Dear Colleague,
Having invoked the Govt Of India Gaurantee yesterday, this has no doubt 
received front page media attention across the country. While we will be 
circulating some of this around, I forward this particularly interesting 
editorial from The Economic Times.  For those of us who question the state 
governments stance refusing to pay and face the frequently encountered charge 
of high tariff etc,  here's what the countries most widely read and 
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, 
rightly, been downgraded by Crisil, following non-payment of dues to the 
Dabhol Power Corporation by the state government. Predictably, Maharashtra 
finance minister Jayant Patil has objected to the downgrade, but that only 
shows how out of touch politicians are with commercial reality. This is a 
problem not just in Maharashtra but in all states. Politicians have got used 
to the nawabi notion that rulers do not really have to pay their legal dues, 
and any payments they actually make are a sort of favour. 

Maharashtra was earlier regarded as one of the best state governments. But 
now it is in fiscal difficulties, like all others. Mr Patil claims Dabhol is 
a special case, reflecting not fiscal distress but a political decision not 
to pay. Sorry, Mr Patil, but any entity that believes it can default on 
payment for political reasons deserves to be punished since it is 
demonstrably unreliable. Many believe the Dabhol deal was a high-cost one. So 
what? Dozens of public sector projects have suffered cost overruns, but that 
is no reason for refusing to pay their dues. The whole point of commercial 
rules is that you must abide by the rules of the game even when they involve 
a loss. You can legitimately withhold payment only if the original deal was 
crooked and broke the law. 

This was the accusation made against Dabhol in the mid 1990s, but detailed 
investigation failed to unearth evidence of wrong-doing, and dozens of legal 
petitions were dismissed by the courts. Cynics say that lack of evidence in 
India does not mean innocence. But that cynicism can apply to every single 
power project in India, including public sector projects. In life, we all 
make some good deals and some bad ones, and need to abide by them 
nevertheless. State governments cannot escape this commercial rule. No state 
should renege on a deal merely because it was a bad one. If it does so, it 
deserves to be downgraded as an unreliable and risky economic partner. The 
Crisil downgrade may not mean much of a rise in the state,s immediate 
borrowing costs. But it will affect the state,s once-awesome reputation, and 
that could be a far higher real cost.