THE HINDU BUSINESSLINE
Friday, May 11, 2001, http://www.hindubusinessline.com/stories/041156ju.htm
DPC-MSEB slugfest -- Needed a conciliatory approach , Uttam Gupta 
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BUSINESS STANDARD
Friday, May 11, 2001, http://www.business-standard.com/today/state1.asp?menu=32
DPC mounts pressure on lenders to terminate PPA , S Ravindran in Mumbai
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THE ECONOMIC TIMES
Friday, May 11, 2001, http://www.economictimes.com/today/11infr02.htm
Godbole panel can renegotiate PPA
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BUSINESS STANDARD
Friday, May 11, 2001, http://www.business-standard.com/today/state4.asp?Menu=32
Third Front may seek probe panel on DPC project 
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THE FINANCIAL EXPRESS
Friday, May 11, 2001, http://www.financialexpress.com/fe20010511/news4.html
MSEB, state want rebate issue resolved before arbitration, Sanjay Jog
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THE FINANCIAL EXPRESS
Friday, May 11, 2001, http://www.financialexpress.com/fe20010511/news2.html
Offshore lenders to skip Godbole panel meeting today ,   Sanjay Jog
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THE FINANCIAL EXPRESS
Friday, May 11, 2001, http://www.financialexpress.com/fe20010511/news1.html
Inter-ministerial panel to assist PPA renegotiations ,  Anupama Airy
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THE ASIAN AGE
Friday, May 11, 2001, http://www.asianageonline.com/
Centre rejects Enron's proposal
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THE ASIAN AGE
Friday, May 11, 2001, http://www.asianageonline.com/
'Talks with Enron on tariff a fraud', Olga Tellis 
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THE ECONOMIC TIMES
Friday, May 11, 2001, http://www.economictimes.com/today/11edit05.htm
Power, populism and lost potential, Ajay Jindal 
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THE HINDU BUSINESSLINE
Friday, May 11, 2001, http://www.hindubusinessline.com/stories/1411562d.htm
Dabhol: Back to the negotiation table , Dinesh Narayanan 
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THE INDIAN- EXPRESS
Friday, May 11, 2001, http://www.indian-express.com/ie20010511/nat19.html
Why disgraced Customs chief took 'secret' flight with Enron, Pranati Mehra
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AFTERNOON
Friday, May 11, 2001, http://www.afternoondc.com/
MSEB workers' agitation against Enron 
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THE ECONOMIC TIMES
Friday, May 11, 2001, http://www.economictimes.com/today/11comp02.htm
Enron to relocate DPC managers abroad, Anto T Joseph 
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THE HINDU BUSINESSLINE, Friday, May 11, 2001
DPC-MSEB slugfest -- Needed a conciliatory approach , Uttam Gupta 

THE ROW between Dabhol Power Corporation (DPC) and the MSEB/Maharashtra Government/Union Government has reached a flashpoint. At a DPC board meeting in London, the Managing Director and President/CEO were authorised to take a decision to wind up the project at an ``appropriate time''. Though the DPC team agreed to meet the Godbole Committee on re-negotiating the terms of the Power Purchase Agreement (PPA), things are far from clear. 

The project's termination will place huge payment liabilities on the MSEB/Maharashtra Government/Centre by way of compensation claims (running into several thousand crore rupees), the aggravation of the power deficit in the State, increased NPAs in financial institutions, adverse impact on companies/units with business links with DPC, loss of employment and attendant social problems. It may be recalled that DPC was the only project, among the eight fast track IPPs that has seen the light of day. If this is also wound up, it will have a debilitating effect on foreign direct investment (FDI) which has already suffered on account of policies and delays in various approvals/clearances. Enron is currently implementing an ambitious project to set up a terminal for handling imported LNG. Apart from replacing naphtha in DPC-I, this will be used as fuel in phase II which is likely to be commissioned next year. The project involves import of 5 million tonnes of LNG, 2 million tonnes of which will be used by DPC I and II and the remainder will be made available to other projects, including the fertiliser sector. 

Due to a severe shortage of domestic gas and the exorbitant cost of other fuels such as naphtha, imported LNG is a favourite considering its low cost. In the fertiliser sector, the ERC has recommended that all naphtha and fuel-oil-based plants switch to imported LNG to improve cost-competitiveness in the emerging liberalised environment. LNG will also help gas-based units feeling the pinch of short supply domestically. Against this backdrop, if the DPC power project is terminated, a major source of guaranteed offtake of LNG on a long-term basis will disappear from the scene. For, it is not likely that the LNG project will be taken up. This will affect the overall availability of LNG, hurting the fortunes of industries such as fertilisers and power. The genesis of the present crisis lies in the high cost of power supplied by DPC and the MSEB's inability to pay its bills. It is the inevitable outcome of a cost plus system of power tariff -- both with respect to the fixed and the variable component -- incorporated in the PPA. The MSEB/Maharashtra Government signed the deal with eyes open and the Centre also provided a  counter-guarantee! 

Having consciously become a party to the deal, things need to be taken in stride. It would be imprudent, at this stage, to lay the blame for the consequential problems on DPC/Enron. Unfortunately, our side has adopted a confrontationist attitude, amply reflected in the MSEB's decision to lodge a claim for Rs 401 crore with DPC because the latter could not supply electricity for a  couple of hours in January. Considering that the termination of the Dabhol project will be detrimental to Indian interests, a conciliatory atmosphere should replace the present mood of mutual bitterness. The setting up of a committee on re-negotiating terms with DPC is a good thing. But there is also the need to avoid frequent outbursts, charges/accusations and so on. 

In the circumstances, the vexatious problem of high cost power should be approached in two parts. First, we need to carefully assess the role of the MSEB/Maharashtra. Second, the need for necessary adjustment/changes in various charges to reduce the tariff should be impressed upon DPC. Needless to say, both parties should take that action concurrently in a spirit of mutual  accommodation. We need to clearly understand that under the PPA, the fixed charges have to be necessarily paid irrespective of the quantum of power drawn by the MSEB. For DPC Phase-I, these are Rs 1,050 crore per annum or Rs 87.5 crore a month. After the commissioning of Phase-II, the charges will be Rs 3,500 crore per annum or Rs 292 crore a month. 

Depending on the quantum of the power drawn, the incidence per unit basis will vary. Thus, at 80 per cent generation capacity of DPC-I, or 5,186 million units per annum, the fixed charges will be Rs 2.02 per kWh. For both DPC-I and II, at 80 per cent load, or 15,067 million units per annum, these will work out to Rs 2.32 per kWh. If, on the other hand, the offtake of power is only a third of the generation capacity, or 2,139 million units on an annualised basis, then for DPC-I the fixed  charges would be Rs 4.91 per kWh. Under a similar scenario, with the operation of Phase-II, the per unit incidence would be Rs 5.63 per kWh. 

DPC-I now uses naphtha as fuel. On the basis of its prevailing price, the variable cost component works out to about Rs 2.2 per kWh. Together with fixed charges corresponding to drawal at 80 per cent load, the total cost to the MSEB is Rs  4.2 per kWh. However, if the offtake is restricted to a third, the cost would zoom to Rs 7.1 per kWh. From next year on, the entire project would operate on imported LNG. This being cheaper ($3.75 per million BTU against about $6 per million BTU for naphtha), the variable cost will go down to Rs 1.3 per kWh. Together with fixed charges at 80 per cent, the total cost of power will be Rs 3.62 per kWh. In the event only a third of the capacity is drawn, the cost will zoom to Rs 6.93 per kWh. Clearly, it is possible to contain the cost of power supplied by Dabhol at Rs 3.5-4 per kWh if, the MSEB draws the optimum load. There seems to be no other way of bringing about a meaningful reduction in cost, other than a significant increase in the offtake of electricity by the MSEB from the present low level. 

The demand-supply scenario for power in Maharashtra justifies the accommodation of entire supplies from DPC at optimum load. For 2001-02, the total requirement is estimated at 70,127 million units. Supply from MSEB's own generating stations and sources other than DPC being about 57,000 million units, there will still be an uncovered gap of 13,127 million units, which is higher than  the supply from DPC-I at 80 per cent load. Notwithstanding the above, if the MSEB is not able to lift power at the optimum load, it is because its precarious financial health limits its ability to make payments. This, in turn, is because of supply of electricity to agriculture and households at subsidised rates and high transmission and distribution losses  (power theft). Without tackling these two problems on a war footing, we cannot easily come out of the Dabhol imbroglio. 

Besides yielding benefits by significantly lowering per unit cost, the above steps  will also help build confidence with DPC, especially considering its consequential ability to optimally utilise generating capacity. The negotiating committee can then leverage this to seek from DPC a meaningful reduction, particularly in the fixed charges. Under the PPA, all liabilities towards foreign capital -- servicing of loans and return on equity -- are denominated in dollars/forex. In the event of the rupee's depreciation, this automatically results in the increased burden on the MSEB. This is contrary to established business practices the worldover and needs to be rectified by freezing all foreign currency liabilities with reference to the exchange rate prevailing at the time of commissioning of the project. Likewise, with fuel cost, efforts should be made to protect the variable component of tariff from the rupee's depreciation. The DPC should be in a position to absorb its effect especially considering that the actual fuel consumption is lower than the norm used for arriving at variable cost. 

(The author is Chief Economist, Fertiliser Association of India. The views expressed are personal.) 
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BUSINESS STANDARD, Friday, May 11, 2001
DPC mounts pressure on lenders to terminate PPA , S Ravindran in Mumbai

The Enron-promoted Dabhol Power Company (DPC) has stepped up pressure on lenders to permit it, without further delay, to terminate the power purchase agreement (PPA) with the Maharashtra State Electricity Board (MSEB). The company has reportedly told the lenders that there should not be any delay in serving the termination notice as the engineering procurement  and construction (EPC) contractor Bechtel has threatened to pull out of the project on June 11. Bechtel holds a 10 per cent stake in the project.  The lenders are, however, not yet ready to back DPC's demand.

They are of the opinion that phase two of the project should be completed first. The MSEB decision to clear the April bill (Rs 139 crore) has also come as a shot in the arm for lenders.  "Financially, phase two is 93 per cent completed while 97 per cent of the physical construction is over. The lenders want the project to be completed without any cost and time overrun. At  this juncture, if the PPA termination notice is served, it will preclude any further disbursements by the lenders," a source familiar with the development said. A DPC spokesperson declined to comment on the development. A fully completed phase two will be in the lenders' interest as they will inherit  the project if it is terminated.The lenders have first charge on the assets of DPC. A fully completed project will enable the lenders to find a buyer and secure a better  valuation. 

Earlier, on April 23 and April 24, DPC had sought the consent of its consortium of lenders at a meeting in London to terminate the PPA. This meeting was held amidst the backdrop of  MSEB defaulting on its payments to DPC and  the Centre failing to honour the counter guarantee for the December bill of Rs 102 crore. The meeting witnessed a sharp division in the ranks of the domestic and offshore lenders. The offshore lenders were all for backing the DPC  move as their exposure is covered by the Centre's counter guarantee, if the PPA and  project are terminated.
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THE ECONOMIC TIMES, Friday, May 11, 2001
Godbole panel can renegotiate PPA

MAHARASHTRA chief minister Vilasrao Deshmukh today said the views held by Enron-promoted Dabhol Power Company on renegotiating PPA with MSEB would be conveyed to the state government by the Godbole committee, which is slated to meet us energy major representatives on Friday. Talking to reporters after a cabinet meeting here, Deshmukh said the state government had empowered the  Godbole committee to renegotiate the controversial power  purchase agreement on its behalf with DPC. When his attention was drawn to the reported stand taken by DPC that its representatives would be attending the meeting convened by the Godbole committee as a mere courtesy and there was no question of renegotiating PPA, the chief minister said the official view held by Enron would be communicated to the government after the discussion.
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BUSINESS STANDARD, Friday, May 11, 2001
Third Front may seek probe panel on DPC project 

The coordination committee meeting of all the Democratic Front allies in the Maharashtra  government scheduled late on Thursday night  would witness the presentation of a written  request by Third Front allies seeking the setting   up of a commission of enquiry to probe the Dabhol Power Company (DPC) power project. Senior Third Front leaders after a meeting held Thursday afternoon decided to place their thus far oral demand in writing to be presented to chief minister Vilasrao Deshmukh in the meeting.A senior Janata Dal leader said: "The first letter that will seek the setting up of the commission of enquiry bears the signatures of Janata Dal leader Nihal Ahmed, PWP leader N D Patil, CPMleader Ashok Dhavle and Republican Party of India leader Sumantrao Gaikwad. Other leaders  who were not present for the afternoon meeting, though unable to pen their signatures, have also expressed their consent to the written missive."
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THE FINANCIAL EXPRESS, Friday, May 11, 2001
MSEB, state want rebate issue resolved before arbitration, Sanjay Jog

THE state government and the Maharashtra State Electricity Board (MSEB)   have asked the Dabhol Power Company (DPC) that the question of payment of Rs 401.62-crore   rebate should be resolved at the outset before any of the other arbitrations are proceeded with. The state government and the MSEB in their separate replies to an arbitration notice served by the   DPC said that such resolution of the arbitration between the DPC and MSEB regarding payment of rebate for the misdeclaration and default on the availability of power on January 28 would "consequently have a substantial and material bearing on the outcome of the other arbitrations."

The state government and MSEB said that the Dabhol power plant had the capability to ramp up to   a 100 per cent load from a cold start within a period of 180 minutes. The DPC, by an availability declaration declared its "declared baseload capacity" to be 657 MW for each hour on January 28,   2001, MSEB by a despatch instruction at 3 PM instructed DPC to deliver its final declared   baseload capacity of 657 MW from 6 PM.  "However, the actual generation of power did not achieve the declared baseload capacity within the   stipulated period. This failure on the part of DPC and its incapability to adhere to and perform according to the dynamic parameters and operating characteristic entitled MSEB to the rebate envisaged under the power purchase agreement (PPA)," state government and MSEB said.

They have further said that under the contractual obligations, the DPC is duty bound to compute the   rebate and to duly adjust the amount at the end of four months block ending in January, May and September. "The DPC has failed to compute account for and adjust the rebate for the shortfall in declared base load availability on January 28 in its billing statement of January 2001. Thus DPC has committed a breach of their contractual obligations by not giving the rebate to MSEB," the state government and MSEB have said in no uncertain terms.

The state government said that the DPC's decision to invoke state guarantee for the outstanding amount of December bill (Rs 102 crore) and January bill (Rs 111 crore) was "baseless, wrongful and unjustified." Moreover, the amounts claimed by DPC towards December and January bills are not due and payable in the present circumstances when disputes and differences have arisen between the DPC and MSEB in regard to the payment of rebate. The state government denied that it has breached any of the obligations arising under the state guarantee, neither has it renounced and repudiated its obligations. 
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THE FINANCIAL EXPRESS, Friday, May 11, 2001
Offshore lenders to skip Godbole panel meeting today ,   Sanjay Jog

THE representatives from Enron Corp, General Electric, Bechtel from US, off-shore lenders and liquified natural gas suppliers from Oman and Abu Dhabi will skip the Madhav Godbole renegotiation committee's meeting scheduled today. Instead, the Dabhol Power Company, which has already agreed to appear before the Godbole  committee as a matter of courtesy without any intent to submit proposals with respect to tariff reduction, would be represented by the Enron India managing director K Wade Cline, DPC  president and chief executive officer Neil McGregor, senior vice-presidents Mukesh Tyagi and Sanjeev Khandekar and chief financial officer Mohan Gurunath, along with a battery of company lawyers.

Curiously, none of the other DPC board members comprising Enron, General Electric, Bechtel and   foreign lenders will fly down from Houston to participate at today's meeting. Instead, the offshore and Indian financial institutions would be represented by former executive director of Industrial Development Bank of India AG Karkhanis at the meeting. Mantralaya sources told The Financial Express that Friday's meeting would be a ceremonial one as no hard  discussions would take place. However, the state government and the MSEB have worked out a combined strategy to press for cuts in the Dabhol tariff and equity returns linked to the dollar, and above all, the Centre's intervention for the disposal of Dabhol phase-II.

The state government and MSEB are believed to have said that they were not against continuation of its contractual agreement for Dabhol phase-I, provided the company agrees to rework tariff and share equity earning with the MSEB. However, for Dabhol phase-II, the Centre would have to step in and bear liability. In a related development, state chief secretary V Ranganathan on Thursday briefed the state governor Dr PC Alexander on the ongoing Dabhol crisis at an hour-long meeting. The state has also written a fresh letter to the government, seeking its active participation during renegotiation and for solving the Dabhol impasse. Mr Ranganathan is believed to have made it clear that the state does not require the Dabhol power, except 300 MW or so at present against the contractual agreement for 90 per cent power generated from the DPC. The chief secretary has also pointed out that the Dabhol project, in its present condition, cannot be   sustained by the state government and hence the Centre's assistance is quite essential.

Mr Ranganathan is believed to have stressed the need for a renegotiation with the DPC to find out   solutions as the burden on account of fixed charge would increase on MSEB from June this year.The liabilities would increase from the present Rs 95 crore to Rs 191 crore in June to Rs 238 crore in October and Rs 475 crore in January 2002. The MSEB would have to shell out Rs 544 crore at 90 per cent plant load factor in January 2002 to DPC. Mr Ranganathan seems to have told the state governor that these levels of liabilities would be  unbearable for both MSEB and the state government. 
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THE FINANCIAL EXPRESS, Friday, May 11, 2001
Inter-ministerial panel to assist PPA renegotiations ,  Anupama Airy

THE Centre has decided to constitute an inter-ministerial committee having senior officials from the ministries of finance, law, petroleum, power and surface transport, for providing inputs to the re-negotiation group recently set up by the Maharashtra government to  recast the state electricity board's PPA with the DPC. This decision was taken at a recent meeting between finance minister Yashwant Sinha and power   minister Suresh Prabhu. This meeting was convened to discuss critical issues pertaining to invocation  of the Centre's counter-guarantee by the DPC.

According to sources, this inter-ministerial committee would also brief the Central nominee on the  re-negotiation committee. Appointment of Solicitor General Harish Salve as the Central nominee on   the re-negotiation panel was likely to be cleared soon and a finance ministry notification to this effect  was likely to issued by Friday, sources added. Sources also disclosed that the finance ministry had turned down the request of the state  government that the chairman of the Central Electricity Authority (CEA) be made a permanent member of the re-negotiation panel. However, it was agreed that a senior CEA representative  would be part of both the inter-ministerial panel and would also be the Centre's nominee on the  re-negotiation panel.

The re-negotiation panel was set up to carry out discussions with DPC for reducing tariff from the 2,184-MW first phase of the Dabhol project. These re-negotiations would mainly relate to the cost of delivered power as also on the exact quantum of power which can be absorbed by the state in  the backdrop of Dabhol phase-II nearing completion. The panel will also look into the issue of wheeling excess power outside Maharashtra. 
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THE ASIAN AGE, Friday, May 11, 2001
CENTRE REJECTS ENRON'S PROPOSAL

The appointment of third conciliator may deepen the controversy over the Enron promoted Dabhol project with Centre turning down Dabhol Power Company's plea for appointment of the third conciliator by London Court of International Arbitration or International Chamber of Commerce to resolve the payment dispute with Maharashtra State Electricity Board. The finance ministry rejected the DPC proposal and put the view that the third conciliator should be appointed by the two conciliators named by the Government of India and DPC.

Favouring appointment of an Indian for the job, Centre also rejected the DPC demand that the third conciliator should not be a national of India or of the US, officials said, adding that such a stipulation (about nationality) is not absolutely necessary. Finance ministry conveyed to DPC that the appointment of the third arbitrator be left to the two conciliators or be selected by an institution based in India like the Indian council of arbitration or the International Centre for Alternate Dispute Resolution. Maharashtra chief minister Vilasrao Deshmukh said the views held by DPC on re negotiating PPA with MSEB would be conveyed to the state government by Godbole committee, which is slated to meet US energy major representatives on Friday. Mr Deshmukh said in Mumbai that the state government had empowered the Godbole committee to renegotiate the controversial power purchase agreement on its behalf with DPC.

Meanwhile, the Maharashtra government and state electricity boardhave refuted all charges levelled against them by the DPC in separate replies to the four international arbitration notices slapped on them by Enron. The replies, which were dispatched to DPC on may eight by the state and MSEB, categorically deny the allegations mooted by the company, official sources said. "Instead, it is DPC which has to adjust the amount from the Rs 401 crores penalty slapped on it by MSEB for its February 28 default," the sources said. The state government, which replied to three notices, including non-compliance of state support agreement and supplemental state support agreement, has said that "since MSEB had already denied DPC's charges over non-payment, the question of the state paying on its behalf did not arise".

Meanwhile, Swadeshi Jagran Manch convenor Ravindra Mahajan said the group will be holding a seminar in Delhi at the end of May, in which "we will take up the Enron issue with the Central government".
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THE ASIAN AGE, Friday, May 11, 2001
'TALKS WITH ENRON ON TARIFF A FRAUD', Olga Tellis 

The discussion on tariff charged to the Maharashtra State Electricity Board by the Dabhol  Power Company between the renegotiating committee and Enron will be based on  flawed, fraudulent and inflated costs, Centre of Indian Trade Unions claimed on Thursday. Enron's former managing director Rebecca Mark who negotiated the Dabhol power  project in the early nineties had offered the 10,000 MW liquified natural gas-based  power project with regassification at 4.9 cents per unit. Dabhol has been charging seven cents, a clear difference of two and a half cents or an additional Rs 2,000 crores per year. The Centre of Indian Trade Unions which is in possession of a copy of this letter questions the very basis on which the renegotiation committee is going to discuss tariff and said it can only be vitiated and can have serious implications on any negotiations.

Mr Vivek Monteiro, secretary Citu, Maharashtra told The Asian Age that "fraudulent and flawed tariff calculations provide the base matrix for corruption on a scale unprecedented in our nation's history. A one paise increase in Dabhol Power Company Phase II tariff translates into a Rs 17 crores extra earnings. A rupee one difference in tariff translates into Rs 1,700 crores per year. It must be remembered that the power purchase agreement is a 20 year contract. So if this renegotiating committee brings down the project say by Rs 500 crores per year it would still leave a difference between what Dabhol Power Company is charging and  what Ms Mark offered, a difference of more than Rs 2,000 per year, which leaves a lot  of room for corruption." So the issue as the Centre of Indian Trade Unions posts it is  "how can you negotiate on bogus figures? Therefore a judicial enquiry and proper financial audit is where the whole process should start. Something illegitimate cannot be negotiated upon," Mr Monteiro said.

Mr Monteiro said the cost of the project is as yet undetermined. The project does not  have an approved financial package. As per Energy Review Committee documents in the possession of the renegotiating committee, the project does not have any approved financial package. The implications on the power purchase agreement of an invalid tariff approval are extremely serious, said Mr Monteiro.
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THE ECONOMIC TIMES, Friday, May 11, 2001
Power, populism and lost potential, Ajay Jindal 

THE CURRENT Enron embroglio throws up two sad points:
firstly, the power sector has achieved precious little in the ten years of privatisation; and secondly, it is hard to figure  out how India will ever really seriously get into a higher economic growth orbit. Privatisation in the power sector was launched with great hopes in the early 1990s. The government realised two things: reliable and sufficient power supply is a prerequisite for industrialised economies; and the government on its own was incapable of meeting expected future requirements. 

India has always been (then and even now) a power deficit  nation. Studies constituted by the government in the early 1990s had shown a demand for additional capacity for about 10,000 MW per annum; annual capacity addition by  various central and state government organs and PSUs  had generally been in the range of 3,000-5,000 MW per annum. Hence, the government figured it urgently wanted private sector to come in generation. Numerous schemes were formulated. Liquid fuel based generation " a practice hardly followed anywhere in the world " was also designed; these plants come up quickly and government wanted power fast. 

Larger, conventional projects "some with central government counter-guarantee like the Enron project " were planned as well. The clearance process was simplified. Pit-head based schemes were encouraged and pit-heads found for such projects. Coal import was liberalised for those wanting to import coal. In short, government showed apparent zeal and innovativeness, something it is hardly known for. Nothing much has come of any of this. Fast-track, liquid-fuel, pit-head based, or mega power projects " all of these schemes lie by the wayside. Don't get fooled by the long list of projects awarded regulatory clearances or under the process of getting clearances. 

What finally comes up is the key issue. Actual capacity addition by the private sector is less than 6,000 MW in all these years of privatisation. There is no improvement in the power supply situation in most states; it has only worsened in some. The Enron controversy has probably driven the final nail in the power privatisation coffin. It is hard to believe that any new greenfield private project will ever come up for many years to come, particularly if it involves selling to the state electricity boards. 

Financial closure will be impossible to achieve now as no lending agency or financial investor can be expected to participate. So we are now back to hoping that the government sector and NTPC can measure up to the task ahead. The irony is that the government probably under-utilised the capacity addition potential of some of its own resources while it focused on getting private players in. In the latter part of the '90s, the government did realise the going the generation way was the wrong path, improving financial and operational health of distribution was more important. Given India's vast size, many states and thus  mane SEBs, and muddled politicians, this is a herculean  task. Even assuming political opinions were all streamlined, distribution reforms would take at least a decade to play through " remember, tariff rationalisation has to occur. With the reality that political masters will continue populist policies, it is difficult to figure out when the SEBs will become financially viable. SEB losses are mounting with every year even now. 

So there we are, all ready to drive in a car with four flats. With a core infrastructure sector sinking deeper in the mire (not to mention no progress in certain other infrastructure sectors as well), just how is Indian economy going into a higher growth curve? Unless reliable and cheap infrastructure is in place, Indian  industry will remain uncompetitive except for a few lucky sectors like the knowledge-economy ones. Going into a higher growth orbit also needs higher rates of investment, some of which needs to come from FDI. The Enron issue could also deter some future FDI, for example in power distribution. A multiple whammy, indeed. 
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THE HINDU BUSINESSLINE, Friday, May 11, 2001
Dabhol: Back to the negotiation table , Dinesh Narayanan 

MANY turbulent years later, when Enron sits across the negotiating table tomorrow, several people would remember the day it stepped into the ``liberalised'' India, promising power, growth and greenbacks. They would also remember 1995, when Ms Rebecca Mark, the high-profile go-getter of Enron, talked out the ``sinking project clear out of the Arabian sea''. Undoubtedly, throughout the decade it has been here, Enron has shown tremendous tenacity and stamina in completing the Dabhol power project. And now, just as the stacks of the second phase of the project were about to begin spewing smoke, the players are back at the table -- ``let's talk what's wrong''. This time, however, Enron makes its ``courtesy visit'' to the Godbole panel knowing fully well it can afford to talk holding an axe over the project. In 1995, when the Shiv Sena Government cancelled the DPC project, Enron pulled arbitration and simultaneously started renegotiating the power purchase agreement with the Negotiating Group of the Maharashtra Government. Several``hard bargains'' later, the project was revived with a ``$330-million reduction in capital cost and a 201-MW increase in the gross output''. 

However, nothing had changed fundamentally and most of the ``problems'' continued to plague the project. The negotiation details were not available and only a summary report was given. Even though there were protests, and cases filed against the company, the project went on and things quietened for a while. That is, till phase I of the plant went on stream and MSEB started paying through its nose for the power purchased (or not purchased). As one anti-Enron activist put it: ``The enormity of the trap fully manifested then.'' Inevitably, the board defaulted and that triggered off another chain reaction. It has come a full circle to arbitration, conciliation and negotiation. However, this time around it appears Enron has the upper hand especially since the damage wreaked will be most on Indian financial institutions and Governments. The financial institutions are going ape because they had committed funds to  the project, not strictly considering its merits but bowing to political pressure, say officials. They say that the Government backing was ``instrumental'' in their taking the exposure. They want the project to continue because that is the best way for them to get their money back. 

MSEB is really cheesed off because it is caught between carrying out the ``social obligations'' of those in power and the rigours of doing business in the open market. Adding insult to injury are the barbs of being inept and unbusinesslike and talk of reform school.In the melee, the Centre -- the one player capable of making any decisive difference to the issue -- has maintained more or less a studied silence. It is understood to be reluctant to get too deep into the matter for fear of contracting another ``headache''. It wants the other three -- the State Government, MSEB and DPC -- to thrash it out among themselves. 

But they want the Centre to talk shop. Enron does not appear interested in hanging around running a multi-billion-dollar power plant, even though it has consistently denied so. It also has not categorically ruled out the sell-out option. The end-game is getting more convoluted with all the players clinging on to even the pawns. Enron has already said it does not agree with the interim report of  the Energy Review Committee headed by Dr Madhav Godbole, which had suggested some workable solutions, never mind if they were really tough. Enron is hesitant to compromise on its returns, institutions cannot reduce interest rates beyond a limit, MSEB is adamant on ``going by the book'', and the  Centre is mum. The going is getting tougher...the tough should get going.
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THE INDIAN- EXPRESS, Friday, May 11, 2001
Why disgraced Customs chief took 'secret' flight with Enron, Pranati Mehra

CVC probes BP Verma's role in getting DPC import duty cuts,                        

THE controversy surrounding the Enron-sponsored Dabhol Power Project (DPC) is taking a new twist. Details of how some Customs officers, including disgraced former Customs chief B.P. Verma, allegedly helped the transnational get import duty concessions are trickling out. The role of Verma, former chief of the Central Board of Excise and Customs who   is in judicial custody, is being investigated by the Central Vigilance Commissioner  for waivers resulting in cheaper imports for DPC's Liquefied Natural Gas (LNG) facility. The role of Pune Customs Commissioner C.K. Kaloni is also under scrutiny. Kaloni rejected his subordinate officers' objections in extending duty concessions to the LNG facility that DPC was putting together. The subordinate officers had taken the stand that the LNG facility is part of  material handling facility and has nothing unique about it to entitle it to duty  benefits. Though the recommending authority is the Union Ministry of Petroleum and Natural Gas, Kaloni allegedly took the support of a Maharashtra Government sanction to justify the lower rate of duty.

The Customs department had earlier denied concessions for the DPC's Naphtha SPM (single-point mooring) project on grounds that it was only a material handling project. The dispute was before the Commissioner (Appeals) when Kaloni allowed the concessions to the LNG project. This and other concessions by the Customs helped the DPC save around Rs 400  crore. Now where does Verma enter the picture? Last year, Kaloni allegedly interfered in the department's efforts to add service charges to the value of the LNG equipment. Just when the dispute was hotting up, Verma who was then DG, Central Economic Intelligence Bureau (CEIB), and was angling for the post of CBEC chairman, visited Pune, on an invitation from the Confederation of Indian  Industry.

While in Pune, he made a secret visit to the project site in Enron's chopper. There was nothing official about it. Immediately afterwards, Kaloni instructed that loading of service charges to the value (of the equipment) be stopped. Verma was accompanied to the project site by Kaloni and another retired customs officer. Verma soon became chairman of CBEC. When contacted, Jimmy Mogul, spokesman for DPC, said he did not want to comment on the issue. DPC has been constructing the LNG facility for the last two years, including a jetty about two kms into the sea. The imported LNG is to be carried in liquid form to the storage tanks through pipelines from the jetty. After regassification, it was to be  used at the plant. DPC had made no secret of the fact that only about 40 per cent of the LNG would  be used for the Dabhol plant and that the rest would be sold to other customers. Enron's own subsidiary, MetGas, was setting up the LNG terminals, and  therefore, in effect, a separate commercial entity was benefiting from theconcessions in the name of the power project.
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AFTERNOON, Friday, May 11, 2001
MSEB workers' agitation against Enron 

The Maharashtra State Electricity Board Workers Federation  (MSEBWF), which is affiliated to the All India Trade Union Congress (AITUC), has proposed to launch an agitation aimed at forcing the US power giant, Enron, to quit Maharashtra. MSEBWF vice-president, Mr. A.D. Golandaz disclosed that a central executive meeting of the federation will be held today at Kolhapur to  finalise plans for the agitation against Enron. The meeting will be presided by the federation president, Mr. A.B. Bardhan. 

Mr. Golandaz pointed out that MSEBWF was the first to come out against the Enron project at Dabhol in 1993, predicting the consequences. It had taken the initiative to form the Enron Virodhi Sangarsha Samiti (Maharashtra) which has been fighting against the project for the past four years. "What we had said about Enron has now come true. It is time that the Maharashtra government tackles over the first phase of the project and hands it over to the MSEB. The agreement with regard to the second phase should be cancelled," he said, adding that the agreement was totally in favour of Enron. 

Drawing attention to the fact that the Madhav Godbole Committee has pointed out numerous irregularities in the agreement, Mr. Golandaz suggested conducting a judicial inquiry into the project. "We insist that no compensation is payable to Enron in the event of scrapping the deal," he said. Mr. Golandaz further pointed out the high cost of Enron's power, which is presently Rs. 8 per unit as against MSEB's rate of Rs. 1.40 per unit. He also expressed dissatisfaction over chief minister, Mr.Vilasrao Deshmukh's insistence on continuing the project and stressed  that the federation would continue agitating till Enron leaves the  state.
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THE ECONOMIC TIMES, Friday, May 11, 2001
Enron to relocate DPC managers abroad, Anto T Joseph 

WITH confrontation with the Maharashtra State Electricity Board deepening by the day, Enron is starting the process of re-locating senior officials to its operations in other countries. Company sources said its multinational parent is working  towards absorbing manegerial talent at its Indiansubsidiary in its operations abroad. The company is expected to give a choice to its remaining staff " whether to continue with the company abroad or opt for a golden handshake. Many senior officials currently working with Enron are  planning to stay with the company, no matter which country they are re-located to. "Enron is a professionally-run company, and tops the chart of the best-run global companies, annually brought out by Fortune. Unfortunately, the company could not pursue its  projects in India, and has decided to fold up its operations  in the country," said a senior Enron official, who expects to  be transferred either to Houston or London. 

The whole process of re-locating the Indian staff is  expected to be completed within a month or two.  An Enron spokesperson refused to comment on these developments. Company sources also said a new VRS is on the anvil for the Dabhol Power Company staff. The Houston-based energy giant has pulled out of all its existing projects in India except the Dabhol power project, which is currently in the thick of controversy. The other group companies " Metgas (which was setting up a liquefied natural gas pipeline in Maharashtra ), and Enron Broadband Solutions (which was laying an optic  fibre cable network across the country) " have already  virtually folded up operations. The other group company Enron Oil & Gas (India) which is  a joint venture between Reliance and ONGC, is currently in   the process of selling its stake. 

Enron, which had earlier proposed to set up a few more power projects in India, has already decided to drop these plans, after it ran into a series of payment problems with MSEB. Enron has already got rid of around 50-60 people by way of a successful voluntary retirement scheme. Enron India now has a little over a dozen employees on its rolls. The focus of Enron Corp, which occupies the seventh position on the Fortune 500 list in terms of revenues (with over $100 bn) has shifted to trading. A lion's share of its turnover came from its trading activities all over the world, especially in the US market.