Vince,

FYI.
---------------------- Forwarded by Sandeep Kohli/ENRON_DEVELOPMENT on 
01/19/2001 05:12 PM ---------------------------

From the Enron India Newsdesk- Jan 18th newsclips



Untie Them (Editorial)
Thursday Jan 18 2001, http://www.economictimes.com/today/18edit02.htm
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State not to give tax sops to DPC for buying naphtha from IOC, (Sanjay Jog) 
 Thursday Jan 18 
2001,http://financialexpress.com/fe/daily/20010118/fec18056.html
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Centre yet to receive proposal on Enron
Thursday Jan 18 2001, http://www.economictimes.com/today/18infr02.htm
 
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Untie Them (Editorial)
Thursday Jan 18 2001

THE GOVERNMENT of Maharashtra wants New Delhi to convince the Power Trading 
Corporation, a central utility, to buy power from Dabhol and sell it across 
the country.It would be far simpler if Dabhol  and all independent power 
producers  were allowed to sell power to whoever was willing to pay for 
it.That, unfortunately, is not allowed by law, which forces private sector 
generators to sell power only to state utilities, which in turn, are not 
permitted to sell power across states on their own. 

Most state electricity boards are bankrupt . MSEB reportedly owes central 
utilities Rs 5,000 crore. They cannot bring themselves to charge many types 
of users for the power consumed, nor can they prevent large-scale theft of 
electricity. Few, including wealthy Maharashtra, have the will to reform 
state electricity boards and privatise transmission and distribution. Given 
this profile of buyers, private generators demand sovereign guarantees to 
help them tide over default risks. But the guarantees merely insulate IPPs 
against risk. They cannot make SEBs solvent. Yet, India needs power 
desperately. Maharashtra, India,s richest state, experiences power shortages 
of around 2,000 MW, about a sixth of its peak needs. 

Over time, the hunger for power will only grow. India cannot afford to wait 
for the painful politics of SEB reform to work themselves out. The government 
should bring in legislation that allows IPPs to sell power directly to paying 
customers.This will free IPPs from the clutches of bankrupt monopsony buyers. 
The power trading legislation will have unexpectedly happy consequences for 
the government too.Once IPPs are freed from their onerous obligations to sell 
power to single, mostly bankrupt buyers, their default risks will come down 
substantially. New Delhi and state governments should then scrap the 
guarantees that they gave IPPs in the past. 
The combination of power trading, private investments in generation, 
transmission and distribution, and gradual SEB reform  will create a 
commercial, workable and competitive power market in India. Anything less 
will be a recipe for disaster. 

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State not to give tax sops to DPC for buying naphtha from IOC, (Sanjay Jog) 
 Thursday Jan 18 2001

The Maharshtra government's finance department, which is striving to reduce 
fiscal deficit from Rs 9,484 crore to Rs 3,484 crore by the beginning of 
April this year, has expressed its inability to provide a sales tax waiver to 
the Dabhol Power Company (DPC) on the procurement of 1.2 million tonne of 
naphtha from the state-run Indian Oil Corporation (IOC). 

Mantralaya sources told The Financial Express on Wednesday that DPC would 
have to pay 4 per cent sales tax. "The government, way back in 1995, has 
modified the sales tax rate to 4 per cent to discourage the import of naphtha 
from Gujarat by electrical companies operating in Maharashtra. The decision 
was taken with a view to encouraging electrical companies to procure naphtha 
at reduced rates within the state," government sources added. Sources said 
that these companies had to pay nearly 15.3 per cent sales tax on naphtha 
that was procured from Gujarat. However, following their representation, the 
government slashed the sales tax rate to 4 per cent.
 
The state finance department's opinion, which would be presented before the 
state cabinet shortly in order to take a final decision, deserves special 
significance especially when the state energy department and the loss-making 
Maharashtra State Electricity Board (MSEB) have wholeheartedly supported the 
DPC's cause and recommended the sales tax waiver. DPC, which was asked by the 
Union ministry of oil and petroleum to procure naphtha within the country in 
view of excess availability, in its presentation to the state government and 
to MSEB, had made it clear that it would be left with no alternative but to 
pass on the additional burden on the MSEB which would be ultimately passed on 
to its consumers. DPC had also told the state government that it had not paid 
sales tax on the procurement of naphtha from Glencore in the calender year 
2000. 

Sources from the state energy department and MSEB have stressed on the need 
for such a waiver while expressing their inability to bear additional burden. 
They have suggested that the state should reciprocate by offering a sales tax 
exemption to DPC because the IOC, at the behest of the Centre, has tried to 
match the international landing price of naphtha during the recently signed 
memorandum of agreement with DPC. "If the state finance department sticks to 
its views, it may hurt the state as a whole," sources from the state energy 
department and MSEB said.DPC will procure naphtha at Rs 11,050 per ton from 
IOC during the calender year 2001 as compared to the Rs 10,050 per tonne 
price quoted by Glencore. The naphtha price comprises $175 per tonne free on 
board (FOB), 21.8 per cent of customs duty, 5.4 per cent of sales tax and 
$18.87 of premium.
 
DPC senior vice president Mukesh Tyagi reiterated that the company has 
already made an appeal to the state government for the sales tax waiver on 
naphtha in the larger interest of the consumers. "Sales tax is a pass through 
and MSEB, which will have to bear the additional burden, will pass it on the 
consumers," he added.
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Centre yet to receive proposal on Enron
Thursday Jan 18 2001

CENTRE on Wednesday said that it had not recevied any proposal from 
Maharashtra government seeking help to solve the tangle with the Enron 
promoted Dhabol Power Project relating to cost and surplus power. Asked about 
the reports that Maharashtra government was sending a proposal that centre 
buy surplus power from Dhabol Power Company through power trading 
corporation, power minister Suresh Prabhu said "we have not received any 
proposal." "We are carefully watching the situation and will await a concrete 
proposal before intervening in this matter," Parbhu said on the sidelines of 
greentech environment excellence awards ceremony, here. Asked whether there 
was any possibility of the government asking the Power Trading Corporation to 
buy power from the Dhabol Power Corporation, Prabhu replied "what will the 
PTC do with the power?" 

Prabhu had earlier asked the state government to study the matter before 
approaching the centre for payment of dues. MSEB had earlier declined to pick 
up its 15 per cent stake in phase II of the 1444 mw project. The Enron issue 
has been hanging fire with the Maharashtra State Electricity Board unable to 
clear the dues of DPC as a result of the skyrocketing prices of Naphtha 
infact MSEB has asked DPC to backdown completely leading to a situation where 
DPC has stopped production at the facility from the begining of the 
month.State government has stepped in with support to the tune of Rs 114 
crore to enable MSEB to clear the dues for October. MSEB dues to DPC for 
November and December amount to over Rs 300 crores.