is still under construction, state government officials=20 clarified that since there is only one PPA covering both phases of the=20 project, the lenders=01, decision will be applicable to the existing Phase = I=20 also. The second phase of the project involves 1,444 MW generation capacity= ,=20 whereas Phase I of 740 MW is already operational.=01&According to the loan= =20 agreement, even if only four per cent of the lenders agree to terminate the= =20 contract then DPC can do so,=018 highly placed sources in the lenders=01,= =20 consortium said from London.=20 This in effect means that only one lender has to agree for DPC to serve a= =20 preliminary termination notice.Following the notice, there is a cooling off= =20 period of six months for both parties (the MSEB and DPC) to find a mutually= =20 acceptable solution, which may take the form of a re-negotiated PPA, source= s=20 added. Sources also said that there are two separate meetings scheduled wit= h=20 lenders. The Monday meeting will be attended by all the lenders including= =20 multilateral funding agencies like Japanese Exim Bank and OPIC. The second= =20 round of meetings schedule for Tuesday will be only with the global loan=20 arrangers ANZ Investment Bank, CSFB, ABN -AMRO, Citibank and the State Bank= =20 of India (SBI).Two representatives each from the Indian lenders, IDBI, ICIC= I=20 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=20 Enron-promoted Dabhol Power Company (DPC) board will meet this Wednesday,= =20 April 25, in London to decide the fate of its 2,184 MW project in Dabhol,= =20 including winding up of its operations. "The top most item on the agenda is= =20 to empower DPC Managing Director Neil McGregor to wind up operations in the= =20 country," state government sources told PTI on Saturday. When contacted, DP= C=20 spokesperson declined to comment on the agenda of the London meeting and=20 added, "I will not like to comment on speculations."=20 Sources said a team comprising three top officials of Maharashtra State=20 Electricity Board (MSEB) including chairman Vinay Bansal would attend the= =20 high-profile board meet. Bansal told PTI that MSEB has decided to give a=20 "fitting reply" and present its case concerning the Rs. 401 crore penalty= =20 that the loss-making board slapped on DPC on February 28, for not generatin= g=20 required power within the stipulated time as per the Power Purchase Agreeme= nt=20 (PPA).=20 This London meet comes two days after the international and domestic=20 financial institutions sit together (April 23) to discuss DPC's future cour= se=20 of action in the wake of non-payment of dues to the tune of Rs. 223 crore b= y=20 MSEB and also to take into account the aforesaid penalty.Over the payment o= f=20 dues of December 2000 and January of Rs. 102 crore and Rs. 111 crore=20 respectively, sources said, both the state government and MSEB had offered = to=20 make a "protest" payment as per the PPA, but DPC, India's first fasttrack= =20 power project, refused to accept on that condition.=20 Currently, Enron India holds 65 per cent in the US $900 million DPC project= ,=20 which includes MSEB's 15 per cent while General Electric and Bechtel hold 1= 0=20 per cent each. The controversial "now on now off" project began in 1992 but= =20 ran into rough weather after the Shiv Sena-BJP came to power and was scrapp= ed=20 only to be revived after renegotiating the PPA. Fresh trouble arose in=20 October last when MSEB began defaulting over the "enormous" billing followi= ng=20 which DPC invoked the state and centre's counter guarantee and also recentl= y=20 sent three international arbitration notices and invoked the political=20 "forced majeure" implying inability to conform towards any financial=20 commitment. =20 DPC had yesterday stated that it had no plans to reduce its stake below 50= =20 per cent but according to Enron Corp's Chief Executive Officer Jeff Skillin= g=20 the company would be interested in talking to potential buyers for its stak= e.=20 Skilling, according to an international financial daily, said the=20 multinational continues to see strong growth in North America, Europe and= =20 Australia 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=20 consolidating all arbitration notices served DPC for the =01&continuous def= ault=20 of contractual obligations=018 and name a common arbitrator for the state= =20 government, the Centre and MSEB.The Maharashtra government team led by the= =20 chief minister Vilasrao Deshmukh, at its meeting with the union finance=20 minister Yashwant Sinha and union power minister Suresh Prabhu on Monday,= =20 also proposes for the appointment of a non-Indian arbitrator with a view to= =20 cutting the cost substantially. During arbitration proceedings initiated by the DPC after the repudiation o= f=20 Dabhol phase-I by the previous Shiv Sena-BJP government in 1995, a non-Indi= an=20 arbitrator, Mr Kumara Swami was appointed as an arbitrator after a suggesti= on=20 by a senior counsel Fali Nariman. State government sources told The Financi= al=20 Express that it would write a letter to the DPC regarding arbitration=20 proceedings after Monday=01,s meetings. The state advocate general Goolam= =20 Wahanwati will be suggesting a suitable arbitrator for the state and centra= l=20 government and MSEB.=20 The advocate general will also suggest solicitors and Queens Counsel, who m= ay=20 be engaged in London for this purpose. Incidentally, Mr Prabhu, who was=20 present at the =01&janata darbar=018 organised by the Thane branch of Shiv = Sena,=20 told reporters that the Centre would provide necessary assistance to the=20 Maharashtra government to find a solution to the Dabhol=20 imbroglio.Furthermore, the state government would formally appeal to the=20 Centre to nominate its representative on the proposed committee to negotiat= e=20 with the DPC in a serious bid to reduce the per unit cost and assess the=20 possibility of sale of Dabhol power to deficit states. The government has= =20 suggested the names of Housing Finance Development Corporation chairman=20 Deepak Parekh and former union energy secretary EAS Sarma, who were members= =20 of the Godbole energy review 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=20 Maharashtra State Electricity Board and US energy major Enron-promoted Dabh= ol=20 Power Company, Maharashtra will set up an expert committee for negotiations= =20 even as the multinational is contemplating winding up of its operations in= =20 the country. "We are now going for negotiations and will form an experts=20 committee in which Maharashtra expects the Centre to participate," chief=20 minister Vilasrao Deshmukh told reporters after attending a condolence=20 meeting to pay tributes to late Nasscom president Dewang Mehta here on=20 Sunday. "All the four parties -- namely the state, Union government, Enron= =20 and MSEB -- should come together for negotiations; otherwise it cannot be a= =20 complete exercise," he added.=20 Deshmukh and the MSEB team are scheduled to meet Union finance minister=20 Yashwant Sinha and power minister Suresh Prabhu on Monday in New Delhi to= =20 discuss the stalemate and find a acceptable solution for the same. "I am=20 meeting Sinha and Prabhu to request them to take an initiative and send=20 representatives for the negotiations committee," he said. Deshmukh's meetin= g=20 with the Centre comes at a crucial stage as DPC's lenders would be meeting = in=20 London, on the same day, to decide upon the future finances of the=20 controversy marred 2,184-mw project in Dabhol.=20 Moreover, the DPC board is also scheduled to meet on April 25 in London to= =20 decide the fate of its $900 million project in Dabhol, including winding up= =20 of its operations. The meeting would discuss the topmost item on the agenda= ,=20 which was to empower DPC managing director Neil McGregor to wind up=20 operations in the country. DPC has already slapped one conciliation notice = on=20 the Centre and three arbitration notices on the state government over=20 non-payment of dues amounting to Rs 213 crore plus interest towards the bil= ls=20 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=20 of the arbitration and conciliation processes, Deshmukh replied in the=20 negative. Deshmukh said MSEB chairman Vinay Bansal along with two senior=20 officials would attend DPC's board meeting in London. Bansal had said on=20 Sunday that MSEB would present its case concerning the Rs 401-crore penalty= =20 that the loss-making board slapped on DPC on February 28, for not generatin= g=20 required power within the stipulated time as per the PPA. Currently, Enron= =20 India holds 65 per cent in the $900-million DPC project, which includes=20 MSEB's 15 per cent, while General Electric and Bechtel hold 10 per cent eac= h.=20 (PTI)=20 ---------------------------------------------------------------------------= --- ----------------------------------------------------------THE ECONOMIC TIME= S,=20 April 23, 2001=20 'Enron is a national problem' =20 UNION power minister Suresh Prabhu on Sunday said the Centre would render a= ll=20 possible help to resolve the Enron crisis faced by Maharashtra which is=20 "haunting the entire country". Prabhu said he would meet the state chief=20 minister Vilasrao Deshmukh in New Delhi tomorrow to discuss stalemate over= =20 the payments due to the US energy major-promoted Dhabol Power Company by th= e=20 Maharashtra State Electricity Board. Referring to Godbole committee report'= s=20 finding that DPC was keen on offering MSEB's 15 per cent stake to the=20 National Thermal Power Corporation, Prabhu said: "The Centre has not receiv= ed=20 any such proposal regarding participation of the central power utility."=20 (PTI)=20 ---------------------------------------------------------------------------= --- ----------------------------------------------------------AFTERNOON, April= =20 23, 2001=20 CM takes Enron to Delhi today=20 =20 Chief Minister Vilasrao Deshmukh will discuss the Enron imbroglio with Unio= n=20 Finance Minister Yashwant Sinha and Union Power Minister Suresh Prabhu in= =20 Delhi today. He will request the Centre to appoint a representative to the= =20 committee that the state government is setting up to carry on discussions a= nd=20 negotiations regarding the Dabhol Power Project of the US-based Enron Power= =20 Company. Today, a special meeting of representatives of all those finanicia= l=20 institutions which have extended loans to the Dabhol Power Project is also= =20 being held in London. A meeting of its directors will be held on Wednesday = to=20 discuss the fate of the $900 million project which has been under a cloud= =20 ever since its inception.=20 Yesterday, Mr. Prabhu declared at a 'Janata Darbar' in Thane that the Centr= e=20 would extend all help to solve the Enron crisis. This is in the backdrop of= =20 pending bills to the tune of Rs. 213 crore which the state fowarded to the= =20 Centre against payments for the months of December 2000 and January 2001.= =20 Confirming that there was no proposal from the state government to handover= =20 the project to the Centre, Mr. Prabhu said that the situation of the=20 electricity boards in the country was precarious. The Centre had decided to= =20 assist Maharashtra upto Rs. 250 crore every year to improve customer=20 services.=20 ---------------------------------------------------------------------------= --- ----------------------------------------------------------OUTLOOK, Monday,= =20 April 23, 2001 The Real Story Of Dabhol If a judicial probe, suggested by the committee, i= s=20 ordered into the Enron deal, it could embarrass three governments RANJIT= =20 BHUSHAN "The Committee has prima facie found infirmities in several decisions taken= =20 in respect of the Enron project at different points of time by successive= =20 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=01*and includ= ing=20 former Union economic affairs secretary E.A.S. Sarma, hdfc chairman Deepak= =20 Parekh, teri chairman RajendraPachauri and Maharashtra government official= =20 Vinay Mohan Lal=01*has recommended a judicial probe into the entire Enron p= ower=20 project deal saying it signified "the utter failure of governance that seem= s=20 to have characterised almost every step of the decision-making process=20 relating to the Dabhol project". The report, which was submitted to the=20 Maharashtra government last fortnight and has been acquired by Outlook, is= =20 severely critical of former chief minister Sharad Pawar (with the Congress= =20 then), the 13-day bjp-led Union government which reworked the deal in 1996,= =20 Shiv Sena supremo Balasaheb Thackeray and his government in Maharashtra=20 headed by Manohar Joshi "The utter failure of governance seems to have characterised almost every= =20 step of decision-making relating to the Dabhol project." Madhav Godbole=20 Committee Report An investigation, if ordered, could embarrass at least these three=20 governments The report clearly upholds the allegations of money being paid = by=20 Enron to politicians and bureaucrats for clinching the deal. According to t= he=20 committee, the deal reveals failure of governance, both at the Centre and= =20 state, and across different agencies. "It strains belief to accept that suc= h=20 widespread and consistent failure to execute responsibilities is purely=20 coincidental," the report said, proposing a set of measures to be implement= ed=20 if something of the project was to be retrieved. Godbole and Sarma also fel= t=20 that the panel should categorically recommend the government of India to=20 order a judicial inquiry. This was finally adopted by it. Says a Congress= =20 leader: "Enron could well become the biggest political issue in Maharashtra= =20 and put to question liberalisation, particularly in the power sector." The proposal has already struck panic. Says ncp's Praful Patel: "If the Enr= on=20 decision has at all been detrimental, it is because of the haste with which= =20 phase 2 was cleared by the Shiv Sena-bjp government. Now with the state=20 having already entered into an agreement with Enron, the important thing is= =20 to resolve it amicably. A judicial inquiry will be an eyewash because it's= =20 not an issue of corruption but that of perception."=20 Pro-market Congressmen privately admit that it was their governments at the= =20 Centre and the state which invited Enron, even though the second phase was= =20 cleared by the bjp-Shiv Sena combine. Says Congress spokesperson Jaipal=20 Reddy: "Right now we're too involved with the Parliament deadlock over=20 Tehelka." Pro-liberalisation Congress MPs also fear that such witch-hunting= =20 could send wrong signals to foreign investors. Non-Congress MPs from=20 Maharashtra, meanwhile, claim that the Godbole Committee was instituted wit= h=20 the express purpose of politicising the Enron issue. "I think I know Vilasr= ao=20 Deshmukh's gameplan," says an MP from the state. But some MPs like Congress= '=20 Prithviraj Chavan question the cloak of secrecy that's surrounded the deal:= =20 "I've maintained for long that there should be a judicial committee to=20 examine this=018. The committee report also says that had the Enron project been subjected to= a=20 techno-economic appraisal, as envisaged under provisions of the Electricity= =20 supply Act of 1948 and related legislations, the infirmities could have bee= n=20 avoided.Since this wasn't done, questions about a concerted effort towards= =20 exercising undue influence at every stage of the project are bound to arise= ,=20 the exhaustive 93-page report points out. "I'd highlight the speed with which the 13-day Vajpayee government cleared= =20 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=20 liberalisation in the early '90s and, despite several controversies, is now= =20 an established power project at Dabhol, 150 km south of Mumbai. In July 199= 2,=20 Enron signed an MoU with the Maharashtra State Electricity Board (mseb) to= =20 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=20 writ against the project. This curiously led to renegotiations with Enron.= =20 The committee has quoted a Bombay High Court order on the renegotiated deal= . =20 "Once it (GoM) decided to revive the project, it acted in the very same=20 manner its predecessors in office had done. It forgot all about competitive= =20 bidding and transparency. The speed with which the negotiating group studie= d=20 the project and made its proposal for renegotiatons, which was accepted by= =20 Dabhol, is unprecedented." Says Chavan: "I would particularly like to=20 highlight the speed with which the 13-day Vajpayee government at Centre=20 endorsed the renegotiated project minutes before it resigned." Since the commissioning of the plant in May 1999, the mseb has paid Rs 1,60= 7=20 crore for the power it has bought from Dabhol. If the same watttage of powe= r=20 had been bought from Indian-built power plants fired by indigenous coal, th= e=20 payment would have been approximately Rs 736 crore. In the first=20 year-and-a-half of its operation itself, the dpc had drained the Maharashtr= a=20 exchequer of nearly Rs 1,000 crore. The Central Electricity Authority (cea), in fact, pointed out that the Dabh= ol=20 plant was not the least costly option. The mseb had other inexpensive=20 alternatives like the four units of Kaparkheda, but they were in a=20 preliminary stage. The report notes: "...if the mseb had made efforts to=20 seriously pursue these projects, they might not have remained in their=20 preliminary stages". It adds that the members were of the opinion that "the= =20 mseb and the Maharashtra government erred seriously, based on information= =20 available at that time, in proceeding with the dpc as a base-load factor ev= en=20 when its capacity was reduced." The failure seems to have been compounded b= y=20 the laxity of the Union power ministry, finance ministry and the cea. It=20 quotes the cea as saying that since the Union finance ministry found the=20 tariff reasonable, no further examination was required Strangely, Bal Thackeray's Shiv Sena, when it came to power together with t= he=20 BJP in Maharashtra, filed a writ in the court and then renegotiated the dea= l.=20 After the new Shiv Sena-bjp government took over, its CM, Manohar Joshi,=20 appointed a renegotiating committee in 1996 which made the right noises,=20 actually managing to reduce the tariff. But certain things remained=20 inexplicable. No fresh clearances were required from the cea, which also sa= id=20 that "since no cost increase was involved...fresh formal clearance wasn't= =20 necessary." Says the committee: "This only adds strength to the suspicion= =20 that the cea didn't consider the economic aspects of the project at all.=20 Indeed, given the non-availability of any official record of the meeting on= =20 June 24, 1994, with the Committee and the nature of this letter dated=20 December 23, 1994, the Committee is doubtful whether the economic aspects o= f=20 dpc were discussed at all.'' The credibility of the Shiv Sena-bjp government has been seriously=20 questioned. "The Committee finds it unexplicable (sic) why there was no=20 mention of any reduction in capital cost of the project from $2,828 million= =20 to $2,501 million as agreed by dpc in the summary report of the renegotiati= ng=20 committee," the panel observes.Says lawyer Prashant Bhushan: "It is strange= =20 that the Shiv Sena-bjp government first filed a writ in the court and then= =20 coolly renegotiated the deal." The committee further spells out the losses= =20 incurred through the deal. "Subsequent to the commissioning of the dpc, the= =20 financial deterioration of mseb has been rapid. While the mseb was in profi= t=20 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= =20 weaknesses. In a letter written to the then power secretary, R. Vasudevan, = a=20 top bank official had said that "after a detailed review of the analytical= =20 framework and costing assumptions, we reconfirm our earlier conclusion that= =20 the Dabhol project, as presently formulated, is not economically justified"= =20 and that in "our assessment the project is too large to enter the mseb syst= em=20 in 1998. The proposed base-load operation could result in uneconomic plant= =20 dispatch, as already existing lower variable cost coal power would be=20 replaced by the higher cost lng power." Enron's persistence and the 'gullibility' of the Indian side can be gauged= =20 from high-ranking Enron official Joe Sutton's letter to a key Indian=20 official, Ajit Nimbalkar: "I recently met with the World Bank and have been= =20 following the articles in the India papers. I feel that the World Bank=20 opinion can be changed. We'll engage a PR firm and hopefully manage the med= ia=20 from here on. The project has solid support from all other agencies in=20 Washington." The key question in the Enron deal is whether a developed state like=20 Maharashtra needs outside intervention in the power sector at all? For the= =20 first time the Godbole committee has raised objections about the viability = of=20 such a project. According to the report, the mseb has been one of the bette= r=20 performing boards in the country and has, despite a faulty transmission and= =20 distribution (T and D) system, managed to consistently earn net revenue=20 surpluses on an accrual basis. Maharashtra accounts for nearly one-fourth of the gross value of India's=20 industrial sector. It's one of the few states to achieve 100 per cent=20 electrification. Since '95, the mseb has been adding to its generation. "Th= is=20 improvement, which has been largely due to renovation and modernisation=20 undertaken by the mseb, exceeded its own expectations at a time when the dp= c=20 was being considered," the report points out. Following a policy of=20 cross-subsidy, roughly nine out of its ten users are subsidised. But the gap between the average cost of supply and average realisation hasn= 't=20 been much. In fact, the subsidy claim decreased from Rs 630 crore in 1995-9= 6=20 to Rs 355 crore in 1998-99, until in 1999-2000 it increased nearly five-fol= d=20 to Rs 2,084 crore due to the sudden increase in the gap by 26 paise per uni= t=01* from 15 to 41 paise=01*an increase of 173 per cent. "The increase in the su= bsidy=20 claim by Rs 1,729 crore is due to the increase in the gap principally becau= se=20 of the increase in power purchase costs," says the committee, adding:=20 "Without the dpc and without problems of T and D loss, the mseb could be=20 financially healthy." But can that happen now since Enron is here to stay? The committee has come= =20 up with some far-reaching recommendations: make public all Dabhol-related= =20 documents and agreements, restructure the Dabhol project itself to bring do= wn=20 the cost of power, restructure dpc financially, allow sale of dpc power=20 outside Maharashtra, re-examine ppas in accordance with least-cost plans, a= nd=20 thoroughly reform the mseb.The committee know this can become reality only= =20 with political consensus and through forming of public opinion. The questio= n=20 is, can that be achieved in an unstable political environment? With Priya Sahgal=20 Making Of A Scam=20 ? 1992: Centre invites Enron to set up 'fast track' power project=20 ? Dec 1993: First PPA signed with MSEB=20 ? 1994: Enron starts construction=20 ? 1995: Sena-BJP govt scraps Enron=20 ? 1996: State govt renegotiates project=20 ? 1996: 13-day Vajpayee govt approves counter-guarantee=20 ? May 1996: State cabinet clears PPA=20 ? May 13, 1999: Phase I commissioned=20 ? Jul 1999: Financial closure for Phase II=20 ? Oct 2000: MSEB defaults on payment, subsequently stops paying monthly bil= ls=20 ? Feb 6, 2001: Enron invokes Central government's counter-guarantee ---------------------------------------------------------------------------= --- ----------------------------------------------------------BUSINESS STANDARD= ,=20 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=20 2001 stood at a record Rs 968 crore. This was largely due to the=20 disconnection drive on defaulter connections -- pegged at nearly 20,000=20 disconnections a month -- which resulted in compliance by consumers. With t= he=20 Dabhol Power Company (DPC) monthly financial burden issue now a topic of=20 discussion among arbitrators on the negotiating table, the MSEB has turned = to=20 putting its house in order.=20 As if to ward of any criticism of its fiscal condition that could be termed= =20 as the facilitator to the entire DPC tariff crisis, the state electricity= =20 board has put matters relating to its performance on record. For instance,= =20 MSEB has recorded the highest power generation in the year ended March 31,= =20 2001, at 45930 units, compared with the previous year's 45582 units, making= =20 it the top SEB of the country in this respect. Similarly its power stations= =20 recorded the highest availability percentage at 86.1 up from 84.6 per cent= =20 last fiscal. Plant load factor is up to 72.78 per cent, compared with 71.7= =20 per cent in 2000.=20 The Parli power station has recorded the highest ever generation in the ten= =20 years of its life time in 2000 at 4545 million units, which made it eligibl= e=20 for the meritorious productivity award under the eligibility guidelines=20 issued by the Government of India carrying a cash award of Rs 12.5 lakh. Al= l=20 other power stations in the state, without exception, also fulfill the=20 eligibility criteria for the cash award, a senior MSEB official said.=20 Similarly, the Chandrapur power station became the first power station of a= ny=20 state electricity board to get the ISO 9002 certification.=20 A senior MSEB official said: "Earlier MSEB was suffering from too much=20 interference in its day to day functioning. The agriculturists were touted = as=20 the major reason for its deteriorating accruals, while theft of electricity= =20 during the transmission and distribution stage was conveniently camouflaged= =20 under this head. In the recent past, the government has authorised MSEB to= =20 take steps to curb this misuse of power by its own officials, many of whom,= =20 including a chief engineer have suffered suspensions
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