THE FINANCIAL EXPRESS
Thursday, May 24, 2001,http://www.financialexpress.com/fe20010524/top1.html
Enron Drama In mumbai, Delhi makes gesture
Godbole shakes govt to action Submits, takes back resignation 

THE ECONOMIC TIMES
Thursday, May 24, 2001,http://www.economictimes.com/today/24econ12.htm
Godbole does a Mamata; quits, then back

The above articles also appeared in the following newspapers:

BUSINESS STANDARD
Thursday, May 24, 2001,http://www.business-standard.com/today/economy5.asp?Menu=3
Godbole relents, withdraws resignation after high drama 

THE HINDU BUSINESSLINE, Thursday, May 24, 2001
A `hurt' Godbole quits, persuaded to stay on -- Dabhol meeting cancelled

THE HINDU
Thursday, May 24, 2001, http://www.the-hindu.com/stories/01240008.htm
Godbole quits, relents later, Mahesh Vijapurkar 

THE TIMES OF INDIA
Thursday, May 24, 2001,http://www.timesofindia.com/today/24busi2.htm
Godbole withdraws resignation from Enron panel 

MID-DAY
Godbole withdraws resignation 
May 23, 2001, http://www.chalomumbai.com/home.asp
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THE TIMES OF INDIA
Thursday, 24 May 2001, http://www.timesofindia.com/today/24intw1.htm
Enron Endgame
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THE ECONOMIC TIMES 
Thursday, May 24, 2001, http://www.economictimes.com/today/bn01.htm
Centre to avoid dispute with Maha on DPC
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THE ECONOMIC TIMES
Thursday, May 24, 2001,http://www.economictimes.com/today/bn02.htm
Centre to accept Godbole panel  recommendations
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THE ECONOMIC TIMES
Thursday, May 24, 2001,http://www.economictimes.com/today/24econ16.htm
Is Pawar playing power politics with Enron?, Girish Kuber 
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THE FINANCIAL EXPRESS
Thursday, May 24, 2001,http://www.financialexpress.com/fe20010524/eco15.html
Pawar seeks probe on resignations of Godbole committee members, Sanjay Jog

Similar article as above also appeared in the following newspaper:

THE ASIAN AGE
Thursday, May 24, 2001,http://www.asianageonline.com/
My remarks on Godbole were private, says Pawar----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
THE FINANCIAL EXPRESS
Thursday, May 24, 2001,http://www.financialexpress.com/fe20010524/top2.html
Prabhu reassures DPC lenders
 
The above article also appeared in the following newspaper:

THE INDIAN EXPRESS
Thursday, May 24, 2001,http://www.indian-express.com/ie20010524/bus5.html
Centre makes a gesture: Assures Dabhol lenders
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THE FINANCIAL EXPRESS
Thursday, May 24, 2001,http://www.financialexpress.com/fe20010524/eco6.html
Dabhol lenders hope for crisis resolution at Friday meeting 
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THE FINANCIAL EXPRESS
Thursday, May 24, 2001,http://www.financialexpress.com/fe20010524/news1.html
Power trading corp to be roped in for disposing of Dabhol power , Sanjay Jog 

The above article also appeared in the following newspaper:

THE INDIAN EXPRESS
Thursday, May 24, 2001,http://www.indian-express.com/ie20010524/bus2.html
PTC likely to dispose Dabhol power, Sanjay Jog
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THE FINANCIAL EXPRESS
Thursday, May 24, 2001,http://www.financialexpress.com/fe20010524/news2.html
State refers DPC dispute to MERC ,  Sanjay Jog
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THE ASIAN AGE
Thursday, May 24, 2001,http://www.asianageonline.com/
MSEB fails to submit report, Rajesh Unnikrishnan
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BUSINESS STANDARD
Thursday, 24 May 2001, http://www.business-standard.com/today/edit1.asp?Menu=9
Cat amongst the pigeons
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BUSINESS STANDARD
Thursday, May 24, 2001,http://www.business-standard.com/today/opinion3.asp?menu=8
The 'base load' question 
This second extract from the Godbole Committe report highlight serious flaws in the basic design of the Dabhol project
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THE FINANCIAL EXPRESS, Thursday, May 24, 2001,
Enron Drama In mumbai, Delhi makes gesture
Godbole shakes govt to action Submits, takes back resignation 

IN a day of dramatic developments, the Dabhol project renegotiation committee chairman Dr Madhav Godbole, who had resigned in the wake of the criticism by former chief minister Sharad Pawar on the functioning of the committee, ultimately withdrew it on Wednesday evening after the state Cabinet affirmed "full faith, support and confidence in the ability of the committee to handle the complex and onerous task". Dr Godbole, whose resignation early on Wednesday morning led to cancellation of a renegotiation committee meeting with the Dabhol Power Company (DPC) team,  told The Financial Express that the next meeting would take place early next week.  He said the state Cabinet had unanimously rejected his resignation sent to the chief  minister Vilasrao Deshmukh and affirmed its full confidence in the committee.The DPC, which had decided to attend Wednesday's Godbole renegotiation committee meeting, declined to comment.

Dr Godbole's resignation has literally shaken the Democratic Front (DF) government in Maharashtra, which has been criticised day in and day out by some of its constituents on the Dabhol issue. Dr Godbole had   put in his papers on Wednesday morning, following Mr Shard Pawar's statement that the  committee's negative approach would not help resolve the Dabhol impasse.   Dr Godbole, in his two-page resignation letter, is believed to have said that it would be impossible to continue to function especially when the leader of one of the major constituents of the state government, the Nationalist Congress Party (NCP), had criticised the functioning of the committee.  Dr Godbole had expressed his anguish over Mr Shard Pawar's remarks and seems to have stated that it would not be proper on his part to discharge his duties when serious aspersions have been  cast on his abilities.

However, Mr Deshmukh and his deputy, Mr Chhagan Bhujbal, who is also the Nationalist Congress Party legislative party leader, were closetted in a meeting and thereafter decided upon a strategy to pacify Dr Godbole.   Thereafter, the state Cabinet wholeheartedly rejected Dr Godbole's resignation after Mr Bhujbal clarified Mr Shard Pawar's statements appearing in a section of the press. Mr Deshmukh said he had appealed to Dr Godbole to withdraw his resignation and added that "Dr  Godbole's indepth knowledge and experience makes him indispensible for handling a vexed issue  such as renegotiation with the US energy giant."  Mr Deshmukh told reporters after the Cabinet meeting that it was the state government which had appointed Dr Godbole for renegotiating the Power Purchase Agreement (PPA) with Dabhol Power Company (DPC) and the Maharashtra State Electricity Board (MSEB) and not any particular individual. "In fact, Dr Godbole's appointment was a Cabinet decision approved by the members of Nationalist Congress Party," Mr Bhujbal said. "Mr Sharad Pawar's statement has not been taken in the right spirit. Mr Pawar had himself put his stamp on Dr Godbole's appointment," he added.  Moreover, Mr Bhujbal said Mr Pawar had said that Maharashtra would not be able to consume the  extra 1,900 mw generated by Dabhol Power Company and that the Centre should play an active  role in reducing the high tariff.

Earlier, the DF constituents, specially the Janata Dal (S) and Peasants and Workers Party (PWP), made several visits and calls to the chief minister urging him to prevail upon Dr Godbole to withdraw his resignation "in the larger interest of the state and its consumers."   A veteran JD (S) leader Mrinal Gore, accompanied by socialist leader PB Samant and Enron Virodhi Andolan convenor Pradyumna Kaul met Dr Godbole and made an appeal to withdraw his resignation.  The Janata Dal (S) came down heavily on Mr Pawar and alleged that he wanted to appoint a pro-Enron man on the renegotiation committee. However, Mr Pawar claimed that Dr Godbole's decision was a personal one.  He said that he (Pawar) was not talking on behalf of the Maharashtra government when he commented on the "negative approach" of those leading the talks. He reiterated that there was a need for renegotiations with Enron to reduce the power tariff and the Godbole panel should complete its unfinished work.
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THE ECONOMIC TIMES, Thursday, May 24, 2001,
Godbole does a Mamata; quits, then back

 IT'S not a comparison that springs naturally to mind. But Madhav Godbole, the former home secretary in charge of renegotiations with Enron, on Wednesday managed a passable imitation of Mamata Banerjee by resigning in the morning and withdrawing his resignation later in the day. In a day marked by considerable drama that briefly threatened the renegotiation process with Enron, Godbole decided not to press for his resignation after chief minister Vilasrao Deshmukh personally expressed "full faith and confidence" in his ability to "handle the complex and onerous task of renegotiation". 

Earlier in the day, Godbole, who took offence to former chief minister Sharad Pawar's "derogatory" remarks, decided to walk out of the panel. Pawar had last on Tuesday night said he was doubtful about the outcome of the ongoing renegotiations between the state and DPC as those heading the state government's panel did have a positive approach to resolve the issue. Godbole's swift decision to quit the panel sent shock waves at the Mantralaya -- headquarters of the state government -- as it seemed to threaten the existence of the government. The Janata Dal, Peasants and Workers Party and other splinter groups went to the extent of saying they would pull  out of the nine-party coalition if Godbole's resignation was accepted. 

Following these development, the state government had to cancel the crucial second round of renegotiations with DPC slated for Wednesday. Enron and the Centre's                                           representative were to attend the meet. "I have resigned due to the derogatory remarks made  against me by Sharad Pawar last night," Godbole said on  Wednesday morning. Godbole said instead of strengthening the negotiator's hands, such statements "loosen the concerned authority's grip over the fragile situation". However, chief minister Vilasrao Deshumukh appealed to him to reconsider his decision. "Godbole's in-depth knowledge and experience makes him indispensable for handling vexed issues such as renegotiation with the US  energy giant," Deshmukh said. 

Deshmukh, after the Cabinet meet, sent a letter to Godbole expressing full confidence in him. "Godbole should not respond to statements from those outside the government," said Deshmukh.  Meanwhile, Pawar, too, tried to control the damage. "It was my personal opinion that was not aimed at any particular  person. Godbole should not have resigned. He should complete his task." Interestingly, Chagan Bhujbal, the state's deputy chief minister, was put on a re-fighting mission and asked to express faith in Godbole on behalf of the NCP, led by Pawar. Later in the evening Godbole decided not to press for the resignation. "I have received a letter from the chief minister expressing full confidence in my abilities. It also states the views expressed by Sharad Pawar were his personal views. He has said the state government had appointed me and they had no complaints against me. I, therefore, see no reason to press for my resignation," Godbole said. Meanwhile, the next meeting of the renegotiating panel has been convened on May 29.
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THE TIMES OF INDIA, Thursday, 24 May 2001
Enron Endgame 

As home secretary, Madhav Godbole was known as a no-nonsense administrator. His report on the Dabhol  Power Corporation deal - which he dubs ``an inexcusable failure of governance'' - shows that he  still believes in calling a spade a spade. Godbole, who was responsible for renegotiating the power-purchase agreement with Enron, is the man in the news. He had tendered his resignation as the chairman of the negotiating committee after Sharad Pawar said ``those leading the talks from the government side                                         are working with a negative approach'', only to take  it back on Wednesday evening after Pawar clarified  that he had not made this comment on the state's   behalf. On a day of such tumultuous developments, he spoke to Aditya Chatterjeehours before withdrawing his resignation: 

You were appointed by the Maharashtra government to renegotiate the power purchase agreement with the Enron-promoted Dabhol Power Company. A key member of the government, Sharad Pawar, has criticised you. Do you feel you have been let down?

The government should learn to first take a stand and then stand by it. As you rightly pointed out, the Maharashtra government had appointed me as the committee head. And now, an important constituent of the government has alleged that the negotiating committee  has a negative attitude. This type of a statement weakens the committee's stand on the crucial issue of renegotiating the power purchase agreement with the Dabhol Power Company. The government should try to give all the support to the committee and help strengthen it. Recent comments made by the senior Nationalist Congress Party leader are counter-productive in this light. I had put in my resignation letter because of the government's attitude. If the state government was not prepared to place its full trust on my capabilities, there was no reason for me to stay on. Therefore, I had sent my resignation to the chief minister, Vilasrao Deshmukh. 

Sharad Pawar was the chief minister of Maharashtra when the state had first signed an agreement with the US-based power major Enron in 1993-94. You were also regarded as the thorn in Enron's flesh. In fact, Enron has publicly said that it was not willing to  accept your committee's report. If you had not recalled your resignation, would Enron and its  supporters havebenefitted?

I would not like to comment on this. It's for you to decide. 

If the ongoing negotiations with Enron fail to break the deadlock, what will be India's best strategy to initiate damage control?

Let me answer you this way. Two members of the Godbole committee had called for a judicial enquiry into the entire issue. Only a judicial enquiry can get into details as to whether Enron had received any undue favour from the state, or whether facts were misrepresented knowingly by the authorities concerned. It is also important to find out whether the contract signed with Enron is legally valid. The committee had also suggested that the judicial enquiry, headed by a serving or a retired Supreme Court judge, should be initiated as soon as possible. One must understand that a committee like ours has limited powers. We cannot, unlike a court, record evidence under oath and issue summons to the state government, the centre, financial institutions and other autonomous bodies. 

A judicial enquiry will have a two-fold advantage. One, Enron would know that the Indian government is serious about finding out the truth about the alleged wrong-doings. This will force Enron back to the negotiating table. Second, if the judicial enquiry is able to prove that there were indeed undue favours accorded to Enron, the power purchase contract will be no longer binding for India. 

Some senior economists argue that the price per unit  of power supplied by Dabhol will come down  dramatically if the Maharashtra State Electricity Board purchases its entire output. What is your opinion?

That's a hypothetical argument. Even if we discount the fact that the MSEB does not have the requisite funds to  purchase Enron's entire output, there is no way Maharashtra can utilise the entire 740 megawatt of power which is being produced by just the first phase of the Dabhol project. The state's power utilisation has been steadily dropping over the last two years because of falling demand. In fact, a judicial enquiry could examine as to whether the MSEB had presented an inflated demand scenario when the DPC project was being conceived. The World Bank had actually raised doubts about the demand scenario then. The average power utilisation of the Dabhol project is only about 30-40 per cent of Phase I. And, I am not  even counting the Phase II portion; that is completely unviable at this point of time. 

So, does Maharashtra really need the Dabhol project?

I would say that Maharashtra only needs a marginal portion of the first phase of the Dabhol project.

At what terms, in your opinion, will the Dabhol project be viable for Maharashtra?

The Energy Review Committee has discussed this aspect in its report. We found that the state would be able to find buyers for the power at Rs 2.50 per unit. As opposed to this, Dabhol Power Company sells its power at a variable rate between Rs 3.50 and Rs 8 - depending on the power utilisation by MSEB.

Is your decision to resign final or will you consider withdrawing the letter if the state government requests you to continue?

I haven't considered this issue at this point of time. 

Sharad Pawar did not specifically name you in his statement. He had actually blamed the entire committee for having a negative approach. Do you think that other conscientious members of the Godbole committee will now follow your lead and put  in their papers? 

That is a possibility. But, it's for the other members to decide.

What is your future plan of action?

Well, I will continue working on the report which involves the second phase of the Dabhol project and restructuring the operations of the MSEB. The report will be completed over the next 10 days.
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THE ECONOMIC TIMES , Thursday, May 24, 2001
Centre to avoid dispute with Maha on DPC

IN ITS first reaction after Dabhol Power Company issued the pre-termination notice last week, the Centre on Wednesday made it clear that it would continue to play its role as a facilitator, but would not step in till such time the state government walked out of the project Power ministry officials told The Economic Times that this was primarily to avoid any Centre-state dispute in the crisis. The Centre would not require to intervene in case the disputes were resolved bilaterally. "We will step in with our suggestions only when the state government has taken a final decision on whether to go ahead or scrap the project. The first move has to be taken by the state government as the matter involves the Maharashtra government and DPC." Union power minister Suresh Prabhu who had been on a  foreign tour met finance minister Yashwant Sinha on Wednesday to discuss the Dabhol power project, and the   financial implications of the pre-termination notice. 

Although the finance ministry may not have to pay out anything immediately, it has to be prepared for its obligations under the counter-guarantee and particularly when decisions have to be taken within a deadline. Senior officials of the power and finance ministries are meeting on Friday to discuss the DPC problem. However, concerned over the affects the Enron controversy is having on other private investments, the power ministry issued a statement highlighting its efforts to solve the ongoing dispute. The Centre has assured lenders of the Dabhol power project that all steps would be taken to resolve the ongoing crisis and steps have already been initiated for an early  settlement of the dispute between MSEB and DPC. 

Prabhu has reiterated and confirmed that the Centre would be willing to consider any worthwhile idea emerging out of the consultations held by the negotiation committee for the settlement of the dispute. However, the solution has to be acceptable to both DPC and MSEB as they are the concerned parties. The Centre has, however, clarified that State-run National Thermal Power Corporation cannot be expected to bail out the Enron project as it would then be unfair to keep all other  IPPs pending. "There are several IPPS whose financial closure has been pending, and NTPC cannot be expected to bail them out," sources said. The Centre has further said in its statement that it also played a proactive role by appointing A V Gokak, retired telecom secretary, as the Government of India nominee on the negotiating committee constituted by the Maharashtra government.
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THE ECONOMIC TIMES, Thursday, May 24, 2001
Centre to accept Godbole panel  recommendations

THE CENTRE will accept recommendations of therenegotiating committee headed by Madhav Godbole for the settlement of the dispute between Dabhol Power Company and the Maharashtra State Electricity Board. A government statement quoting power minister Suresh Prabhu said, "The government of India is ready to consider any worthwhile idea emerging out of the renegotiating committee for the settlement of the dispute." The proposal, Prabhu said, had to be acceptable to the parties to the dispute - MSEB and Enron-promoted DPC - adding a quick settlement of the differences was essential for the power sector of Maharashtra. DPC had last week slapped a preliminary termination notice on MSEB following the dispute over payment of power bills. While former telecom secretary A V Gokak had been appointed as the Centre's nominee on the Godbole Committee constituted by the Maharashtra government, a committee of senior officers of the concerned ministries  had been set up to quickly examine the proposals emerging out of the negotiating committee, the statement  said. The committee officers comprise officials of ministries of finance, power and petroleum. (PTI)
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THE ECONOMIC TIMES, Thursday, May 24, 2001,
Is Pawar playing power politics with Enron?, Girish Kuber 

MAHARASHTRA'S former chief minister Sharad Pawar's statement criticising Madhav Godbole, the head of the renegotiation team, and the timing chosen by him to air his views, has focused attention on his role in the Enron controversy. Pawar, who had first inked the Enron deal as the chief minister of Maharashtra in 1992, was at the center of controversy when the Opposition accused him of favouring" the US energy giant. The issue of Rs 64 crore being spent by Enron on "educating" Indians had become a political issue in the 1995 state Assembly elections which Pawar lost. In more recent times, Pawar has repeatedly intervened at crucial junctures. On the eve of Wednesday's session of the Godbole panel, Pawar criticised Godbole of having " a negative attitude" about Enron. Though Pawar did not  name Godbole, the message was loud and clear. His statement comes at a time when the Maharashtra State Electricity is planning to issue a pre termination notice to Enron after the Godbole panel's scheduled meet on Wednesday. 

The board officials had discussed the issue with the state's advocate-general and were believed to have received a go-ahead from chief minister Vilasrao Deshmukh. Last October, when the state government had decided not to pay Enron's bills, Pawar convinced the state government to release Enron payments. It was after his intervention that the state government decided to appoint a committee  to review the project. Surprisingly, last month, when Deshmukh had a meeting with Yashwant Sinha and Suresh Prabhu at Delhi, Pawar was seen accompanying the chief minister though his name did not figure on the official list of invitees. However, subsequently, the committee could not be formed since the faction loyal to Pawar in the state government was clearly against Godbole's appointment. 

State energy minister and Pawar's trusted aide, Padmasinh Patil, had publicly expressed his ire against  Godbole. It was only after the Janata Dal, Peasents and Workers Party, CPI (M) and other anti-Enron groups threatened to withdraw support of the government, the Godbole Committee came into being. But not bofore a month was lost in a wrangling. Even after the committee's formation, Patil continued his tirade against Godbole. It was only chief minister Deshmukh's support that the Godbole Committee could survive the opposition from within. Political observers believe that it was the Congress' strategy to support the Godbole Committee that at the end could expose the wrongdoings of the earlier governments. As expected, the Godbole Committee, in its first report, exposed what it called the "lack of governance at every stage" in finalising the Enron deal. Godbole even  suggested a judicial probe to pin those guilty for this "faulty deal". It was against this backdrop that Pawar's views on Godbole created a flutter on Wednesday. Although Godbole withdrew his resignation, it has certainly widened  the rift between the NCP and Congress.
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THE FINANCIAL EXPRESS, Thursday, May 24, 2001,
Pawar seeks probe on resignations of Godbole committee members, Sanjay Jog

THE Nationalist Congress Party president Sharad Pawar on Wednesday called upon the Maharashtra government to probe the reasons for the resignations of Mr RK Pachauri, Mr Kirit Parikh and Mr EAS Sarma from the Madhav Godbole renegotiation committee on Dabhol  project. Mr Pawar in an exclusive interview to the The Financial Express said the government should find out why these members had quit on the grounds of "prior engagements." He said the renegotiation is the best possible option for the reduction of Dabhol tariff.   Mr Pawar, whose party is a major constituent of the Democratic Front government in Maharashtra,  said that the state government is quite keen to resolve the Dabhol impasse. "The state government's bonafide cannot be challenged as it is quite serious to resolve the Dabhol imbroglio," he remarked.

He reiterated that the renegotiation committee as well as state government should keep a positive   approach for the resolution of the issue. He said that the Centre's intervention is a foregone conclusion as the Maharashtra State Electricity Board (MSEB) was not in a position to absorb  nearly 1,900 mw of power generated from the Dabhol plant. "In fact, questions are being raised about the purchase of even 500 mw from Dabhol Power Company," he added. Mr Pawar said that the Centre would have to step in and help the MSEB to find a way for the disposal of excess power especially in the power deficit states. He pointed out that the DPC's decision to serve preliminary termination notice was in haste and uncalled for.
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THE FINANCIAL EXPRESS, Thursday, May 24, 2001,
Prabhu reassures DPC lenders 

THE Centre has assured the lenders to the Dabhol Power Company (DPC)  that all necessary steps will be taken to defuse the Dabhol power crisis.  In an official statement issued on Wednesday, the Union Power Minister, Suresh Prabhu said, "The government is ready to consider any worthwhile idea emerging  out of the negotiating committee for the settlement of the dispute." Significantly, this is the first official statement released by the Centre after the issuance of the preliminary termination notice by DPC to the Maharashtra State Electricity Board (MSEB) a few days back. Sources said Mr Prabhu also held discussions with the Union Finance Minister Yashwant Sinha on Wednesday evening, over various issues concerning the Dabhol power project. According to Mr Prabhu, a quick settlement of the Dabhol dispute is essential and the Centre will give its full support to the implementation of any proposal, acceptable to DPC and the Maharashtra State Electricity Board (MSEB) - the main parties to the dispute.

Sources said in order to allay the fears of the domestic lender community, the finance ministry has already responded to the letters written by IDBI, ICICI and SBI to the ministry, wherein they had sought the latter's intervention in resolving the ongoing Dabhol crisis.  According to sources, the finance ministry has asked the lenders not to panic as the government is making all possible efforts to resolve the crisis through the negotiations route. "The Dabhol project is not only important for Maharashtra but for the entire country and, therefore,  all possible efforts are being made by the Centre to revive this project," the officials said.  According to top government sources, a team of senior officials from DPC will also be meeting the  top brass in the power and finance ministry on Friday. "In order to reach an amicable solution to the  ongoing crisis, both sides will have to make some sacrifices. The details in this regard will be discussed with the DPC bigwigs on Friday," the sources said.

As per the official statement, the Centre has been proactively taking a number of steps to find a solution to the Dabhol project. The Centre wants this issue to be settled through the negotiation route and it has already deputed its representative - former telecom secretary AV Gokak on the negotiation panel."Moreover, an inter-ministerial committee of joint secretaries has also been constituted to assist Mr  Gokak and to quickly examine the proposals emerging out of the negotiating committee," the statement said.
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THE FINANCIAL EXPRESS, Thursday, May 24, 2001,
Dabhol lenders hope for crisis resolution at Friday meeting 

THE domestic lenders to the Dabhol power project, who along with foreign lenders had suspended further disbursements for DPC phase-II, have pinned their hopes on the  meeting called by the Centre on Friday in New Delhi to find an amicable solution for the ongoing  Dabhol impasse. "We are hopeful that the meet, which will bring all the disputing parties together, will arrive at an   amicable solution for protecting the national interest," said a top officials of State Bank of India. "We are not worried about the present development and we are sure about a positive development at the end," he said. Regarding the repayment of installments, the official said that he does not expect any problem till   September as the 'reserve fund' which takes care of the quarter instalment has sufficient funds.

Also the suspension of further disbursements by the lenders is a temporary measure which has no long-term implications on the project. "As stipulated by the PTN, they have got six months to sort out things and the time period is enough to settle the differences," he said. The domestic lenders have also given various suggestions to the Centre and MSEB as to how to tackle the crisis.While the foreign banks are, to an extent, comfortable with the idea of the termination of the project as they have Centre's counter guarantee for the phase I, the local banks and financial institutions have to worry about getting their exposure back as they are not at all covered by the counter guarantee. 

However, the local lenders are confident that the profit making project, the insurance cover of which has been renewed recently, will be operational soon.The domestic lenders had also asked the Centre to convince MSEB and force it to restrain from issuing a PTN to DPC.   They may also skip the forthcoming two-day global lenders meet during June 4-6 in Singapore to discuss the implication of PTN served by the DPC to MSEB.  The Indian lenders, led by the Industrial Development Bank of India, SBI and ICICI, have lent around $1.4 billion out of a total $3 billion for the 2,184 mw project.
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MID-DAY, May 23, 2001	
Enron renegotiation to begin next week'    By: Yogesh Naik

The phone rings incessantly at the Godboles 16th floor apartment at Buena Vista just 200 metres away from Mantralaya. The retired Home Secretary, Madhav Godbole, who had been recently appointed as the chairman of the renegotiations committee, answers each one of them and speaks to the media men who ask him whether he has taken back his resignation as chairman of the Enron renegotiations panel or not.  A visibly upset Godbole answers each call untiringly. " I have taken back my resignation after the chief minister sent me a letter saying that the entire cabinet had expressed faith in my work."

 Godbole had submitted a resignation to the CM, Vilasrao Deshmukh last morning following a 'derogatory statement' from Nationalist Congress Party chief, Sharad Pawar saying that he was apprehensive of the outcome of the discussions as those leading the talks from the government side had a negative approach. Pawar had made a statement to the media on Tuesday evening. The NCP chief did a volte-face by retracting it.  Godbole told Chalomumbai, " Even I had seen him on television as many of you reporters did. He said something else on the television and he is saying something else now. That' s the way, world is." Though the Power Purchase Agreement with Dabhol Power Corporation is very tight. Godbole feels, " PPAs have renegotiated worldwide. Why can it not be done here."

 Though some allegations have been leveled Godbole report on Enron, the Pune based retired home secretary is known for his honesty and integrity. The state government just provides him with remuneration of Rs 10000 per month and to and fro transportation, while the lawyers who defend the case in the international courts are paid upto 400 pounds an hour.  Yesterday, Deshmukh tried a lot to undo the damage done to Godbole. He also clarified that no one from the government had criticised Godbole. Godbole was supposed to hear the US energy giant yesterday but the hearing could not take place. The Godbole resignation episode coupled with the resignations of three other members earlier this month has given a setback to the renegotiations. But Godbole says that the renegotiations will begin early next week.
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THE FINANCIAL EXPRESS, May 23, 2001
Power trading corp to be roped in for disposing of Dabhol power , Sanjay Jog 

THE BJP-led government at the Centre, which had come under severe attack for being a silent observer, has ultimately decided to step in to resolve the ongoing Dabhol impasse. The Centre has asked the Union ministry of power to prepare a comprehensive proposal for the consideration of the union cabinet for roping in the state-run Power Trading Corporation (PTC) for  the disposal of Dabhol power in power deficit states across the country. Top sources told The Financial Express on Wednesday that the Centre has asked the Union power ministry to project the requirement of finances for the PTC to make the trading of Dabhol power a reality. "The Centre's nominee and former bureaucrat nominated on the Madhav Godbole renegotiation committee for the Dabhol project, AV Gokak, has been given the mandate in this direction. The Union ministry is expected to submit a necessary proposal in this regard very shortly," sources said.

The inter-ministerial team, comprising secretaries of ministries of power, finance and oil and natural gas have reportedly made a strong recommendation in this connection, following the refusal by the National Thermal Power Corporation (NTPC) to enter into the picture by dispatching Dabhol power. Sources said that former Maharashtra chief minister Sharad Pawar is believed to have  played a major role in convincing the Centre to intervene directly to enable the Dabhol crisis to blow  over. In fact, Maharashtra chief minister Mr Vilasrao Deshmukh, in his successive communications to the   Prime Minister Atal Behari Vajpayee on February 6, April 17 and May 10, had appealed that the  surplus power generated by the DPC would have to be disposed by national organisations such as NTPC and PTC, in power deficit states. "The negotiation with DPC with a view to reducing the tariff of power from the Dabhol project, hinges around the question whether the entire power from this project at 90 per cent plant load factor, would be purchased by a credit-worthy purchaser or not. The DPC may be willing to reduce the tariff from the existing high levels, provided they get such an assurance from the government of India," Mr Deshmukh added. According to sources, PTC has already stepped into the field of inter-state trading of power by identifying surplus and deficit states and regions and providing commercial payment arrangements. PTC traded power from Maharashtra to Karnataka for Jindal Vijaynagar Steel to the extent of 28.35 million units of energy during 1999-00 and 1.44 million units during 2000-01.
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THE FINANCIAL EXPRESS, May 23, 2001
State refers DPC dispute to MERC ,  Sanjay Jog

THE Maharashtra government, in a tactical move, has decided to refer the ongoing Dabhol disputes to the Maharashtra Electricity Regulatory Commission (Merc) mainly to "buy time."  The state cabinet on Wednesday has approved this proposal and is believed to have directed the chief secretary and power secretary to complete the necessary formalities in this regard. Mantralaya sources told The Financial Express that the state government has already informed its  intent to Merc in this connection. Merc has already been delegated adequate power under section 22 (2)(n) of the Electricity Regulatory Commission Act 1998 to "adjudicate upon the disputes/differences between the licencees and utilities and refer the matter for arbitration" through a government notification issued on December 5, 2000.

The state government had delegated these powers to Merc, when it had referred the disputes between the Tata Power and BSES over the payment of standby charges. At present Merc is holding hearings on a petition filed by BSES in this connection. The disputes related to the issuance of preliminary termination notice arbitration notice, political  force majuere and non payment of rebate of Rs 401 crore by the DPC to Maharashtra State Electricity Board (MSEB) for misdeclaration and default on the availability of power on January 28, would be referred to the Merc for its consideration and ruling. According to sources, this would  defer the proposed proceedings on arbitration notices served by the DPC, as these proceedings are  likely to commence within a month.

"The idea of referring these disputes arisen between the MSEB and DPC is with an objective to buy time, as well as transfer legal battles on the Indian soil," a senior minister said. He added that the DPC, would have to undergo the Merc route and thereby it could go on challenging its orders in the Bombay High court and thereafter in the Supreme Court. Sources said that the DPC's move to serve PTN, was unwarranted especially when the MSEB has not defaulted on the payment of monthly bills, neither it had expressed intent in this regard. MSEB and state government, whose stand has been backed by the Centre, have justified the rebate claim made by the MSEB, for misdeclaration and default on the availability of power. Both state government and MSEB have also refuted the DPC's allegations, regarding the political  interference and have said that MSEB was not entitled to make the payment of December (Rs 102  crore) and January (Rs 111 crore) bills, as it could be adjusted against the rebate payment by DPC.
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THE ASIAN AGE, May 23, 2001
MSEB Fails to submit report, Rajesh Unnikrishnan

The Maharashtra State Electricity Board has failed to submit confidential documents and reports to the NGO, Prayas, as directed by the Maharashtra Electricity Regulatory Commission, on three controversial power projects in Maharashtra - the Enron-promoted Dabhol power project, Reliance promoted Patalganga project and Ispat Industry's Bhadrawati project. Based on a petition filed last year by Prayas, a Pune-based non-governmental organisation, which sought confidential documents on various agreements signed by MSEB and the promoters of these power projects, Merc had asked the state electricity board to give the NGO the documents requested. However, MSEB did not produce all the documents requested by Prayas. 

The NGO has now filed a contempt petition before the Merc, which will be heard on Thursday. On the DPC, Prayas had asked for clearance notifications issued by various ministries and government departments, various directives of government and documentary evidence indicating fulfilment and achievement of these clearances or directives, condition precedent as set out in Section 2 of the DPC-MSEB power purchase agreement that have either been met or waived by DPC or MSEB. Prayas also asked for the mathematical and computer models being used by MSEB to calculate or verify the payments to be made to DPC. MSEB produced only partial clearances, and some of them were even incomplete.
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BUSINESS STANDARD, Thursday, 24 May 2001
Cat amongst the pigeons
Maharashtra's debacle over Enron's Dabhol project seems to have set the cat amongst the pigeons. Karnataka has decided to review as many as 11 private power projects. It seems to have suddenly realised that it, too, may be being taken for a ride and wants to see if it can get independent power producers (IPPs) to lower their tariffs. Fresh protests have been heard, meanwhile, against the likely cost of power from the Maheshwar hydel project in Madhya Pradesh. And a fracas has developed in Orissa between Gridco and an IPP. If anyone thought that the path to privatising the power basis would be either smooth or easy, he had better think again. But 10 years down the road from the time privatisation of electricity was first thought of, have any lessons been learnt? Given the amazing features of the Dabhol power purchase agreement (PPA), suspicion about the nature of private power deals would be entirely warranted, as only the na?ve would now hold that these PPAs do not require a second look. 
Recent experience with India's politicians suggests that either out of ignorance or just plain knavery, but also because of the reality of commercial risk, the IPPs may well have walked away with more than their fair due. There is a problem, of course, in determining what this is. But as the Enron PPA shows, it is possible to sneak in all sorts of hidden costs that have the ultimate effect of raising the tariff payable by the purchaser. Take the Karnataka example. The cost of thermal power (mostly) from the six stations of the Raichur thermal power station, is around Rs 2.20 per unit, and the cost of central purchase is about Rs 1.46 per unit. The purchase from one independent power producer (IPP), Jindal Tractabel Power, is at Rs 2.60 a unit. 
It is true that power from new projects will cost more than power from older ones. The question is, how much more. On average, power from the coal-based public sector plants costs around Rs 2 to generate. The cost of power from the newest amongst them, such as the NTPC one at Simhadri, is around Rs 1.80 per kilowatt-hour. In contrast, the IPPs are charging over Rs 2.40. The key issue, therefore, is to agree on how much more the power from an IPP should cost. There is good reason why private power producers will budget for higher returns. They see the risks flowing from poor distribution systems, high transmission/distribution losses, the poor financial condition of the electricity boards, and the chaotic power tariff structure, and realise that entering a minefield such as this must only be for higher than normal reward. 
The official response of offering insurance against system risk, through counter-guarantees and escrow accounts, has now run into a dead end. What remains now is to do the obvious thing: reform the distribution and tariff structures and introduce greater commercial sense into the power sector. If these are done, and if the electricity boards and governments have learnt how to negotiate, then private investment in electricity generation can come at lower cost. If these are not done, prepare for either no electricity or very costly electricity. 
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BUSINESS STANDARD, Thursday, May 24, 2001
The 'base load' question 
This second extract from the Godbole Committe report highlight serious flaws in the basic design of the Dabhol project
MSEB, in its affidavit in the Ramdas Nayak case, affirmed that: "protracted negotiations and discussions took place between both the parties during the period August 1992 to December 1993". As a consequence of these negotiations, "at 90% power availability the estimated total tariff in 1997 prices, at an exchange rate of Rs. 32/- = $1 and distillate price of $4.3/mmbtu will be Rs. 2.40/kwH". The quality of these "protracted negotiations" can be judged by comparing this rate of 7.5 cents per kwH with 7.3 cents per kwH in the original MoU Term Sheet and more significantly, with the price "proposed by Enron" two months later in the Power Purchase Agreement: Heads of Terms, Draft 4, dated 29 August 1992 (revised), where the tariff structure was to be designed to achieve an "all-in price to MSEB of 6.91 cents per kwH (at 1996 prices) assuming a natural gas cost...of US $4.91/mmbtu." That is, at the start of negotiations, at a higher assumed fuel price, the all-in cost was lower by nearly 0.6 cents per unit (an annual outgo of over $100 million). The protracted negotiations seem to have led to an increase in price. 
MSEB and the state government averred repeatedly before the Courts that this project was intensively negotiated over a long period of 16 months and best possible terms were obtained from the foreign party, namely, Enron. The very first document signed by MSEB with Enron and GE was the MOU, which was signed within 5 days of their coming to India and within 3 days of coming to Mumbai. The Enron team first arrived in New Delhi on 15 June 1992 and the MOU was signed on 20 June 1992. Though the MOU makes it clear that it is not legally binding on the parties, it sets the tone for future negotiations of the project. Interestingly, all the main features of the project have basically remained the same throughout the so-called intensive negotiations that ensued after the signing of the MOU. 
MSEB agreed, in principle, to a LNG based project of 2000 MW capacity being put up as a base load station without going into the question of the absorption of this large power in the Maharashtra system and the cost implications thereof. It agreed to orders for the plant and equipment being placed on GE without going into the comparative costs thereof and without bothering about the international competitive bidding. The contract was to be denominated in dollars, payable in rupees. The only major difference was that the power venture was to include the power plant but not gas facilities, which were to be owned in a separate fuel venture, to be negotiated separately. Subsequently, this separation was offered as a concession in the renegotiation of the project in 1995 but later on retained as a part of the project to avoid a fresh clearance from CEA. 
As mentioned above, DPC has been designed as a base load project, right from inception. The World Bank in its assessment of the project, in 1993, pointed out that "Dispatch[ing] the plant as a base load unit at 80-85% minimum plant factor...would prevent the operational flexibility of a combined cycle plant". ... Maharashtra and MSEB need load-following capacity, not for meeting base load but for peak and intermediate load. The situation was the same in 1993. It appears that the Planning Commission, at the CEA meeting held to consider the project, also observed that from a "system operation point of view it would perhaps be advantageous to consider setting up of pumped storage schemes in the Western region" and that "The backing down of the existing thermal generation capacity in Maharashtra due to this new capacity addition would imply heavy additional economic costs imposed on the power system of MSEB". 
Furthermore, it appears that at the same meeting one of the representatives of CEA observed that as "per the studies conducted by CEA, Dabhol CCGT plant was not the least cost option...MSEB had other less costly options such as Kaparkheda Unit 3 & 4 (2X210MW), Kaparkheda-Unit 5 & 6 (2x250MW), Unred TPS-1000 MW, but these schemes were in the preliminary stages." The Committee would like to point out at this stage that if MSEB had made efforts to seriously pursue these projects, they might not have remained in their "preliminary stages". Regardless of these apprehensions, the CEA found the technical aspects of the scheme "to be generally in order". GoM went ahead with the project as designed. Even though the execution of Phase-II was deferred, the Phase I project continued to be considered as a base load project, and not as an intermediate load project, as evidenced by the calculation of tariff at 90% PLF. 
If a lower level of dispatch was contemplated, as would be the case for a project designed to meet intermediate loads, the estimated PLF would have been lower and consequently, the associate tariff would have been higher, since the same fixed costs would have been spread over a smaller base. The Committee is of the opinion that MSEB and GoM erred seriously, based on information available at that time, in proceeding with DPC as a base load project, even when it's capacity was reduced to 695 MW. It has been argued that there were pending applications for power at that time. The World Bank in their evaluation, considered this and rejected the argument because it was not demonstrated that the load was additional to normal growth, that consumers were willing to pay a higher price as would be needed for LNG power (indeed, its surveys of willingness to pay showed otherwise), that they were willing to defer their demand until DPC came up and whether the load in question was from continuous process industries, justifying a 90% PLF. 
As the World Bank noted, "under (MSEB's) assumption industrial load would double, i.e. grow at an average rate of about 20% for 4 years, compared to CEA's already respectable 8% average annual growth." As it happened, even CEA's growth rate did not materialise ....Industrial consumption has hardly grown in the past few years.... The attitude of the CEA in according clearance to this scheme is also questionable, especially given the record of discussions in the meeting. Nowhere in the summary record are the issues relating to the technical design of the project effectively addressed and yet, it was decided that the technical aspects were "generally in order". 
A loss-reduction fairy tale 
What happens if MSEB actually buys all the Phase II power? Can it really afford it if the realisations are rationalised and losses are reduced? To understand this it is useful to do two simple exercises, each of which has three parts. 
In the first part of the first exercise, all of MSEB's power purchase is from DPC at the relatively reasonable rate of Rs. 4.10 per unit (as submitted by DPC to the Committee), but realisations for existing consumers (grouped into four broad groups of HT [high tension] and Commercial consumers. Bulk Supply Consumers, Agricultural Consumers and Domestic and Other Consumers) remain at current levels. This leads to a deficit of Rs. 4293 crore. In the second part, agricultural realisations are increased to Rs. 1.00 per unit and domestic realisations are adjusted so that MSEB's expenses are fully met (without any return). This implies a raise in average domestic realisations of 193% to Rs. 5.27 per unit from the current realisations of Rs. 1.80 per unit. Finally, in the third part, we ask what if there is an overnight conversion of 10,000 MU of commercial losses into paying consumers (at an average realisations of Rs. 2.75) i.e. an overnight additional revenue of Rs. 2750 crore? Domestic realisations would still have to be increased by 58%. So, the problem therefore is not just that of high commercial losses, though it is a major problem. Even if the losses were fixed in the manner above, there would remain a deficit of Rs. 1543 crore. The problem is that there is not enough demand to absorb this power. 
In the second part of this exercise, we project an overnight increase in demand of 13,350 MU, equal to DPC Phase II, which is distributed evenly across all non-agricultural consumers, implying an overnight increase in consumption of 36%. If realisations stay at existing levels, this decreases the deficit to Rs. 3273 crore. In the second part, agricultural realisations are again increased to Rs.. 1.00 per unit and domestic realisations are adjusted so that MSEB's expenses are fully met (without any return as before). This implies a lower raise of 117% in average domestic tariffs. In the third part, as before, there is an overnight conversion of 10,000 MU of commercial losses into paying consumers, i.e. an overnight additional revenue of Rs.. 2750 crore. In this case, finally, domestic realisations do not have to be increased. 
This implies that if HT and Commercial realisations remain at their current excessively high levels, agricultural realisations rise to Re. 1.00 per unit, i.e. double the existing tariff, and 10,000 MU of commercial losses is converted into paying consumption at an average realisations of Rs.. 2.75. non-agricultural consumption rises by 36% and agricultural consumption does not grow then it is possible for DPC to be absorbed without any increase in domestic realisations. However, even this fairy tale is too good to last. As time goes on, DPC tariff will rise and if it were Rs.. 4.50 instead of Rs.. 4.10, then domestic realisations would have to be increased by 26%.