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Enron Mail |
Dear Colleague,
Having invoked the Govt Of India Gaurantee yesterday, this has no doubt=20 received front page media attention across the country. While we will be=20 circulating some of this around, I forward this particularly interesting=20 editorial from The Economic Times. For those of us who question the state= =20 governments stance refusing to pay and face the frequently encountered char= ge=20 of high tariff etc, here's what the countries most widely read and=20 influential daily has independantly to say in our support: THE ECONOMIC TIMES Wednesday Feb 07 2001, http://www.economictimes.com/today/07edit02.htm A Deserved Downgrade, ( EDITORIAL) THE rating assigned to four government of Maharashtra supported bonds has,= =20 rightly, been downgraded by Crisil, following non-payment of dues to the=20 Dabhol Power Corporation by the state government. Predictably, Maharashtra= =20 finance minister Jayant Patil has objected to the downgrade, but that only= =20 shows how out of touch politicians are with commercial reality. This is a= =20 problem not just in Maharashtra but in all states. Politicians have got use= d=20 to the nawabi notion that rulers do not really have to pay their legal dues= ,=20 and any payments they actually make are a sort of favour.=20 Maharashtra was earlier regarded as one of the best state governments. But= =20 now it is in fiscal difficulties, like all others. Mr Patil claims Dabhol i= s=20 a special case, reflecting not fiscal distress but a political decision not= =20 to pay. Sorry, Mr Patil, but any entity that believes it can default on=20 payment for political reasons deserves to be punished since it is=20 demonstrably unreliable. Many believe the Dabhol deal was a high-cost one. = So=20 what? Dozens of public sector projects have suffered cost overruns, but tha= t=20 is no reason for refusing to pay their dues. The whole point of commercial= =20 rules is that you must abide by the rules of the game even when they involv= e=20 a loss. You can legitimately withhold payment only if the original deal was= =20 crooked and broke the law.=20 This was the accusation made against Dabhol in the mid 1990s, but detailed= =20 investigation failed to unearth evidence of wrong-doing, and dozens of lega= l=20 petitions were dismissed by the courts. Cynics say that lack of evidence in= =20 India does not mean innocence. But that cynicism can apply to every single= =20 power project in India, including public sector projects. In life, we all= =20 make some good deals and some bad ones, and need to abide by them=20 nevertheless. State governments cannot escape this commercial rule. No stat= e=20 should renege on a deal merely because it was a bad one. If it does so, it= =20 deserves to be downgraded as an unreliable and risky economic partner. The= =20 Crisil downgrade may not mean much of a rise in the state=01,s immediate=20 borrowing costs. But it will affect the state=01,s once-awesome reputation,= and=20 that could be a far higher real cost.=20
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