Rediff.com,Tuesday, May 29, 2001
Meeting with DPC was good, says Godbole, Priya Ganapati in Bombay 
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Ndtv.com, Tuesday, May 29, 2001:
Centre offers set of proposals to end Enron crisis 
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Reuters.com,Tuesday, May 29, 2001
Enron, India panel make no progress on power row , By Sriram Ramakrishnan
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PTI, Tuesday, May 29, 2001
Govt offers set of proposals for solving Dabhol dispute 
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Mid Day, (Chalomumbai.com)Tuesday, May 29, 2001
http://www.chalomumbai.com/asp/article.asp?cat_id=29&cat_code=2f574841545f535f4f4e5f4d554d4241492f5441415a415f4b4841424152&art_id=11287
No proposal from Enron at renegotiation meet
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Mid Day,(Chalomumbai.comTuesday, May 29, 2001
http://www.chalomumbai.com/asp/article.asp?cat_id=29&art_id=11289&cat_code=2F574841545F535F4F4E5F4D554D4241492F5441415A415F4B4841424152
Govt will play active role in Enron crisis: Godbole
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Rediff.com,,Tuesday, May 29, 2001
MERC set to hear MSEB petition 
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THE ECONOMIC TIMES,Tuesday, May 29, 2001
http://www.economictimes.com/today/bn05.htm
DPC willing to further cut tariff by 10%

The above article also appeared in the following newspapers:

BUSINESS STANDARD, ,Tuesday, May 29, 2001
http://www.business-standard.com/today/financ14.asp?Menu=5
Dabhol willing to cut tariffs by 10 per cent

THE HINDU BUSINESSLINE,Tuesday, May 29, 2001
http://www.hindubusinessline.com/stories/14295601.htm
Dabhol offers to cut tariffs 10 pc

MID DAY, Tuesday, May 29, 2001
http://www.chalomumbai.com/asp/article.asp?cat_id=29&cat_code=2f574841545f535f4f4e5f4d554d4241492f5441415a415f4b4841424152&art_id=11260
Enron ready to slash tariff by 10 %: IDBI chief
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THE ECONOMIC TIMES, Tuesday, May 29, 2001
http://www.economictimes.com/today/29infr01.htm
DPC rejects MSEB's legal notice
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THE ECONOMIC TIMES,Tuesday, May 29, 2001
http://www.economictimes.com/today/29infr02.htm
Dabhol Indian lenders to meet on May 30
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BUSINESS STANDARD,Tuesday, May 29, 2001
http://www.business-standard.com/today/state2.asp?menu=32
MERC clubs Prayas, Hogade suits , Renni Abraham 
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THE FINANCIAL EXPRESS,Tuesday, May 29, 2001
http://www.financialexpress.com/fe20010529/top1.html
Govt shoots down plan to sell DPC power to central utilities , Anupama Airy
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THE FINANCIAL EXPRESS, ,Tuesday, May 29, 2001
http://www.financialexpress.com/fe20010529/news2.html
MSEB refuses to issue cheque towards April bill to DPC ,   Sanjay Jog
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THE TIMES OF INDIA,Tuesday, May 29, 2001
http://www.timesofindia.com/today/29busi1.htm
DPC signals climb down, sees scope to cut power tariffs , Pradipta Bagchi
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THE TIMES OF INDIA,Tuesday, May 29, 2001
http://www.timesofindia.com/today/29busi2.htm
DPC rejects MSEB's legal notice 
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FINANCIAL TIMES
 May 29, 2001, http://globalarchive.ft.com/globalarchive/articles.html?id=010529001722&query=enron
Enron rocks India's flagship investors: Fears are growing over rift between domestic and foreign lenders to power project, Khozem Merchant and David Gardner: 
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THE INDIAN EXPRESS,Tuesday, May 29, 2001
http://www.indian-express.com/ie20010529/bus7.html
Worried FIs in fresh bid to defuse Dabhol crisis
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Rediff.com
Meeting with DPC was good, says Godbole, Priya Ganapati in Bombay 

Officials of US energy giant Enron Corp-promoted Dabhol Power Company who met with the Godbole committee on Tuesday to discuss the fate of the controversial $2.9-billion power project were non-committal on the outcome of the talks, but said that the "meeting was good". Both the sides, however, were unanimous that it would take more discussions to arrive at a peaceful solution to the vexed issue. Tuesday's meeting was cordial and broke fresh ground, said sources, indicating that the problem may yet be resolved. Both the parties have decided to meet again and take the discussions forward. Energy secretary V M Lal, speaking to the reporters, informed that both the parties have decided to meet again and continue the deliberations, but fresh date for the meeting has not been fixed yet. The meeting concluded with both the sides agreeing to extend the tenure of the Godbole committee which was slated to expire on Wednesday. The period for which the panel's tenure has been extended has not yet been decided. 

Speaking after the meeting Madhav Godbole, chairman of the committee set up to renegotiate the power purchase agreement with DPC, said: "The meeting was quite productive. Basically, we discussed each other's position in the issue. The Government of India has put forth a set of proposals before the DPC and we shall see how things proceed from here." He, however, declined to spell out what the 'new set of proposals' comprised. When asked what did the committee think of DPC's proposal to cut power tariff by 10 per cent, Godbole said: "It is too early to talk about specifics at this point. We discussed generalities and it was a satisfactory meeting." Central government nominee A V Gokak, who attended the meeting for the first time, said: "The government is keen to resolve the vexed issue and will actively participate in the process and talks." 

"The negotiations would take into account the interests of all the sides," Gokak said. "Nobody's intentions can be doubted as the deliberations are on to come to an amicable solution which is agreeable to all," he said when asked to comment on DPC's earlier posture of taking the meeting only as a courtesy call. DPC chief K Wade Kline said that only general issues were discussed at the meeting and that the deliberations were "good". The renegotiation committee meeting was headed by Madhav Godbole, energy secretary V M Lal, MSEB chairman Vinay Bansal, finance secretary S K Srivastav and central nominee A V Gokak, HDFC chairman Deepak Parekh. The Dabhol Power Company team was represented by DPC chief K Wade Cline, president Neil McGregor, Bechtel representative Phiroz J Nagarwala, DPC chief financial officer S Mohan Gurunath, DPC vice-president Sanjeev Khandkar and IDBI official Mukesh Tyagi, Rajesh Sivaraman, and Paul Kraft, general counsel. 

Earlier analysts had said the meeting is unlikely to yield any result as Dabhol Power Company had announced that the meeting would only be a courtesy call. The panel was formed last month by the Maharashtra state government to renegotiate the tariffs charged by the 2,184 MW power project. Maharashtra State Electricity Board, which agreed in 1995 to buy the plant's entire output, says the power is too costly and has defaulted on $48 million of power payments. Dabhol issued a notice this month to cancel its power purchase deal. The Maharashtra government has asked the panel to renegotiate the project with Dabhol and bring down the tariff. The first meeting scheduled for May 5, was cancelled as Enron sought more time to attend the meeting, while the second meeting which was held on May 11 concluded without any transaction in which, of the nine members, five including central nominee A V Gokak were absent. Later, it was fixed for May 23, which also had to be cancelled in wake of the resignation by the committee chairman Madhav Godbole following remarks by NCP chief Sharad Pawar about the negative attitude of the renegotiation committee. 

However, the Maharashtra Cabinet unanimously decided not to accept his resignation. Maharashtra Chief Minister Vilasrao Deshmukh wrote a letter to him after the Cabinet meeting stating that "the state government has full faith and confidence in his working, and urge you to withdraw your resignation as the chairman of the committee." An MSEB official had on Monday said that the success of the re-negotiations would largely depend on the co-operation of DPC officials as well as the Union government, particularly over the issue of the second phase's 1444 mw power offtake. The second phase would be commissioned from October this year. After the commencement of second phase, the MSEB will have to pay Rs 5 billion per month from the beginning of next year, which is unaffordable for the MSEB. Phase-I, comprising 740-mw power, was commissioned three years ago, but the cost of the power from the plant based on imported naphtha has made a dent in the profitability and margin of the state-owned electricity board. 
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Ndtv.com, Tuesday, May 29, 2001:
Centre offers set of proposals to end Enron crisis 

The Godbole Committee today held a meeting to discuss the Enron imbroglio. The Committee was set up by the Maharashtra government to renegotiate the power contract between Maharashtra State Electricity Board (MSEB) and Enron promoted Dabhol Power Company.After the meeting the Chairman of the renegotiation committee, Dr Madhav Godbole said, "We discussed each others position. We have listed out a few issues which are going to be discussed and then we will meet again after some time. If there is anything concrete we will definitely proceed further. We are prepared to play an active role but whatever solution emerges has to take care of the interests of all sides."The representative from the Centre, A V Gokak said they have given a set of proposals to the Committee. Controversy has surrounded the Committee specially since Enron has made it clear that it will not accept the recommendations of the Committee as the basis for renegotiations.

However, even as the central representative reiterated the Centre's willingness to play an active role in solving the Enron controversy, Power Minister Suresh Prabhu has ruled out that the Centre will bail Maharashtra out by buying expensive power produced by the Dabhol project. "How can the central utilities buy power from Dabhol and sell it elsewhere when it is not possible for Maharashtra government to buy it," informed Mr Prabhu.

In another crucial meeting scheduled to be held later today, the Maharashtra Electricity Regulatory Commission (MERC) will hear MSEB's petition about the validity of the power contract or the Power Purchase Agreement (PPA).

PTI adds:

The Union government today offered a set of proposals for solving the ongoing dispute between Enron's Dabhol Power Company (DPC) and Maharashtra State Electricity Board (MSEB).The offer was made at the second meeting of the renegotiating Committee, headed by Madhav Godbole, held in Mumbai today to resolve the crisis over the DPC-MSEB dispute.Godbole later told reporters that the meeting was "positive" and the committee discussed and tried to know the position of the two sides. However, he declined to reveal the set of proposals put forth by the Centre for resolving the issue. "Centre's representative A V Gokak told Enron India managing director K Wade Cline that National Thermal Power Corporation (NTPC) will not be able to buy power from DPC", an official who attended the meeting told PTI.Asked whether DPC had made any reference to a 10 per cent cut in its tariff, Godbole said "it was too early for any comment on specifics of the discussions".

Gokak, Former telecom secretary, said the Union Government was quite keen on resolving the matter and "will definitely play an active role" in the entire process.
"In the second round of our meeting, our discussions were good and the dialogue will continue. However, the next date of the meeting will be fixed later", state energy secretary V M Lal said. Wade Cline too echoed the sentiment and said "we discussed a variety of issues".Asked if DPC had agreed for a possible 10 per cent tariff cut, Cline said "no proposal has been submitted before the committee and discussions were on".Lal said the committee discussed all issues which "were hindering the progress of the project".However, he refused to divulge further details of the discussions, saying "it has been made clear time and again that renegotiations cannot be done through the media".The DPC delegation included president Neil McGregor, vice presidents Sanjeev Khandekar and Mukesh Tyagi and chief financial officer Mohan Gurunath and Bechtel India managing director Feroze Nagarwala.The other committee members who attended the meeting were MSEB chief Vinay Bansal, HDFC chairman Deepak Parekh, and state principal finance secretary S K Srivastava.
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Reuters.com,Tuesday, May 29, 2001
Enron, India panel make no progress on power row , By Sriram Ramakrishnan

 Talks between U.S. energy giant Enron Corp's Indian unit and a government panel ended on Tuesday without resolving a contentious dispute over a giant $2.9 billion power project, officials said.But they said the talks will continue.Participants at the meeting, which lasted an hour, discussed the issue of a reduction in tariff rates charged by Enron's unit for the power it sells to Indian state utility the Maharashtra State Electricity Board (MSEB), government and company officials said.

Also discussed was the option of a third entity, apart from the sole buyer MSEB, purchasing the power from the second phase of the project. "We had a good meeting. We discussed a lot of issues. But no proposals were submitted," K. Wade Kline, chief operating officer, Enron India Pvt Ltd, told reporters.V.M. Lal, principal secretary to the Maharashtra government, said the discussions will continue with Dabhol Power Company, which is 65 percent owned by Houston-based Enron <ENE.N>."We are negotiating on the various issues that are coming in the way of the project," he told reporters, adding that no date has been fixed for the next meeting.Enron and MSEB have been sparring for over six months on the 2,184 MW project, which was originally slated to sell its entire output to MSEB at a fixed price.The row is seen as a test case of India's ability to attract foreign investment in the power sector, which needs 100,000 MW over the next 10 years to meet growing demand.MSEB began buying the 740 MW of power produced by the the project's first phase in May 1999, but late last year, it started to default on payments saying the tariffs were too high.
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PTI, Tuesday, May 29, 2001
Govt offers set of proposals for solving Dabhol dispute 

 Mumbai,Tuesday, May 29, 2001:    The Union government today offered a `set of proposals' for solving the ongoing dispute between Enron's Dabhol Power Company (DPC) and Maharashtra State Electricity Board (MSEB).   The offer was made at the second meeting of the renegotiating Committee, headed by Madhav Godbole, held here today to resolve the crisis over the DPC-MSEB dispute. Godbole later told reporters that the meeting was `positive' and the committee discussed and tried to know the position of the two sides. However, he declined to reveal the set of proposals put forth by the Centre for resolving the issue.  "Centre's representative A V Gokak told Enron India managing director K Wade Cline that National Thermal Power Corporation (NTPC) will not be able to buy power from DPC," an official who attended the meeting told PTI.  Asked whether DPC had made any reference to a 10 per cent cut in its tariff, Godbole said "it was too early for any comment on specifics of the discussions".  Gokak, former telecom secretary, said the Union Government was quite keen on resolving the matter and "will definitely play an active role" in the entire process.
(PTI) 
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MID DAY,Tuesday, May 29, 2001
No proposal from Enron at renegotiation meet

The U S Energy major Enron promoted Dabhol power company (DPC) did not put up any proposal before the renegotiation committeee headed by Former Home secretary Madhav Godbole at its crucial meeting which began this morning. ''We have not put up any proposal before the renegotiation committe, but the discussion during the meeting was fairly good'', DPC India Chief K Wade Cline told reporters, after attending the meeting. The re-negotiation committee meeting which started at 11.00 am continues and discussions are still on.  Besides, K Wade Cline, DPC President Neil Mcgregor, Chief Financial officer Mohan Gurunath, Vice President Sanjeev Khandekar and Mukesh Tyagi were present at the meeting from Enron. While the MSEB is being represented by MSEB chairman Vinay Bansal, Energy Secretary V M Lal. The Union Government's nominee A V Gokak is also attending the meeting.
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MID DAY,Tuesday, May 29, 2001
Govt will play active role in Enron crisis: Godbole

The government of India (GoI) will play an active role to resolve the ongoing dispute over the Power Purchase Agreement (PPA) between Enron promoted Dabhol Power Company (DPC) and the Maharashtra State Electricity Board (MSEB), re-negotiation committee chairman Dr Madhav Godbole said today.  Briefing the mediapersons after the crucial meeting today, Dr Godbole said the Centre submitted some proposals in the meeting making their position clear in regard of resolving the issue. During the meeting the committee has made a list of issues which will be discussed in the next meeting, for which a fresh date has not yet been finalised.  
 ''The meeting was quiet productive, we had a good discussion,'' he said, adding, we have discussed several issues and tried to understand each others position in the meeting. On being asked about the issues which were discussed in the meeting, he declined to disclose them saying it is at a preliminary stage, therefore it would not be proper to say anything on the subject at the moment.  When quired by the journalists whether the DPC is ready to cut down the tarrif, Dr Godbole said ''It is very early to talk on a specific issue.''
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Rediff.com, Tuesday, May 29, 2001
MERC set to hear MSEB petition 

The Maharashtra Electricity Regulatory Commission will also hear a petition filed by MSEB against DPC for their non-performance as per the PPA on Tuesday. 

Lenders' meet 

Meanwhile, Indian lenders to Dabhol are scheduled meet in Bombay on Wednesday to try and find a way to protect their interests in the project, a lender said on Monday. The meeting's top priority will be the adoption of a common strategy to convince foreign lenders not to invoke guarantees issued by local financial institutions and banks. The project is being built at a total cost of $2.9 billion, of which $2 billion has been funded through loans. Of this amount, the local lenders have contributed $1.4 billion and foreign lenders have provided the rest. Foreign lenders are protected by guarantees issued by domestic banks and financial institutions. They have called a meeting on June 5 and 6 in Singapore to discuss invoking guarantees on their loans in the project. At stake is not just the investment in the project, but also India's efforts to reform the power sector. Indian lenders would also take a hit on their books if their foreign counterparts insist on payments. 
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THE ECONOMIC TIMES,Tuesday, May 29, 2001
DPC willing to further cut tariff by 10%

 DABHOL Power Company has informed lenders that it is willing to bring down its tariff by 10 per cent. This decrease will be over and above the fall in tariff due to the shift from naphtha to LNG. This has been indicated by Enron to the lead financial institution, IDBI, recently. Once DPC switches over fuel  from naphtha to LNG by the end of this calendar year, the  tariff will automatically be reduced by 10 per cent. Apart from this, it is learnt that Dabhol has agreed to reduce the tariff by a further 10 per cent. While this alone may not be adequate to resolve the on-going differences, the proposal has reportedly been well received by domestic lenders. At the same time, to protect their interest, domestic lenders have formed a committee to look into the problems relating the DPC. The total debt to DPC amounts to Rs 6,600 crore of which 90 per cent has already been disbursed. 

The committee is slated to meet on May 30 here, while all lenders will be meeting on June 5 and June 6 in Singapore to discuss various issues relating to DPC. IDBI has total exposure of Rs 2,158 crore in phase I and phase II. Of this, Rs 1528 crore constitute guarantees and Rs 630 crore is loan. IDBI officials indicated that the domestic lenders will make an effort to persuade foreign lenders against invoking the counter guarantee or precipitate matters any further. Officials from the term lending institution also maintained that finding a purchaser for the power generated is a bigger problem than tariff reduction. "The tariff can be re-negotiated and reduced, but the larger issue is finding a buyer for the power," said IDBI officials. 

Meanwhile , Union energy minister Suresh Prabhu today again turned down the state's request to buy power generated by the Dabhol Power while CM Vilasrao Deshmukh accused the BJP-led NDA government at the Centre of "not being very keen to resolve the ongoing imbroglio" between MSEB and DPC. Prabhu expressed the Centre's `helplessness' saying that his government has hardly any role to play as far as buying DPC power is concerned. He was speaking to media persons after attending a symposium over power reforms. Tomorrow, the controversy is likely to take a new turn with MERC all set to hear the cases of both the parties. DPC, after rejecting MSEB legal notice for "rescinding" the PPA, will be pleading its case before the MERC on Tuesday. In a three-page response to MSEB's notice, Enron India MD K Wade Cline has said "the legal notice is not acceptable to us, as according to the PPA, MSEB does not have the right to rescind the agreement".
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THE ECONOMIC TIMES, Tuesday, May 29, 2001
DPC rejects MSEB's legal notice
 
ENRON'S Dabhol Power Company has rejected the Maharashtra State Electricity Board's legal notice for"rescinding" the power, saying: "It (MSEB) did not have the right to do so." The two partners are getting ready to plead their case before the Maharashtra Electricity Regulatory Commission on Wednesday. In a three-page response to MSEB's May 24 legal notice, Enron India managing director K Wade Cline has said: "The legal notice is not acceptable to us, as according to the PPA, MSEB does not have the right to rescind the agreement." The letter, dated May 26, also asks MSEB to comply with the "sanctity" of the PPA: "Please confirm that the board would also pay all DPC dues, including the disputed Rs 213-crore for December and January bills plus the interest." 

In its notice, MSEB has questioned the legal validity of the entire PPA as per the Indian Contracts' Act 1872 and later also went a step further by filing a petition with the MERC.  "Other than non-acceptance of our legal notice, DPC has continued its demand for an escrow account, knowing fully well that MSEB has filed a caveat in the Mumbai High Court for not activating the same," sources said. DPC has also demanded an increase in LC (letter of credit) amount in line with the PPA, as MSEB was supposed to do 21 days before the firing of its second phase on June 6, they said.  "We are tired now with the same explanation that unless the political force majeure stands activated, we will not be in a position to increase the limit, but are yet to hear something positive from their side," state government sources said. 

Interestingly, the sources said, there was no mention of DPC paying Rs 401 crore penalty and a subsequent rebate for December and January bills. DPC also reiterated that the 2,194-mw power station was a  "base" load one and could not be treated as "peak" load, and hence, it took a minimum six hours to ramp up to full capacity. The multinational has also expressed disappointment at the loss-making board's "repeated attempts to create a situation allowing it to claim rebates for alleged misdeclarations" about the capacity of the $3-billion power station. (PTI)
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THE ECONOMIC TIMES,Tuesday, May 29, 2001
Dabhol Indian lenders to meet on May 30
 
INDIAN lenders of Enron-promoted Dabhol Power Company led by Industrial Development Bank of India will meet on May 30 to chalk out a strategy for pressurising their foreign counterparts not to escalate the crisis by withdrawing from  the $3-billion project. "There is a rift between the domestic and foreign lenders, but the forthcoming meeting will formulate our future course of action to convince the latter not to precipitate the crisis any further in the June 4-6 Singapore meet," IDBI acting chairman and managing director S K Chakrabarti told  reporters here on Monday. "IDBI's exposure to DPC project is to the tune of Rs 2,158 crore including guarantees worth Rs 1,528 crore and rupee loans of Rs 630 crore," the CMD said. For the first time the Indian lenders on Monday disclosed their exact exposure to DPC, which stood at Rs 6,600 crore, Chakrabarti said. Other than IDBI, the domestic lenders include ICICI, State Bank of India and Canara Bank. "IDBI does not have any non-performing assets in the power sector and as far as the US multinational is concerned, its exposure would be considered as standard  assets," he said, adding: "DPC had enough funds to meet the obligations for six months." (PTI)
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BUSINESS STANDARD, Tuesday, May 29, 2001
MERC clubs Prayas, Hogade suits , Renni Abraham 

The Maharashtra Electricity Regulatory Commission (MERC) has clubbed together the  petitions filed by Prayas (an NGO) and senior Janta Dal leader Pratap Hogade, which sought   the copies of the power purchase agreements and other associated documents of the Dabhol Power Co, Patalganga and Bhadrawati power  projects. The two petitions have additionally provided the opportunity to test the effectiveness or otherwise  of the Maharashtra Right to Information Act, 2000. The MERC members on their part are keen to  ensure that the much sought after transparency, since the act was passed by the state legislature,actually translates into a reality. 

Chairman of MERC P Subramaniam, during the last hearing on the issue of DPC documents being made available to Prayas berated MSEB (Maharashtra State Electricity Board) for issuing  conflicting statements in connection with the financing agreement for phase II of the project as also being unable to backup with legal reasoning how it could withhold the documents sought by Prayas.He subsequently directed MSEB to issue all the documents related to DPC to the commission  within a month, and granted two weeks time for the release of documents sought by Prayas.  A senior MERC official told Business Standard, "While initially MSEB said that it was   not in possession of the documents, it later told  the commission that the documents were in fact available with it but not the detailed document." 

The commission also found it peculiar that MSEB had chosen to merely reiterate the legal  submission made by DPC with regards to the confidentiality attached to certain key documents  instead of employing the services of the large  in-house legal department.  According to a senior government official, while the Reliance-promoted Patalganga project and  Ispat-promoted Bhadrawati projects are yet to achieve financial closure, the petitions before MERC would serve as the touchstone ruling for deciding upon the issue of public access to  information. 

Both MSEB and DPC as well as the Reliance and Ispat groups would have to explain how they could withhold the documents sought by the common public under the provisions of the act. The Maharashtra Right to Information Act, 2000, clearly stipulates, "Every bonafide person requiring information may have access to such information in accordance with the procedure specified under this act." The criteria for denying information is also specified under the act where it would prejudice the security, integrity or sovereignity of the nation or the state, information relating to defence matters.However, according to well placed sources in the MSEB, its legal department has taken the provisions of the act through a fine comb to find  grounds for justifying the withholding of the   documents sought by Prayas. 

A senior MSEB official said, "For instance, one of the criterion for denying information as stated   in the act says that it is permitted if the disclosure would prejudice negotiations or the effective  conduct of personnel management or commercial or contractual activities. It also notes if the information disclosure would harm the competitive position of a third party or if the  information has been supplied in confidence under a statutory guarantee that its confidentiality  would be protected, the act would not apply."
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THE FINANCIAL EXPRESS, Tuesday, May 29, 2001
Govt shoots down plan to sell DPC power to central utilities , Anupama Airy

THE Centre has turned down the Maharashtra government's proposal that National Thermal Power Corporation (NTPC) or the Power Trading Corporatiopn (PTC) be asked to buy and distribute Dabhol power.   Top government officials told The Financial Express that the consequences of commercial   decisions taken by the state government or the  Maharashtra State Electricity Board (MSEB) will   not be passed on to the consumers across the  country. Besides, NTPC is a central power sector organisation whose main task is generation and it has no expertise in power trading, the  sources said.

 Moreover, as per officials, any attempt to force NTPC to buy high-cost power will adversely affect the corporation's financial health, as it is already struggling to recover huge dues from the state electricity boards (SEBs).  "The basic objective of reforms in India's power sector is to provide power at reasonable cost. The Maharashtra government's proposals to distribute high-cost Dabhol power through NTPC or  through PTC will be clearly against the objective of reforms and consumer interests," said a senior  government official.Sources said even PTC cannot be asked to buy and distribute power of the Dabhol plant. This is because the Centre has already refused to declare Dabhol project as a mega power project while PTC only deals with the power from mega projects, which are inter-state projects. Officials said the Centre is of the view that if any decision is taken to impose high cost power from Dabhol on other states, it will be an open invitation to other states to pass on their existing liabilities vis-a-vis private producers to the central government. "This will not be acceptable to the government of India," the sources said.

Coming down heavily on the Maharashtra government, the officials said the state government's   unwillingness to rationalise tariffs has crippled MSEB's ability to make available reasonably priced power in the state. "The Maharashtra government has been directly interfering in MSEB's efforts to collect arrears which have mounted to a whopping Rs 5,000 crores," the officials said. On the condition of anonymity, a highly placed central government official said, "Although the Centre is committed to support any worthwhile idea acceptable to both MSEB and DPC for settling the problem, it would be more advisable for the state government to rise above politics and carry out re-negotiations in a constructive manner so that sustainable solution is found."

Officials disclosed that between April 1997 and March 2000, MSEB doled out Rs 2,800 crore of   subsidies and, in the year 2000, MSEB was incurring cash loss of about Rs 5 crore per day, which  is 40 per cent of the cost of generation.  "There has been no increase in tariff since September 1998 and, the total receivables of MSEB are in the range of Rs 5,000 crore," the officials said. Central government sources informed that the Maharashtra government has been announcing subsidies to specified categories of consumers such as powerlooms and agriculturists without ensuring that subsidies are paid to MSEB. The financial condition of MSEB, therefore, has deteriorated to such an extent that it cannot pay for   the power being purchased from Dabhol," the sources informed.
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THE FINANCIAL EXPRESS, Tuesday, May 29, 2001
MSEB refuses to issue cheque towards April bill to DPC ,   Sanjay Jog

THE Maharashtra State Electricity Board (MSEB) on Monday refused to issue a cheque of Rs 136 crore towards the April bill to the Dabhol Power Company (DPC). MSEB sources told The Financial Express that the decision was taken after the DPC's bank, Bank of America, returned the MSEB's cheque, deposited within two hours on May 23. Sources said that MSEB, which has decided to pay the monthly bills "under protest," until the issue of non-payment of rebate of Rs 401 crore by DPC for the misdeclaration and default on the availability of power is resolved, would not accept any other conditions from DPC on payment of bills.

Sources said that Enron India managing director K Wade Cline and DPC chief financial officer Mohan Gurunath, in separate letters had asked the MSEB not to pay the April cheque. They said that MSEB should make the payment without any 'ifs and buts' as there is no provision of payment under protest incorporated in the power purchase agreement (PPA). MSEB was highly disappointed over the return of its cheque by the Bank of America on grounds that it cannot accept the cheque, following clear cut directives from the DPC. 

  "Suddenly, Mr Gurunath calls up this morning and tells that a company official will come to collect the cheque, even if it is to be issued under protest. This is not acceptable to us and thus we refused to hand over the cheque today to DPC officials," sources said. According to MSEB sources, had it paid the April cheque without any protest, the DPC's stand on non-payment of rebate would have been confirmed. Meanwhile, Mr Wade Cline, whose letter, written on May 23 to the MSEB chairman Vinay Bansal, was received by the latter on Monday.
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THE TIMES OF INDIA, Tuesday, May 29, 2001
DPC signals climb down, sees scope to cut power tariffs , Pradipta Bagchi

The Dabhol Power Company (DPC) has told its major lenders that there is room for a downward  revision in tariffs. According to S.K. Chakrabarti, acting chairman and managing director of the Industrial Development Bank of India (IDBI), DPC has informed lenders in writing that there may be scope to reduce the power tariffs by ten per cent from the existing levels.This is the first time since the Dabhol controversy exploded that Enron, the main promoter of DPC, has shown any sign of wanting to renegotiate tariffs. According to bankers, DPC will charge a tariff of Rs  3.50 per unit after Phase II of the project is commissioned as per the power purchase agreement. However, in its latest communication to lenders through its lawyers, White and Case, DPC has told lenders that there is room for the tariffs to be renegotiated downwards by ten per cent to Rs 3.15 per unit from the existing rate of Rs 3.50 per unit.

Speaking to the press, Chakrabarti said that he was hopeful of an amicable resolution of all outstanding issues between DPC and MSEB. ``We have also impressed upon DPC that there is scope to reduce the tariffs further,'' he added.According to the lending banks, DPC has said that tariffs can be revised downwards if contracts for buying   liquefied natural gas (LNG) are renegotiated with the sellers. This is because LNG prices have come down significantly since the contracts were signed a couple of years ago.DPC has also indicated that LNG shipping and carriage rates can also be renegotiated to help reduce tariffs. These rates have also fallen since the contracts were signed in the nineties. The major lenders are supposed to meet in Singapore on June 5 and 6 to discuss matters further. Moreover, IDBI has set up a committee for the domestic lenders to help  them take a united stand in the matter.  ``We will try and convince the foreign lenders that they should not take any action to precipitate matters further,'' Chakrabarti said. The Indian banks and financial institutions together have  an exposure in excess of Rs 6,000 crore in the project.
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THE TIMES OF INDIA, Tuesday, May 29, 2001
DPC rejects MSEB's legal notice 

Enron's Dabhol Power Company has rejected MSEB's legal notice for "rescinding" the PPA, saying "it did not have the right to do so", as the two  partners get ready to plead their case before the state  electricity regulatory commission (MERC) on Tuesday. In a three-page response to MSEB's May 24 legal notice, MD of Enron India K Wade Cline has said, "The legal notice is not acceptable to us, as according to the PPA, MSEB does not have the right to rescind the agreement," state government sources said here on Monday. The letter, dated May 26, also asks MSEB to comply with the "sanctity" of the PPA: "Please confirm that the board would also pay all DPC dues, including the disputed Rs 213 crore for December and January bills  plus the interest." In its notice, MSEB has questioned the legal validity of the entire PPA as per the Indian Contracts' Act (ICA) 1872, and later also went a step further by filing a petition in MERC. 

"Other than non-acceptance of our legal notice, DPC has continued its demand for an escrow account, knowing fully well that MSEB has filed a caveat in the Mumbai High Court for not activating the same," sources said. DPC has also demanded an increase in LC (letter of credit) amount in line with the PPA, as MSEB was supposed to do 21 days before the firing of its second phase on June 6, they said."We are tired now with the same explanation that unless the political force majeure stands activated, we will not be in a position to increase the LC limit, but are yet to hear something positive from their side," state government sources said. Interestingly, they added that there is no mention of DPC paying Rs 401 crore penalty and a subsequent rebate for December and January bills. DPC also reiterated that the 2,194-MW power station  was a "base" load one and could not be treated as "peak"  load, hence it takes a minimum six hours to ramp up to  full capacity. 

In its notice, MSEB has alleged that DPC has not been able to conform to certain dynamic characteristics and operations of the PPA and time and again had failed to comply with the same, they added.   "As per ICA, such a confession amounts to material misrepresentation of facts, which, in this case, has been knowingly committed by DPC," the sources informed. DPC has denied this very charge and said, "There has been no material misrepresentation of facts as alleged by MSEB in the avoidance notice." The MNC has also expressed disappointment at the loss-making MSEB's "repeated attempts to create a  situation allowing it to claim rebates for alleged  misdeclarations" about the capacity of the $ 3-billion  power station.(PTI)
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FINANCIAL TIMES,  May 29, 2001
Enron rocks India's flagship investors: Fears are growing over rift between domestic and foreign lenders to power project, Khozem Merchant and David Gardner: 

A"basic rift" has emerged between domestic and foreign lenders to the Enron power project near Bombay, which threatens to undermine attempts to rescue India's flagship foreign direct investment.Indian banks account for about 70 per cent of the Dollars 2bn in debt raised to finance the Dollars 2.9bn Dabhol project. Foreign banks provide the balance of the loans but some of them are protected by guarantees from Indian financial institutions. Indian bankers fear the foreign banks may call in the guarantees. S.K. Chakrabati, chairman of the Industrial Development Bank of India, which accounts for about a third of Indian banks' total exposure of Rs66bn (Dollars 1.4bn), yesterday said he was "substantially hopeful" of solving the rift. Lenders to Enron's Indian unit, Dabhol Power Company, will meet in Singapore on June 5-6. The Indian lenders, which include the State Bank of India, the country's biggest, and ICICI, will meet tomorrow to devise a strategy that would rely more on "persuasion because we lack the power of veto", one Indian official said. 

Foreign lenders, which include US Exim, Bank of America and Industrial Bank of Japan, have become increasingly dissatisfied with the payments record of Dabhol's sole client, Maharashtra State Electricity Board. MSEB owes DPC Dollars 45m in unpaid bills. Last month foreign banks gave Dabhol the authority to withdraw from the project. Last week, Dabhol issued a "pre-termination notice" to withdraw in  six months. The past few days of tit-for-tat moves by Dabhol and MSEB have also raised complex legal issues. MSEB's decision to cancel the power purchase agreement, which defines contractual relations with Enron, seems destined to go to court. The question is: which court? The agreement is governed by and based on English law. But the MSEB has referred the cancellation of the agreement, whose high tariffs are at the root of the dispute, to the untested electricity regulator.  This is a risky strategy. "The regulator is not the authority that can decide on a purely contractual issue between parties," says a Bombay commercial lawyer. "In fact, even an Indian court of law would have to refer the matter to an arbitration tribunal as identified in the agreement." 

Enron launched arbitration proceedings on April 12 after increasingly bitter wrangling. Many foreign bankers regard this official undermining of a contract as a dangerous game of "power poker", which is already having a chilling effect on multinationals' plans to invest in India's power and  telecommunications sectors. Three companies have told the Financial Times privately that they were reviewing their involvement with and strategy in India. One senior executive pointed out that the risk premium for investors in India has already gone up in the past six weeks. He said the "hurdle rate of return" - the minimum rate of return on equity in dollars - that his and other companies eyeing opportunities in India were seeking had risen by one to two percentage points. "If this Enron thing works out badly," the senior executive said, "the hurdle rate is going to be   infinity." Foreign companies are also becoming nervous by increasing domestic hostility. At the weekend, protestors attacked the Orissa-based subsidiary of the US energy company, AES. Last week, about 2,000 protesters burnt down AES offices in northern Orissa. The state of Orissa pioneered the privatisation of power distribution in India. 

The Enron dispute has also forced Karnataka, to the south of Maharashtra, to re-open 11 power purchase agreements signed with independent producers in a move to cut electricity tariffs. Enron's position on its agreement remains unchanged. It refuses to renegotiate the contract, as the Indians suggest, based on the findings of a recently published official report by the respected politician, Madhav Godbole. Enron regards the report as hostile even though the author was equally critical of the "quality of governance" in the early to mid-1990s when the agreement was signed. Commentators say this is a reference to the administration of Sharad Pawar, who as the then leader of Maharashtra was, and remains, a keen advocate of Enron's interests. 

Meanwhile, K. Wade Cline, managing director of Dabhol, has told MSEB in a letter dated May 25 that the utility's cancellation of the agreement is not valid. MSEB axed the contract because, it says, of Enron's poor plant performance, notably a failure to raise capacity from a cold start in three hours, which Enron disputes. Yesterday, an Enron official picked up for the second time a cheque for Rs1.37bn that MSEB paid last week "under protest", but which was returned by the US company, apparently to clear any misunderstanding about its position. As Mr Cline said in his leaked letter: "MSEB cannot have it both ways. We will rely upon any payment as constituting an unequivocal affirmation of the validity of the PPA (power purchase agreement by) MSEB." Enron's  choreographed show of corporate pique yesterday at least shows it has learned something about the ways of Indian political play-acting. 
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THE INDIAN EXPRESS, Tuesday, May 29, 2001
Worried FIs in fresh bid to defuse Dabhol crisis

Worried over the prospects of their Rs 6,600 exposure to the Dabhol project becoming non-performing assets (NPAs), Indian lenders led by the Industrial Development Bank of India (IDBI) have decided to meet on May 30, here with the main objective of persuading the offshore lenders against  precipitating matters further and request them to show restraint.IDBI, which has an exposure of Rs 2,158 crore in the Dabhol project and has provided a guarantee forRs 1,528 crore to the offshore lenders, has taken the initiative to convene the May 30 meet in a bid to  avert a major lending crisis. IDBI is believed to have expressed concern over the lack of guarantee cover for the IFIs as against the similar protection enjoyed by the offshore lenders.

For the first time the Indian lenders today disclosed their exact exposure to DPC, which stood at Rs 6,600 crore. Other than IDBI, the domestic lenders include ICICI, State Bank of India and Canara   Bank. FIs feel that if Enron ultimately decides to pull out at this stage, terminating the power purchase  agreement, it will have serious consequences with regard to the investments made by the FIs in the project. The Wednesday's meeting is expected to be attended by the representatives of IDBI, ICICI, State Bank of India, Industrial Finance Corporation of India and Canara Bank to chalk out future course of action.

"However, we will have to persuade the foreign lenders that crisis should not be further precipitated and they should not exert pressure on the termination of project," sources said, adding, "Considering all aspects, the FIs are of the view that the Dabhol phase-II, which is already completed to the extent of 90 per cent,should be allowed to be fully completed and an alternative for distribution of power should be explored, having regard to the inability of the MSEB to absorb the Dabhol phase-II power."Foreign lenders, already upset with the payment delays and the controversy over the PPA cancellation, are apparently not happy with the turn of events. "Indian lenders will be the losers. Foreign lenders exposure is backed by guarantees. That's not the case with Indian lenders," FI sources said, adding,  "looking at their stand so far, foreign lenders may cash their guarantees." There is  also speculation that belligerent foreign lenders are all set to encash the deferred  payment guarantees.