Vince,

From the sound of the articles, it appears ENE is ready to exit India, or 
alternately to get into an arbitration battle.

I have scheduled some time with you at 10.30 to discuss.

Regards,
Sandeep.
---------------------- Forwarded by Sandeep Kohli/ENRON_DEVELOPMENT on 
04/23/2001 07:59 AM ---------------------------


Nikita Varma
04/23/2001 07:20 AM
To: Nikita Varma/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc:  (bcc: Sandeep Kohli/ENRON_DEVELOPMENT)

Subject: From The Enron India Newsdesk - April 23rd newsclips



April 23, 2001, http://www.financialexpress.com/fe20010423/fed3.html
Godbole,s report unearths absurd calculations , Maharashtra could use this to 
wriggle out of the Dabhol project 
Sucheta Dalal
------------------------------------------------------------------------------
----------------------------------------------------------
April 23, 2001,  http://www.financialexpress.com/fe20010423/news1.html    
DPC board set to authorise president, Enron MD to issue notice of 
termination, Sanjay Jog   
Scrapping of Power Purchase Agreement
------------------------------------------------------------------------------
----------------------------------------------------------
Monday, April 23, 2001, 
http://www.business-standard.com/today/corp8.asp?Menu=2
DPC seeks OK to exit power project , Tamal Bandyopadhyay & S Ravindran 
------------------------------------------------------------------------------
----------------------------------------------------------

April 23, 2001, http://www.cybernoon.com/index.html
Enron winding up operations in India? 
------------------------------------------------------------------------------
----------------------------------------------------------

State for consolidating all DPC arbitration notices, Sanjay Jog   
Monday, April 23, 2001, http://www.financialexpress.com/fe20010423/news3.html
------------------------------------------------------------------------------
----------------------------------------------------------

Monday, April 23, 2001, http://www.economictimes.com/today/23econ04.htm
Maharashtra to set up experts panel on Enron 

The article also appeared in the following newspaper

BUSINESS STANDARD
April 23, 2001, http://www.business-standard.com/today/state3.asp?Menu=32
Maharashtra to set up expert panel on Enron 

------------------------------------------------------------------------------
----------------------------------------------------------
April 23, 2001, http://www.economictimes.com/today/23econ07.htm
 'Enron is a national problem'
------------------------------------------------------------------------------
----------------------------------------------------------
April 23, 2001, http://www.cybernoon.com/index.html
CM takes Enron to Delhi today 
------------------------------------------------------------------------------
----------------------------------------------------------
Monday, April 23, 2001,
http://www.outlookindia.com/full.asp?fname=Enron+%28F%29&fodname=20010430&sid=
1

The Real Story Of Dabhol If a judicial probe, suggested by the committee, is 
ordered into the Enron deal, it could embarrass three governments    RANJIT 
BHUSHAN
------------------------------------------------------------------------------
----------------------------------------------------------

Monday, April 23, 2001, 
http://www.business-standard.com/today/state2.asp?Menu=32
MSEB revenue collections up at Rs 968 crore in March , Renni Abraham 
------------------------------------------------------------------------------
----------------------------------------------------------
THE FINANCIAL EXPRESS,April 23, 2001 
Godbole,s report unearths absurd calculations , Maharashtra could use this to 
wriggle out of the Dabhol project , Sucheta Dalal

It is finally Quit India time for Enron. Though the controversial 
multinational has denied plans to sell its stake in Dabhol Power Company 
(DPC), informed sources say that it has sent feelers to China Light & Power 
and others to offload its majority holding.Getting out of India may be the 
best course for Enron. Though it has threatened a fight and invoked political 
force majeure, the Energy Review Committee headed by Madhav Godbole will 
certainly weaken its case. The committee points out that the many 
&infirmities8 in the DPC approval process brings into question the &propriety 
of the decisions8.

 It is clear that the $20m that Enron spent on educating India,s 
policy-makers and bureaucrats did not even teach them the basics of 
techno-economic appraisal or due procedure with regard to large international 
contracts. The committee says it is &troubled with the failure of governance 
that seems to have characterised almost every step of the decision making 
process on matters relating to DPC. The failure of governance has been broad, 
across different governments at different points of time, at both the state 
and the central level, and across different agencies associated with 
examining the project and at both the administrative and political levels. It 
strains belief to accept that such widespread and consistent failure to 
execute assigned responsibilities is purely co-incidental8.

Though the committee decided that it is not the proper forum to investigate 
these infirmities, its two key members, Mr Godbole, and former secretary in 
the Ministry of Finance, EAS Sarma, have asked for a judicial inquiry into 
the process of clearing the DPC project. Other members felt a judicial 
inquiry would delay the negotiation process and &not serve any purpose8. 
There may be some merit in an argument against a further delay in 
renegotiating tariffs or facilitating Enron,s exit, but the report certainly 
provides the Central Vigilance Commission (CVC) with all the grounds that it 
needs to start an investigation.

CVC N Vittal has already received innumerable requests to investigate the 
deal, especially the beneficiaries of its education campaign. Though the 
political establishment may be reluctant to set up a judicial inquiry, the 
CVC can establish whether there are lapses on the part of &government 
functionaries including political executives8 and ensure &appropriate action8 
against them. If it is indeed able to establish &undue influence8 in signing 
the contract, then Maharashtra may be able to get out of a deal patently 
against the public interest without any monetary liability.

The Godbole committee has vindicated the stand of anti-Enron activists who 
have been opposed it since negotiations began in 1994. It establishes that 
Enron power is expensive per se, and the project needs to be re-negotiated, 
regardless of the causes for the Maharashtra State Electricity Board,s (MSEB) 
financial distress. Also that DPC,s extortionate tariffs are not merely 
because of the steep rise in petro-product prices and rupee depreciation, but 
mainly on account of its sweetheart deal with the state government. Enron,s 
contract is clearly one-sided; it deliberately uses expensive raw material 
(ignoring World Bank warnings), has worked on fanciful demand-supply 
estimates and several legal requirements and permissions.

In fact, the committee has found that the MSEB has been paying Enron Rs 930 
crore more than it should every year. This comprises overcharging of Rs 253 
crore on account of the large regassification plant of which only 42 per cent 
of the capacity is used for DPC. There,s also a Rs 100 crore extra billing to 
the MSEB for shipping and harbour charges although the cost of these 
facilities had been included in the capital recovery charge. By charging more 
than twice the operations & maintenance rate stipulated by the government of 
India, Enron collects approximately Rs 246 crore extra every year. It has 
also been collecting Rs 332 crore every year through inflated fuel 
consumption claims. Enron has been charging at 1878 kcal/kwh under the power 
purchase agreement (PPA) although the equipment manufacturer has guaranteed 
it a much lower consumption rate. This gives it a fat fuel arbitrage 
opportunity at the cost of the people of Maharashtra. 

The committee has also pointed to the strange practice of using four 
different exchange rates for different aspects of the project negotiation: a 
rate of Rs 32 per dollar was assumed for calculating debt service of rupee 
loans, Rs 34.5 per dollar as reference rate for Phase-I, Rs 39.35 per dollar 
as reference rate for Phase-II and a curious Rs 42 per dollar for calculating 
Government of India tariff. Forcing a reduction of these excessive charges 
has nothing to do with contract cancellation. All it needs is tough 
negotiation and public pressure on the political establishment. 

The Godbole committee has established that DPC,s tariffs can easily be halved 
if excess payments are eliminated and unfair conditions such as the 
dollarisation of payments, the take-or-pay clause and escrow facility (which 
is in fact hampering MSEB,s reform particularly in power distribution) are 
scrapped.The security of future payments to DPC under the restructured tariff 
would be based on increased cash flows from a reformed distribution system. 
The committee also gives Enron a difficult escape route. It says that if the 
multinational finds the conditions for restructuring too onerous, it should 
free MSEB from its contractual obligations and find buyers outside 
Maharashtra. The committee has tried to establish another precedent on all 
projects negotiated by government: &The public has a right to know what is 
being contracted on their behalf8 and has recommended that all documents, 
including contracts related to all Independent Power Projects (IPPs), 
particularly DPC, should be published by the Maharashtra government within 
two months.

Also, having established that demand-supply estimates by the state government 
were fanciful, the committee has asked MSEB to defer all negotiations with 
power producers until demand levels in the state permit full absorption of 
power generation from such IPPs. It recommends that such negotiations should 
be in accordance with the least-cost plan spelt out by the report. This 
should also end the hectic lobbying by Reliance (Patalganga), Mittals 
(Bhadravati), the BSES (Saphale) and others to set up IPPs in Maharashtra.
------------------------------------------------------------------------------
----------------------------------------------------------THE FINANCIAL 
EXPRESS, April 23, 2001    
DPC board set to authorise president, Enron MD to issue notice of 
termination, Sanjay Jog   
Scrapping of Power Purchase Agreement

The board of directors of Dabhol Power Company (DPC), which has already taken 
an aggressive posture, has proposed to authorise the Enron India managing 
director K Wade Cline and DPC president and chief executive officer Neil 
McGregor to issue notices for the termination of power purchase agreement 
(PPA) and transfer of Dabhol project in view of continuing default by the 
state and Central governments and Maharashtra State Electricity Board (MSEB).

The board of directors, which would meet on April 25 in London, also plans to 
appoint Mr Cline as its &true and lawful Attorney-in-fact8 and authorise him 
to represent the company in the negotiation of all project contracts and 
financing agreements and their amendments and modifications.Top sources told 
The Financial Express that DPC would authorise Mr Cline and/or Mr McGregor to 
serve the preliminary termination notices and transfer notices to the state 
and Central governments and MSEB under clause 17 and schedule 11 of the PPA.

&In response to the continuing default by the MSEB of its payment obligations 
under the PPA, the failure of the Government of Maharashtra to honour 
obligations under its guarantee and state support agreement and failure of 
the Government of India to honour obligations under its counter guarantee, 
the company has sought recourse to dispute resolution and has initiated 
conciliation and arbitration proceedings,8 the company resolution said. 
&Consistent with this recourse to contractual remedies, the company now seeks 
the authority to serve preliminary termination notices and transfer notices 
pursuant to clause 17 and schedule 11 of the PPA from time to time and at any 
time upon the occurrence of an event giving rise to its right to serve such 
notices as determined by the company,8 the resolution added.

According to the resolution, the directors, the company secretary and 
officers of the company and each of them acting individually, are authorised 
and empowered to execute and deliver such documents and instruments and take 
such other actions as they deem fit to effect the purpose of the resolution, 
in the name and for and on behalf of the company. Against this backdrop, the 
state government and MSEB have been exploring the possibilities of issuing 
termination notice to the DPC for its failure to meet the contractual 
obligations under the PPA. The state government and MSEB sources said that 
such a notice could be served by the MSEB as DPC has not paid the rebate 
(penalty) of Rs 409 crore for misdeclaration and default on the availability 
of power on January 28 and February 13.

The state government and MSEB, which reviewed its position on Saturday at a 
meeting convened by the Chief Minister Vilasrao Deshmukh, are of the view 
that they have a strong case and substantial grounds to slap the termination 
notice to the DPC. The DPC,s move to appoint Mr K Wade Cline as its &true and 
lawful Attorney-in-fact8 deserves importance especially when the state 
government proposes to set up a negotiating committee to cut the per unit 
cost and gauge the possibility of sale of Dabhol power to the power deficit 
states.

Mr Cline would also be authorised to dispose of equipment that is worn out or 
obsolete or other equipment or fuel no longer expected to be used in the 
ordinary course in amounts exceeding Rs 64 crore or the equivalent in foreign 
currency in any financial year. Furthermore, Mr Cline would be in a position 
to enter into contracts and take any other actions for purpose relating to 
the day-to-day operation of the company,s business or exercise its rights and 
discharge its obligations under the project contracts and the financing 
agreements
------------------------------------------------------------------------------
----------------------------------------------------------BUSINESS STANDARD, 
Monday, April 23, 2001
DPC seeks OK to exit power project , Tamal Bandyopadhyay & S Ravindran 

The Enron-promoted Dabhol Power Company (DPC) is seeking the approval of its 
25 lenders to pull the plug on the $3 billion power project in Maharashtra 
tomorrow (April 23).The meeting has been convened in London at the initiative 
of the company. The meeting is crucial as the DPC board is meeting on April 
25 in London to discuss the issue of serving a termination notice to the 
Maharshtra State Electricity Board (MSEB).
 
DPC cannot go ahead with this unless it gets the go ahead from the lenders. 
While bankers said the lenders, meeting is about the second phase of the 
project, which is still under construction, state government officials 
clarified that since there is only one PPA covering both phases of the 
project, the lenders, decision will be applicable to the existing Phase I 
also. The second phase of the project involves 1,444 MW generation capacity, 
whereas Phase I of 740 MW is already operational.&According to the loan 
agreement, even if only four per cent of the lenders agree to terminate the 
contract then DPC can do so,8 highly placed sources in the lenders, 
consortium said from London. 

This in effect means that only one lender has to agree for DPC to serve a 
preliminary termination notice.Following the notice, there is a cooling off 
period of six months for both parties (the MSEB and DPC) to find a mutually 
acceptable solution, which may take the form of a re-negotiated PPA, sources 
added. Sources also said that there are two separate meetings scheduled with 
lenders. The Monday meeting will be attended by all the lenders including 
multilateral funding agencies like Japanese Exim Bank and OPIC. The second 
round of meetings schedule for Tuesday will be only with the global loan 
arrangers ANZ Investment Bank, CSFB, ABN -AMRO, Citibank and the State Bank 
of India (SBI).Two representatives each from the Indian lenders, IDBI, ICICI 
and SBI have already left for London. 
------------------------------------------------------------------------------
----------------------------------------------------------
AFTERNOON, April 23, 2001
Enron winding up operations in India? 

Marred by controversies since inception, the US-based energy major 
Enron-promoted Dabhol Power Company (DPC) board will meet this Wednesday, 
April 25, in London to decide the fate of its 2,184 MW project in Dabhol, 
including winding up of its operations. "The top most item on the agenda is 
to empower DPC Managing Director Neil McGregor to wind up operations in the 
country," state government sources told PTI on Saturday. When contacted, DPC 
spokesperson declined to comment on the agenda of the London meeting and 
added, "I will not like to comment on speculations." 

Sources said a team comprising three top officials of Maharashtra State 
Electricity Board (MSEB) including chairman Vinay Bansal would attend the 
high-profile board meet. Bansal told PTI that MSEB has decided to give a 
"fitting reply" and present its case concerning the Rs. 401 crore penalty 
that the loss-making board slapped on DPC on February 28, for not generating 
required power within the stipulated time as per the Power Purchase Agreement 
(PPA). 

This London meet comes two days after the international and domestic 
financial institutions sit together (April 23) to discuss DPC's future course 
of action in the wake of non-payment of dues to the tune of Rs. 223 crore by 
MSEB and also to take into account the aforesaid penalty.Over the payment of 
dues of December 2000 and January of Rs. 102 crore and Rs. 111 crore 
respectively, sources said, both the state government and MSEB had offered to 
make a "protest" payment as per the PPA, but DPC, India's first fasttrack 
power project, refused to accept on that condition. 

Currently, Enron India holds 65 per cent in the US $900 million DPC project, 
which includes MSEB's 15 per cent while General Electric and Bechtel hold 10 
per cent each. The controversial "now on now off" project began in 1992 but 
ran into rough weather after the Shiv Sena-BJP came to power and was scrapped 
only to be revived after renegotiating the PPA. Fresh trouble arose in 
October last when MSEB began defaulting over the "enormous" billing following 
which DPC invoked the state and centre's counter guarantee and also recently 
sent three international arbitration notices and invoked the political 
"forced majeure" implying inability to conform towards any financial 
commitment.
 
DPC had yesterday stated that it had no plans to reduce its stake below 50 
per cent but according to Enron Corp's Chief Executive Officer Jeff Skilling 
the company would be interested in talking to potential buyers for its stake. 
Skilling, according to an international financial daily, said the 
multinational continues to see strong growth in North America, Europe and 
Australia indicating a possibility of exiting from India
------------------------------------------------------------------------------
----------------------------------------------------------
THE FINANCIAL EXPRESS, Monday, April 23, 2001
State for consolidating all DPC arbitration notices, Sanjay Jog   

The Maharashtra government has decided to appeal to the Centre for 
consolidating all arbitration notices served DPC for the &continuous default 
of contractual obligations8 and name a common arbitrator for the state 
government, the Centre and MSEB.The Maharashtra government team led by the 
chief minister Vilasrao Deshmukh, at its meeting with the union finance 
minister Yashwant Sinha and union power minister Suresh Prabhu on Monday, 
also proposes for the appointment of a non-Indian arbitrator with a view to 
cutting the cost substantially.

During arbitration proceedings initiated by the DPC after the repudiation of 
Dabhol phase-I by the previous Shiv Sena-BJP government in 1995, a non-Indian 
arbitrator, Mr Kumara Swami was appointed as an arbitrator after a suggestion 
by a senior counsel Fali Nariman. State government sources told The Financial 
Express that it would write a letter to the DPC regarding arbitration 
proceedings after Monday,s meetings. The state advocate general Goolam 
Wahanwati will be suggesting a suitable arbitrator for the state and central 
government and MSEB. 

The advocate general will also suggest solicitors and Queens Counsel, who may 
be engaged in London for this purpose. Incidentally, Mr Prabhu, who was 
present at the &janata darbar8 organised by the Thane branch of Shiv Sena, 
told reporters that the Centre would provide necessary assistance to the 
Maharashtra government to find a solution to the Dabhol 
imbroglio.Furthermore, the state government would formally appeal to the 
Centre to nominate its representative on the proposed committee to negotiate 
with the DPC in a serious bid to reduce the per unit cost and assess the 
possibility of sale of Dabhol power to deficit states. The government has 
suggested the names of Housing Finance Development Corporation chairman 
Deepak Parekh and former union energy secretary EAS Sarma, who were members 
of the Godbole energy review committee. 
------------------------------------------------------------------------------
----------------------------------------------------------
THE ECONOMIC TIMES, Monday, April 23, 2001 
Maharashtra to set up experts panel on Enron 
 
 IN order to resolve the imbroglio over payment crisis between the 
Maharashtra State Electricity Board and US energy major Enron-promoted Dabhol 
Power Company, Maharashtra will set up an expert committee for negotiations 
even as the multinational is contemplating winding up of its operations in 
the country. "We are now going for negotiations and will form an experts 
committee in which Maharashtra expects the Centre to participate," chief 
minister Vilasrao Deshmukh told reporters after attending a condolence 
meeting to pay tributes to late Nasscom president Dewang Mehta here on 
Sunday. "All the four parties -- namely the state, Union government, Enron 
and MSEB -- should come together for negotiations; otherwise it cannot be a 
complete exercise," he added. 

Deshmukh and the MSEB team are scheduled to meet Union finance minister 
Yashwant Sinha and power minister Suresh Prabhu on Monday in New Delhi to 
discuss the stalemate and find a acceptable solution for the same. "I am 
meeting Sinha and Prabhu to request them to take an initiative and send 
representatives for the negotiations committee," he said. Deshmukh's meeting 
with the Centre comes at a crucial stage as DPC's lenders would be meeting in 
London, on the same day, to decide upon the future finances of the 
controversy marred 2,184-mw project in Dabhol. 

Moreover, the DPC board is also scheduled to meet on April 25 in London to 
decide the fate of its $900 million project in Dabhol, including winding up 
of its operations. The meeting would discuss the topmost item on the agenda, 
which was to empower DPC managing director Neil McGregor to wind up 
operations in the country. DPC has already slapped one conciliation notice on 
the Centre and three arbitration notices on the state government over 
non-payment of dues amounting to Rs 213 crore plus interest towards the bills 
due for the months of December 2000 and January 2001. 

Asked whether the Centre had send any feel over a possible clubbing together 
of the arbitration and conciliation processes, Deshmukh replied in the 
negative. Deshmukh said MSEB chairman Vinay Bansal along with two senior 
officials would attend DPC's board meeting in London. Bansal had said on 
Sunday that MSEB would present its case concerning the Rs 401-crore penalty 
that the loss-making board slapped on DPC on February 28, for not generating 
required power within the stipulated time as per the PPA. Currently, Enron 
India holds 65 per cent in the $900-million DPC project, which includes 
MSEB's 15 per cent, while General Electric and Bechtel hold 10 per cent each. 
(PTI) 
------------------------------------------------------------------------------
----------------------------------------------------------THE ECONOMIC TIMES, 
April 23, 2001 
 'Enron is a national problem'
 
UNION power minister Suresh Prabhu on Sunday said the Centre would render all 
possible help to resolve the Enron crisis faced by Maharashtra which is 
"haunting the entire country". Prabhu said he would meet the state chief 
minister Vilasrao Deshmukh in New Delhi tomorrow to discuss stalemate over 
the payments due to the US energy major-promoted Dhabol Power Company by the 
Maharashtra State Electricity Board. Referring to Godbole committee report's 
finding that DPC was keen on offering MSEB's 15 per cent stake to the 
National Thermal Power Corporation, Prabhu said: "The Centre has not received 
any such proposal regarding participation of the central power utility." 
(PTI) 
------------------------------------------------------------------------------
----------------------------------------------------------AFTERNOON, April 
23, 2001 
CM takes Enron to Delhi today 
 
Chief Minister Vilasrao Deshmukh will discuss the Enron imbroglio with Union 
Finance Minister Yashwant Sinha and Union Power Minister Suresh Prabhu in 
Delhi today. He will request the Centre to appoint a representative to the 
committee that the state government is setting up to carry on discussions and 
negotiations regarding the Dabhol Power Project of the US-based Enron Power 
Company. Today, a special meeting of representatives of all those finanicial 
institutions which have extended loans to the Dabhol Power Project is also 
being held in London. A meeting of its directors will be held on Wednesday to 
discuss the fate of the $900 million project which has been under a cloud 
ever since its inception. 

Yesterday, Mr. Prabhu declared at a 'Janata Darbar' in Thane that the Centre 
would extend all help to solve the Enron crisis. This is in the backdrop of 
pending bills to the tune of Rs. 213 crore which the state fowarded to the 
Centre against payments for the months of December 2000 and January 2001. 
Confirming that there was no proposal from the state government to handover 
the project to the Centre, Mr. Prabhu said that the situation of the 
electricity boards in the country was precarious. The Centre had decided to 
assist Maharashtra upto Rs. 250 crore every year to improve customer 
services. 
------------------------------------------------------------------------------
----------------------------------------------------------OUTLOOK, Monday, 
April 23, 2001

The Real Story Of Dabhol If a judicial probe, suggested by the committee, is 
ordered into the Enron deal, it could embarrass three governments    RANJIT 
BHUSHAN

"The Committee has prima facie found infirmities in several decisions taken 
in respect of the Enron project at different points of time by successive 
governments and agencies in the Centre and state."
--Energy Review Committee headed by former home secretary Madhav Godbole

This could well be the real Enron story
A five-member high-powered committee headed by Madhav Godbole*and including 
former Union economic affairs secretary E.A.S. Sarma, hdfc chairman Deepak 
Parekh, teri chairman RajendraPachauri and Maharashtra government official 
Vinay Mohan Lal*has recommended a judicial probe into the entire Enron power 
project deal saying it signified "the utter failure of governance that seems 
to have characterised almost every step of the decision-making process 
relating to the Dabhol project". The report, which was submitted to the 
Maharashtra government last fortnight and has been acquired by Outlook, is 
severely critical of former chief minister Sharad Pawar (with the Congress 
then), the 13-day bjp-led Union government which reworked the deal in 1996, 
Shiv Sena supremo Balasaheb Thackeray and his government in Maharashtra 
headed by Manohar Joshi

"The utter failure of governance seems to have characterised almost every 
step of decision-making relating to the Dabhol project." Madhav Godbole 
Committee Report

An investigation, if ordered, could embarrass at least these three 
governments The report clearly upholds the allegations of money being paid by 
Enron to politicians and bureaucrats for clinching the deal. According to the 
committee, the deal reveals failure of governance, both at the Centre and 
state, and across different agencies. "It strains belief to accept that such 
widespread and consistent failure to execute responsibilities is purely 
coincidental," the report said, proposing a set of measures to be implemented 
if something of the project was to be retrieved. Godbole and Sarma also felt 
that the panel should categorically recommend the government of India to 
order a judicial inquiry. This was finally adopted by it. Says a Congress 
leader: "Enron could well become the biggest political issue in Maharashtra 
and put to question liberalisation, particularly in the power sector."

The proposal has already struck panic. Says ncp's Praful Patel: "If the Enron 
decision has at all been detrimental, it is because of the haste with which 
phase 2 was cleared by the Shiv Sena-bjp government. Now with the state 
having already entered into an agreement with Enron, the important thing is 
to resolve it amicably. A judicial inquiry will be an eyewash because it's 
not an issue of corruption but that of perception." 

Pro-market Congressmen privately admit that it was their governments at the 
Centre and the state which invited Enron, even though the second phase was 
cleared by the bjp-Shiv Sena combine. Says Congress spokesperson Jaipal 
Reddy: "Right now we're too involved with the Parliament deadlock  over 
Tehelka." Pro-liberalisation Congress MPs also fear that such witch-hunting 
could send wrong signals to foreign investors. Non-Congress MPs from 
Maharashtra, meanwhile, claim that the Godbole Committee was instituted with 
the express purpose of politicising the Enron issue. "I think I know Vilasrao 
Deshmukh's gameplan," says an MP from the state. But some MPs like Congress' 
Prithviraj Chavan question the cloak of secrecy that's surrounded the deal: 
"I've maintained for long that there should be a judicial committee to 
examine this8.

The committee report also says that had the Enron project been subjected to a 
techno-economic appraisal, as envisaged under provisions of the Electricity 
supply Act of 1948 and related legislations, the infirmities could have been 
avoided.Since this wasn't done, questions about a concerted effort towards 
exercising undue influence at every stage of the project are bound to arise, 
the exhaustive 93-page report points out.

"I'd highlight the speed with which the 13-day Vajpayee government cleared 
the project minutes before it quit," says Congress MP Prithviraj Chavan. 


The Enron project had been held out as an exemplar of the impending 
liberalisation in the early '90s and, despite several controversies, is now 
an established power project at Dabhol, 150 km south of Mumbai. In July 1992, 
Enron signed an MoU with the Maharashtra State Electricity Board (mseb) to 
set up a 2,550 MW station as part of the government's 'fast track' projects.

Subsequently, when the Shiv-Sena-bjp came to power in Maharashtra it filed a 
writ against the project. This curiously led to renegotiations with Enron. 
The committee has quoted a Bombay High Court order on the renegotiated deal.  
"Once it (GoM) decided to revive the project, it acted in the very same 
manner its predecessors in office had done. It forgot all about competitive 
bidding and transparency. The speed with which the negotiating group studied 
the project and made its proposal for renegotiatons, which was accepted by 
Dabhol, is unprecedented." Says Chavan: "I would particularly like to 
highlight the speed with which the 13-day Vajpayee government at Centre 
endorsed the renegotiated project minutes before it resigned."


Since the commissioning of the plant in May 1999, the mseb has paid Rs 1,607 
crore for the power it has bought from Dabhol. If the same watttage of power 
had been bought from Indian-built power plants fired by indigenous coal, the 
payment would have been approximately Rs 736 crore. In the first 
year-and-a-half of its operation itself, the dpc had drained the Maharashtra 
exchequer of nearly Rs 1,000 crore.

The Central Electricity Authority (cea), in fact, pointed out that the Dabhol 
plant was not the least costly option. The mseb had other inexpensive 
alternatives like the four units of Kaparkheda, but they were in a 
preliminary stage. The report notes: "...if the mseb had made efforts to 
seriously pursue these projects, they might not have remained in their 
preliminary stages". It adds that the members were of the opinion that "the 
mseb and the Maharashtra government erred seriously, based on information 
available at that time, in proceeding with the dpc as a base-load factor even 
when its capacity was reduced." The failure seems to have been compounded by 
the laxity of the Union power ministry, finance ministry and the cea. It 
quotes the cea as saying that since the Union finance ministry found the 
tariff reasonable, no further examination was required

Strangely, Bal Thackeray's Shiv Sena, when it came to power together with the 
BJP in Maharashtra, filed a writ in the court and then renegotiated the deal. 

After the new Shiv Sena-bjp government took over, its CM, Manohar Joshi, 
appointed a renegotiating committee in 1996 which made the right noises, 
actually managing to reduce the tariff. But certain things remained 
inexplicable. No fresh clearances were required from the cea, which also said 
that "since no cost increase was involved...fresh formal clearance wasn't 
necessary." Says the committee: "This only adds strength to the suspicion 
that the cea didn't consider the economic aspects of the project at all. 
Indeed, given the non-availability of any official record of the meeting on 
June 24, 1994, with the Committee and the nature of this letter dated 
December 23, 1994, the Committee is doubtful whether the economic aspects of 
dpc were discussed at all.''

The credibility of the Shiv Sena-bjp government has been seriously 
questioned. "The Committee finds it unexplicable (sic) why there was no 
mention of any reduction in capital cost of the project from $2,828 million 
to $2,501 million as agreed by dpc in the summary report of the renegotiating 
committee," the panel observes.Says lawyer Prashant Bhushan: "It is strange 
that the Shiv Sena-bjp government first filed a writ in the court and then 
coolly renegotiated the deal." The committee further spells out the losses 
incurred through the deal. "Subsequent to the commissioning of the dpc, the 
financial deterioration of mseb has been rapid. While the mseb was in profit 
in 1998-99, it plunged into huge losses of Rs 1681 crore in 1999-2000." 

Significantly, the World Bank in 1993 had predicted the system's inherent 
weaknesses. In a letter written to the then power secretary, R. Vasudevan, a 
top bank official had said that "after a detailed review of the analytical 
framework and costing assumptions, we reconfirm our earlier conclusion that 
the Dabhol project, as presently formulated, is not economically justified" 
and that in "our assessment the project is too large to enter the mseb system 
in 1998. The proposed base-load operation could result in uneconomic plant 
dispatch, as already existing lower variable cost coal power would be 
replaced by the higher cost lng power."

Enron's persistence and the 'gullibility' of the Indian side can be gauged 
from high-ranking Enron official Joe Sutton's letter to a key Indian 
official, Ajit Nimbalkar: "I recently met with the World Bank and have been 
following the articles in the India papers. I feel that the World Bank 
opinion can be changed. We'll engage a PR firm and hopefully manage the media 
from here on. The project has solid support from all other agencies in 
Washington."

The key question in the Enron deal is whether a developed state like 
Maharashtra needs outside intervention in the power sector at all? For the 
first time the Godbole committee has raised objections about the viability of 
such a project. According to the report, the mseb has been one of the better 
performing boards in the country and has, despite a faulty transmission and 
distribution (T and D) system, managed to consistently earn net revenue 
surpluses on an accrual basis.

Maharashtra accounts for nearly one-fourth of the gross value of India's 
industrial sector. It's one of the few states to achieve 100 per cent 
electrification. Since '95, the mseb has been adding to its generation. "This 
improvement, which has been largely due to renovation and modernisation 
undertaken by the mseb, exceeded its own expectations at a time when the dpc 
was being considered," the report points out. Following a policy of 
cross-subsidy, roughly nine out of its ten users are subsidised.

But the gap between the average cost of supply and average realisation hasn't 
been much. In fact, the subsidy claim decreased from Rs 630 crore in 1995-96 
to Rs 355 crore in 1998-99, until in 1999-2000 it increased nearly five-fold 
to Rs 2,084 crore due to the sudden increase in the gap by 26 paise per unit*
from 15 to 41 paise*an increase of 173 per cent. "The increase in the subsidy 
claim by Rs 1,729 crore is due to the increase in the gap principally because 
of the increase in power purchase costs," says the committee, adding: 
"Without the dpc and without problems of T and D loss, the mseb could be 
financially healthy."

But can that happen now since Enron is here to stay? The committee has come 
up with some far-reaching recommendations: make public all Dabhol-related 
documents and agreements, restructure the Dabhol project itself to bring down 
the cost of power, restructure dpc financially, allow sale of dpc power 
outside Maharashtra, re-examine ppas in accordance with least-cost plans, and 
thoroughly reform the mseb.The committee know this can become reality only 
with political consensus and through forming of public opinion. The question 
is, can that be achieved in an unstable political environment?

With Priya Sahgal 

Making Of A Scam 

? 1992: Centre invites Enron to set up 'fast track' power project 
? Dec 1993: First PPA signed with MSEB 
? 1994: Enron starts construction 
? 1995: Sena-BJP govt scraps Enron 
? 1996: State govt renegotiates project 
? 1996: 13-day Vajpayee govt approves counter-guarantee 
? May 1996: State cabinet clears PPA 
? May 13, 1999: Phase I commissioned 
? Jul 1999: Financial closure for Phase II 
? Oct 2000: MSEB defaults on payment, subsequently stops paying monthly bills 
? Feb 6, 2001: Enron invokes Central government's counter-guarantee
------------------------------------------------------------------------------
----------------------------------------------------------BUSINESS STANDARD, 
Monday, April 23, 2001
MSEB revenue collections up at Rs 968 crore in March , Renni Abraham 

The Maharashtra State Electricity Board's (MSEB) revenue collections in March 
2001 stood at a record Rs 968 crore. This was largely due to the 
disconnection drive on defaulter connections -- pegged at nearly 20,000 
disconnections a month -- which resulted in compliance by consumers. With the 
Dabhol Power Company (DPC) monthly financial burden issue now a topic of 
discussion among arbitrators on the negotiating table, the MSEB has turned to 
putting its house in order. 

As if to ward of any criticism of its fiscal condition that could be termed 
as the facilitator to the entire DPC tariff crisis, the state electricity 
board has put matters relating to its performance on record. For instance, 
MSEB has recorded the highest power generation in the year ended March 31, 
2001, at 45930 units, compared with the previous year's 45582 units, making 
it the top SEB of the country in this respect. Similarly its power stations 
recorded the highest availability percentage at 86.1 up from 84.6 per cent 
last fiscal. Plant load factor is up to 72.78 per cent, compared with 71.7 
per cent in 2000. 

The Parli power station has recorded the highest ever generation in the ten 
years of its life time in 2000 at 4545 million units, which made it eligible 
for the meritorious productivity award under the eligibility guidelines 
issued by the Government of India carrying a cash award of Rs 12.5 lakh. All 
other power stations in the state, without exception, also fulfill the 
eligibility criteria for the cash award, a senior MSEB official said. 
Similarly, the Chandrapur power station became the first power station of any 
state electricity board to get the ISO 9002 certification. 

A senior MSEB official said: "Earlier MSEB was suffering from too much 
interference in its day to day functioning. The agriculturists were touted as 
the major reason for its deteriorating accruals, while theft of electricity 
during the transmission and distribution stage was conveniently camouflaged 
under this head. In the recent past, the government has authorised MSEB to 
take steps to curb this misuse of power by its own officials, many of whom, 
including a chief engineer have suffered suspensions