Message-ID: <1418681.1075856605191.JavaMail.evans@thyme>
Date: Mon, 23 Apr 2001 01:01:00 -0700 (PDT)
From: sandeep.kohli@enron.com
Subject: From The Enron India Newsdesk - April 23rd newsclips
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X-From: Sandeep Kohli
X-To: Vince J Kaminski@ECT
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Vince,

From the sound of the articles, it appears ENE is ready to exit India, or=
=20
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=20
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=01,s report unearths absurd calculations , Maharashtra could use th=
is to=20
wriggle out of the Dabhol project=20
Sucheta Dalal
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April 23, 2001,  http://www.financialexpress.com/fe20010423/news1.html   =
=20
DPC board set to authorise president, Enron MD to issue notice of=20
termination, Sanjay Jog  =20
Scrapping of Power Purchase Agreement
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Monday, April 23, 2001,=20
http://www.business-standard.com/today/corp8.asp?Menu=3D2
DPC seeks OK to exit power project , Tamal Bandyopadhyay & S Ravindran=20
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----------------------------------------------------------

April 23, 2001, http://www.cybernoon.com/index.html
Enron winding up operations in India?=20
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----------------------------------------------------------

State for consolidating all DPC arbitration notices, Sanjay Jog  =20
Monday, April 23, 2001, http://www.financialexpress.com/fe20010423/news3.ht=
ml
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----------------------------------------------------------

Monday, April 23, 2001, http://www.economictimes.com/today/23econ04.htm
Maharashtra to set up experts panel on Enron=20

The article also appeared in the following newspaper

BUSINESS STANDARD
April 23, 2001, http://www.business-standard.com/today/state3.asp?Menu=3D32
Maharashtra to set up expert panel on Enron=20

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April 23, 2001, http://www.economictimes.com/today/23econ07.htm
 'Enron is a national problem'
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April 23, 2001, http://www.cybernoon.com/index.html
CM takes Enron to Delhi today=20
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----------------------------------------------------------
Monday, April 23, 2001,
http://www.outlookindia.com/full.asp?fname=3DEnron+%28F%29&fodname=3D200104=
30&sid=3D
1

The Real Story Of Dabhol If a judicial probe, suggested by the committee, i=
s=20
ordered into the Enron deal, it could embarrass three governments    RANJIT=
=20
BHUSHAN
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---
----------------------------------------------------------

Monday, April 23, 2001,=20
http://www.business-standard.com/today/state2.asp?Menu=3D32
MSEB revenue collections up at Rs 968 crore in March , Renni Abraham=20
---------------------------------------------------------------------------=
---
----------------------------------------------------------
THE FINANCIAL EXPRESS,April 23, 2001=20
Godbole=01,s report unearths absurd calculations , Maharashtra could use th=
is to=20
wriggle out of the Dabhol project , Sucheta Dalal

It is finally Quit India time for Enron. Though the controversial=20
multinational has denied plans to sell its stake in Dabhol Power Company=20
(DPC), informed sources say that it has sent feelers to China Light & Power=
=20
and others to offload its majority holding.Getting out of India may be the=
=20
best course for Enron. Though it has threatened a fight and invoked politic=
al=20
force majeure, the Energy Review Committee headed by Madhav Godbole will=20
certainly weaken its case. The committee points out that the many=20
=01&infirmities=018 in the DPC approval process brings into question the =
=01&propriety=20
of the decisions=018.

 It is clear that the $20m that Enron spent on educating India=01,s=20
policy-makers and bureaucrats did not even teach them the basics of=20
techno-economic appraisal or due procedure with regard to large internation=
al=20
contracts. The committee says it is =01&troubled with the failure of govern=
ance=20
that seems to have characterised almost every step of the decision making=
=20
process on matters relating to DPC. The failure of governance has been broa=
d,=20
across different governments at different points of time, at both the state=
=20
and the central level, and across different agencies associated with=20
examining the project and at both the administrative and political levels. =
It=20
strains belief to accept that such widespread and consistent failure to=20
execute assigned responsibilities is purely co-incidental=018.

Though the committee decided that it is not the proper forum to investigate=
=20
these infirmities, its two key members, Mr Godbole, and former secretary in=
=20
the Ministry of Finance, EAS Sarma, have asked for a judicial inquiry into=
=20
the process of clearing the DPC project. Other members felt a judicial=20
inquiry would delay the negotiation process and =01&not serve any purpose=
=018.=20
There may be some merit in an argument against a further delay in=20
renegotiating tariffs or facilitating Enron=01,s exit, but the report certa=
inly=20
provides the Central Vigilance Commission (CVC) with all the grounds that i=
t=20
needs to start an investigation.

CVC N Vittal has already received innumerable requests to investigate the=
=20
deal, especially the beneficiaries of its education campaign. Though the=20
political establishment may be reluctant to set up a judicial inquiry, the=
=20
CVC can establish whether there are lapses on the part of =01&government=20
functionaries including political executives=018 and ensure =01&appropriate=
 action=018=20
against them. If it is indeed able to establish =01&undue influence=018 in =
signing=20
the contract, then Maharashtra may be able to get out of a deal patently=20
against the public interest without any monetary liability.

The Godbole committee has vindicated the stand of anti-Enron activists who=
=20
have been opposed it since negotiations began in 1994. It establishes that=
=20
Enron power is expensive per se, and the project needs to be re-negotiated,=
=20
regardless of the causes for the Maharashtra State Electricity Board=01,s (=
MSEB)=20
financial distress. Also that DPC=01,s extortionate tariffs are not merely=
=20
because of the steep rise in petro-product prices and rupee depreciation, b=
ut=20
mainly on account of its sweetheart deal with the state government. Enron=
=01,s=20
contract is clearly one-sided; it deliberately uses expensive raw material=
=20
(ignoring World Bank warnings), has worked on fanciful demand-supply=20
estimates and several legal requirements and permissions.

In fact, the committee has found that the MSEB has been paying Enron Rs 930=
=20
crore more than it should every year. This comprises overcharging of Rs 253=
=20
crore on account of the large regassification plant of which only 42 per ce=
nt=20
of the capacity is used for DPC. There=01,s also a Rs 100 crore extra billi=
ng to=20
the MSEB for shipping and harbour charges although the cost of these=20
facilities had been included in the capital recovery charge. By charging mo=
re=20
than twice the operations & maintenance rate stipulated by the government o=
f=20
India, Enron collects approximately Rs 246 crore extra every year. It has=
=20
also been collecting Rs 332 crore every year through inflated fuel=20
consumption claims. Enron has been charging at 1878 kcal/kwh under the powe=
r=20
purchase agreement (PPA) although the equipment manufacturer has guaranteed=
=20
it a much lower consumption rate. This gives it a fat fuel arbitrage=20
opportunity at the cost of the people of Maharashtra.=20

The committee has also pointed to the strange practice of using four=20
different exchange rates for different aspects of the project negotiation: =
a=20
rate of Rs 32 per dollar was assumed for calculating debt service of rupee=
=20
loans, Rs 34.5 per dollar as reference rate for Phase-I, Rs 39.35 per dolla=
r=20
as reference rate for Phase-II and a curious Rs 42 per dollar for calculati=
ng=20
Government of India tariff. Forcing a reduction of these excessive charges=
=20
has nothing to do with contract cancellation. All it needs is tough=20
negotiation and public pressure on the political establishment.=20

The Godbole committee has established that DPC=01,s tariffs can easily be h=
alved=20
if excess payments are eliminated and unfair conditions such as the=20
dollarisation of payments, the take-or-pay clause and escrow facility (whic=
h=20
is in fact hampering MSEB=01,s reform particularly in power distribution) a=
re=20
scrapped.The security of future payments to DPC under the restructured tari=
ff=20
would be based on increased cash flows from a reformed distribution system.=
=20
The committee also gives Enron a difficult escape route. It says that if th=
e=20
multinational finds the conditions for restructuring too onerous, it should=
=20
free MSEB from its contractual obligations and find buyers outside=20
Maharashtra. The committee has tried to establish another precedent on all=
=20
projects negotiated by government: =01&The public has a right to know what =
is=20
being contracted on their behalf=018 and has recommended that all documents=
,=20
including contracts related to all Independent Power Projects (IPPs),=20
particularly DPC, should be published by the Maharashtra government within=
=20
two months.

Also, having established that demand-supply estimates by the state governme=
nt=20
were fanciful, the committee has asked MSEB to defer all negotiations with=
=20
power producers until demand levels in the state permit full absorption of=
=20
power generation from such IPPs. It recommends that such negotiations shoul=
d=20
be in accordance with the least-cost plan spelt out by the report. This=20
should also end the hectic lobbying by Reliance (Patalganga), Mittals=20
(Bhadravati), the BSES (Saphale) and others to set up IPPs in Maharashtra.
---------------------------------------------------------------------------=
---
----------------------------------------------------------THE FINANCIAL=20
EXPRESS, April 23, 2001   =20
DPC board set to authorise president, Enron MD to issue notice of=20
termination, Sanjay Jog  =20
Scrapping of Power Purchase Agreement

The board of directors of Dabhol Power Company (DPC), which has already tak=
en=20
an aggressive posture, has proposed to authorise the Enron India managing=
=20
director K Wade Cline and DPC president and chief executive officer Neil=20
McGregor to issue notices for the termination of power purchase agreement=
=20
(PPA) and transfer of Dabhol project in view of continuing default by the=
=20
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=20
appoint Mr Cline as its =01&true and lawful Attorney-in-fact=018 and author=
ise him=20
to represent the company in the negotiation of all project contracts and=20
financing agreements and their amendments and modifications.Top sources tol=
d=20
The Financial Express that DPC would authorise Mr Cline and/or Mr McGregor =
to=20
serve the preliminary termination notices and transfer notices to the state=
=20
and Central governments and MSEB under clause 17 and schedule 11 of the PPA=
.

=01&In response to the continuing default by the MSEB of its payment obliga=
tions=20
under the PPA, the failure of the Government of Maharashtra to honour=20
obligations under its guarantee and state support agreement and failure of=
=20
the Government of India to honour obligations under its counter guarantee,=
=20
the company has sought recourse to dispute resolution and has initiated=20
conciliation and arbitration proceedings,=018 the company resolution said.=
=20
=01&Consistent with this recourse to contractual remedies, the company now =
seeks=20
the authority to serve preliminary termination notices and transfer notices=
=20
pursuant to clause 17 and schedule 11 of the PPA from time to time and at a=
ny=20
time upon the occurrence of an event giving rise to its right to serve such=
=20
notices as determined by the company,=018 the resolution added.

According to the resolution, the directors, the company secretary and=20
officers of the company and each of them acting individually, are authorise=
d=20
and empowered to execute and deliver such documents and instruments and tak=
e=20
such other actions as they deem fit to effect the purpose of the resolution=
,=20
in the name and for and on behalf of the company. Against this backdrop, th=
e=20
state government and MSEB have been exploring the possibilities of issuing=
=20
termination notice to the DPC for its failure to meet the contractual=20
obligations under the PPA. The state government and MSEB sources said that=
=20
such a notice could be served by the MSEB as DPC has not paid the rebate=20
(penalty) of Rs 409 crore for misdeclaration and default on the availabilit=
y=20
of power on January 28 and February 13.

The state government and MSEB, which reviewed its position on Saturday at a=
=20
meeting convened by the Chief Minister Vilasrao Deshmukh, are of the view=
=20
that they have a strong case and substantial grounds to slap the terminatio=
n=20
notice to the DPC. The DPC=01,s move to appoint Mr K Wade Cline as its =01&=
true and=20
lawful Attorney-in-fact=018 deserves importance especially when the state=
=20
government proposes to set up a negotiating committee to cut the per unit=
=20
cost and gauge the possibility of sale of Dabhol power to the power deficit=
=20
states.

Mr Cline would also be authorised to dispose of equipment that is worn out =
or=20
obsolete or other equipment or fuel no longer expected to be used in the=20
ordinary course in amounts exceeding Rs 64 crore or the equivalent in forei=
gn=20
currency in any financial year. Furthermore, Mr Cline would be in a positio=
n=20
to enter into contracts and take any other actions for purpose relating to=
=20
the day-to-day operation of the company=01,s business or exercise its right=
s and=20
discharge its obligations under the project contracts and the financing=20
agreements
---------------------------------------------------------------------------=
---
----------------------------------------------------------BUSINESS STANDARD=
,=20
Monday, April 23, 2001
DPC seeks OK to exit power project , Tamal Bandyopadhyay & S Ravindran=20

The Enron-promoted Dabhol Power Company (DPC) is seeking the approval of it=
s=20
25 lenders to pull the plug on the $3 billion power project in Maharashtra=
=20
tomorrow (April 23).The meeting has been convened in London at the initiati=
ve=20
of the company. The meeting is crucial as the DPC board is meeting on April=
=20
25 in London to discuss the issue of serving a termination notice to the=20
Maharshtra State Electricity Board (MSEB).
=20
DPC cannot go ahead with this unless it gets the go ahead from the lenders.=
=20
While bankers said the lenders=01, meeting is about the second phase of the=
=20
project, which is still under construction, state government officials=20
clarified that since there is only one PPA covering both phases of the=20
project, the lenders=01, decision will be applicable to the existing Phase =
I=20
also. The second phase of the project involves 1,444 MW generation capacity=
,=20
whereas Phase I of 740 MW is already operational.=01&According to the loan=
=20
agreement, even if only four per cent of the lenders agree to terminate the=
=20
contract then DPC can do so,=018 highly placed sources in the lenders=01,=
=20
consortium said from London.=20

This in effect means that only one lender has to agree for DPC to serve a=
=20
preliminary termination notice.Following the notice, there is a cooling off=
=20
period of six months for both parties (the MSEB and DPC) to find a mutually=
=20
acceptable solution, which may take the form of a re-negotiated PPA, source=
s=20
added. Sources also said that there are two separate meetings scheduled wit=
h=20
lenders. The Monday meeting will be attended by all the lenders including=
=20
multilateral funding agencies like Japanese Exim Bank and OPIC. The second=
=20
round of meetings schedule for Tuesday will be only with the global loan=20
arrangers ANZ Investment Bank, CSFB, ABN -AMRO, Citibank and the State Bank=
=20
of India (SBI).Two representatives each from the Indian lenders, IDBI, ICIC=
I=20
and SBI have already left for London.=20
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----------------------------------------------------------
AFTERNOON, April 23, 2001
Enron winding up operations in India?=20

Marred by controversies since inception, the US-based energy major=20
Enron-promoted Dabhol Power Company (DPC) board will meet this Wednesday,=
=20
April 25, in London to decide the fate of its 2,184 MW project in Dabhol,=
=20
including winding up of its operations. "The top most item on the agenda is=
=20
to empower DPC Managing Director Neil McGregor to wind up operations in the=
=20
country," state government sources told PTI on Saturday. When contacted, DP=
C=20
spokesperson declined to comment on the agenda of the London meeting and=20
added, "I will not like to comment on speculations."=20

Sources said a team comprising three top officials of Maharashtra State=20
Electricity Board (MSEB) including chairman Vinay Bansal would attend the=
=20
high-profile board meet. Bansal told PTI that MSEB has decided to give a=20
"fitting reply" and present its case concerning the Rs. 401 crore penalty=
=20
that the loss-making board slapped on DPC on February 28, for not generatin=
g=20
required power within the stipulated time as per the Power Purchase Agreeme=
nt=20
(PPA).=20

This London meet comes two days after the international and domestic=20
financial institutions sit together (April 23) to discuss DPC's future cour=
se=20
of action in the wake of non-payment of dues to the tune of Rs. 223 crore b=
y=20
MSEB and also to take into account the aforesaid penalty.Over the payment o=
f=20
dues of December 2000 and January of Rs. 102 crore and Rs. 111 crore=20
respectively, sources said, both the state government and MSEB had offered =
to=20
make a "protest" payment as per the PPA, but DPC, India's first fasttrack=
=20
power project, refused to accept on that condition.=20

Currently, Enron India holds 65 per cent in the US $900 million DPC project=
,=20
which includes MSEB's 15 per cent while General Electric and Bechtel hold 1=
0=20
per cent each. The controversial "now on now off" project began in 1992 but=
=20
ran into rough weather after the Shiv Sena-BJP came to power and was scrapp=
ed=20
only to be revived after renegotiating the PPA. Fresh trouble arose in=20
October last when MSEB began defaulting over the "enormous" billing followi=
ng=20
which DPC invoked the state and centre's counter guarantee and also recentl=
y=20
sent three international arbitration notices and invoked the political=20
"forced majeure" implying inability to conform towards any financial=20
commitment.
=20
DPC had yesterday stated that it had no plans to reduce its stake below 50=
=20
per cent but according to Enron Corp's Chief Executive Officer Jeff Skillin=
g=20
the company would be interested in talking to potential buyers for its stak=
e.=20
Skilling, according to an international financial daily, said the=20
multinational continues to see strong growth in North America, Europe and=
=20
Australia indicating a possibility of exiting from India
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THE FINANCIAL EXPRESS, Monday, April 23, 2001
State for consolidating all DPC arbitration notices, Sanjay Jog  =20

The Maharashtra government has decided to appeal to the Centre for=20
consolidating all arbitration notices served DPC for the =01&continuous def=
ault=20
of contractual obligations=018 and name a common arbitrator for the state=
=20
government, the Centre and MSEB.The Maharashtra government team led by the=
=20
chief minister Vilasrao Deshmukh, at its meeting with the union finance=20
minister Yashwant Sinha and union power minister Suresh Prabhu on Monday,=
=20
also proposes for the appointment of a non-Indian arbitrator with a view to=
=20
cutting the cost substantially.

During arbitration proceedings initiated by the DPC after the repudiation o=
f=20
Dabhol phase-I by the previous Shiv Sena-BJP government in 1995, a non-Indi=
an=20
arbitrator, Mr Kumara Swami was appointed as an arbitrator after a suggesti=
on=20
by a senior counsel Fali Nariman. State government sources told The Financi=
al=20
Express that it would write a letter to the DPC regarding arbitration=20
proceedings after Monday=01,s meetings. The state advocate general Goolam=
=20
Wahanwati will be suggesting a suitable arbitrator for the state and centra=
l=20
government and MSEB.=20

The advocate general will also suggest solicitors and Queens Counsel, who m=
ay=20
be engaged in London for this purpose. Incidentally, Mr Prabhu, who was=20
present at the =01&janata darbar=018 organised by the Thane branch of Shiv =
Sena,=20
told reporters that the Centre would provide necessary assistance to the=20
Maharashtra government to find a solution to the Dabhol=20
imbroglio.Furthermore, the state government would formally appeal to the=20
Centre to nominate its representative on the proposed committee to negotiat=
e=20
with the DPC in a serious bid to reduce the per unit cost and assess the=20
possibility of sale of Dabhol power to deficit states. The government has=
=20
suggested the names of Housing Finance Development Corporation chairman=20
Deepak Parekh and former union energy secretary EAS Sarma, who were members=
=20
of the Godbole energy review committee.=20
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THE ECONOMIC TIMES, Monday, April 23, 2001=20
Maharashtra to set up experts panel on Enron=20
=20
 IN order to resolve the imbroglio over payment crisis between the=20
Maharashtra State Electricity Board and US energy major Enron-promoted Dabh=
ol=20
Power Company, Maharashtra will set up an expert committee for negotiations=
=20
even as the multinational is contemplating winding up of its operations in=
=20
the country. "We are now going for negotiations and will form an experts=20
committee in which Maharashtra expects the Centre to participate," chief=20
minister Vilasrao Deshmukh told reporters after attending a condolence=20
meeting to pay tributes to late Nasscom president Dewang Mehta here on=20
Sunday. "All the four parties -- namely the state, Union government, Enron=
=20
and MSEB -- should come together for negotiations; otherwise it cannot be a=
=20
complete exercise," he added.=20

Deshmukh and the MSEB team are scheduled to meet Union finance minister=20
Yashwant Sinha and power minister Suresh Prabhu on Monday in New Delhi to=
=20
discuss the stalemate and find a acceptable solution for the same. "I am=20
meeting Sinha and Prabhu to request them to take an initiative and send=20
representatives for the negotiations committee," he said. Deshmukh's meetin=
g=20
with the Centre comes at a crucial stage as DPC's lenders would be meeting =
in=20
London, on the same day, to decide upon the future finances of the=20
controversy marred 2,184-mw project in Dabhol.=20

Moreover, the DPC board is also scheduled to meet on April 25 in London to=
=20
decide the fate of its $900 million project in Dabhol, including winding up=
=20
of its operations. The meeting would discuss the topmost item on the agenda=
,=20
which was to empower DPC managing director Neil McGregor to wind up=20
operations in the country. DPC has already slapped one conciliation notice =
on=20
the Centre and three arbitration notices on the state government over=20
non-payment of dues amounting to Rs 213 crore plus interest towards the bil=
ls=20
due for the months of December 2000 and January 2001.=20

Asked whether the Centre had send any feel over a possible clubbing togethe=
r=20
of the arbitration and conciliation processes, Deshmukh replied in the=20
negative. Deshmukh said MSEB chairman Vinay Bansal along with two senior=20
officials would attend DPC's board meeting in London. Bansal had said on=20
Sunday that MSEB would present its case concerning the Rs 401-crore penalty=
=20
that the loss-making board slapped on DPC on February 28, for not generatin=
g=20
required power within the stipulated time as per the PPA. Currently, Enron=
=20
India holds 65 per cent in the $900-million DPC project, which includes=20
MSEB's 15 per cent, while General Electric and Bechtel hold 10 per cent eac=
h.=20
(PTI)=20
---------------------------------------------------------------------------=
---
----------------------------------------------------------THE ECONOMIC TIME=
S,=20
April 23, 2001=20
 'Enron is a national problem'
=20
UNION power minister Suresh Prabhu on Sunday said the Centre would render a=
ll=20
possible help to resolve the Enron crisis faced by Maharashtra which is=20
"haunting the entire country". Prabhu said he would meet the state chief=20
minister Vilasrao Deshmukh in New Delhi tomorrow to discuss stalemate over=
=20
the payments due to the US energy major-promoted Dhabol Power Company by th=
e=20
Maharashtra State Electricity Board. Referring to Godbole committee report'=
s=20
finding that DPC was keen on offering MSEB's 15 per cent stake to the=20
National Thermal Power Corporation, Prabhu said: "The Centre has not receiv=
ed=20
any such proposal regarding participation of the central power utility."=20
(PTI)=20
---------------------------------------------------------------------------=
---
----------------------------------------------------------AFTERNOON, April=
=20
23, 2001=20
CM takes Enron to Delhi today=20
=20
Chief Minister Vilasrao Deshmukh will discuss the Enron imbroglio with Unio=
n=20
Finance Minister Yashwant Sinha and Union Power Minister Suresh Prabhu in=
=20
Delhi today. He will request the Centre to appoint a representative to the=
=20
committee that the state government is setting up to carry on discussions a=
nd=20
negotiations regarding the Dabhol Power Project of the US-based Enron Power=
=20
Company. Today, a special meeting of representatives of all those finanicia=
l=20
institutions which have extended loans to the Dabhol Power Project is also=
=20
being held in London. A meeting of its directors will be held on Wednesday =
to=20
discuss the fate of the $900 million project which has been under a cloud=
=20
ever since its inception.=20

Yesterday, Mr. Prabhu declared at a 'Janata Darbar' in Thane that the Centr=
e=20
would extend all help to solve the Enron crisis. This is in the backdrop of=
=20
pending bills to the tune of Rs. 213 crore which the state fowarded to the=
=20
Centre against payments for the months of December 2000 and January 2001.=
=20
Confirming that there was no proposal from the state government to handover=
=20
the project to the Centre, Mr. Prabhu said that the situation of the=20
electricity boards in the country was precarious. The Centre had decided to=
=20
assist Maharashtra upto Rs. 250 crore every year to improve customer=20
services.=20
---------------------------------------------------------------------------=
---
----------------------------------------------------------OUTLOOK, Monday,=
=20
April 23, 2001

The Real Story Of Dabhol If a judicial probe, suggested by the committee, i=
s=20
ordered into the Enron deal, it could embarrass three governments    RANJIT=
=20
BHUSHAN

"The Committee has prima facie found infirmities in several decisions taken=
=20
in respect of the Enron project at different points of time by successive=
=20
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=01*and includ=
ing=20
former Union economic affairs secretary E.A.S. Sarma, hdfc chairman Deepak=
=20
Parekh, teri chairman RajendraPachauri and Maharashtra government official=
=20
Vinay Mohan Lal=01*has recommended a judicial probe into the entire Enron p=
ower=20
project deal saying it signified "the utter failure of governance that seem=
s=20
to have characterised almost every step of the decision-making process=20
relating to the Dabhol project". The report, which was submitted to the=20
Maharashtra government last fortnight and has been acquired by Outlook, is=
=20
severely critical of former chief minister Sharad Pawar (with the Congress=
=20
then), the 13-day bjp-led Union government which reworked the deal in 1996,=
=20
Shiv Sena supremo Balasaheb Thackeray and his government in Maharashtra=20
headed by Manohar Joshi

"The utter failure of governance seems to have characterised almost every=
=20
step of decision-making relating to the Dabhol project." Madhav Godbole=20
Committee Report

An investigation, if ordered, could embarrass at least these three=20
governments The report clearly upholds the allegations of money being paid =
by=20
Enron to politicians and bureaucrats for clinching the deal. According to t=
he=20
committee, the deal reveals failure of governance, both at the Centre and=
=20
state, and across different agencies. "It strains belief to accept that suc=
h=20
widespread and consistent failure to execute responsibilities is purely=20
coincidental," the report said, proposing a set of measures to be implement=
ed=20
if something of the project was to be retrieved. Godbole and Sarma also fel=
t=20
that the panel should categorically recommend the government of India to=20
order a judicial inquiry. This was finally adopted by it. Says a Congress=
=20
leader: "Enron could well become the biggest political issue in Maharashtra=
=20
and put to question liberalisation, particularly in the power sector."

The proposal has already struck panic. Says ncp's Praful Patel: "If the Enr=
on=20
decision has at all been detrimental, it is because of the haste with which=
=20
phase 2 was cleared by the Shiv Sena-bjp government. Now with the state=20
having already entered into an agreement with Enron, the important thing is=
=20
to resolve it amicably. A judicial inquiry will be an eyewash because it's=
=20
not an issue of corruption but that of perception."=20

Pro-market Congressmen privately admit that it was their governments at the=
=20
Centre and the state which invited Enron, even though the second phase was=
=20
cleared by the bjp-Shiv Sena combine. Says Congress spokesperson Jaipal=20
Reddy: "Right now we're too involved with the Parliament deadlock  over=20
Tehelka." Pro-liberalisation Congress MPs also fear that such witch-hunting=
=20
could send wrong signals to foreign investors. Non-Congress MPs from=20
Maharashtra, meanwhile, claim that the Godbole Committee was instituted wit=
h=20
the express purpose of politicising the Enron issue. "I think I know Vilasr=
ao=20
Deshmukh's gameplan," says an MP from the state. But some MPs like Congress=
'=20
Prithviraj Chavan question the cloak of secrecy that's surrounded the deal:=
=20
"I've maintained for long that there should be a judicial committee to=20
examine this=018.

The committee report also says that had the Enron project been subjected to=
 a=20
techno-economic appraisal, as envisaged under provisions of the Electricity=
=20
supply Act of 1948 and related legislations, the infirmities could have bee=
n=20
avoided.Since this wasn't done, questions about a concerted effort towards=
=20
exercising undue influence at every stage of the project are bound to arise=
,=20
the exhaustive 93-page report points out.

"I'd highlight the speed with which the 13-day Vajpayee government cleared=
=20
the project minutes before it quit," says Congress MP Prithviraj Chavan.=20


The Enron project had been held out as an exemplar of the impending=20
liberalisation in the early '90s and, despite several controversies, is now=
=20
an established power project at Dabhol, 150 km south of Mumbai. In July 199=
2,=20
Enron signed an MoU with the Maharashtra State Electricity Board (mseb) to=
=20
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=20
writ against the project. This curiously led to renegotiations with Enron.=
=20
The committee has quoted a Bombay High Court order on the renegotiated deal=
. =20
"Once it (GoM) decided to revive the project, it acted in the very same=20
manner its predecessors in office had done. It forgot all about competitive=
=20
bidding and transparency. The speed with which the negotiating group studie=
d=20
the project and made its proposal for renegotiatons, which was accepted by=
=20
Dabhol, is unprecedented." Says Chavan: "I would particularly like to=20
highlight the speed with which the 13-day Vajpayee government at Centre=20
endorsed the renegotiated project minutes before it resigned."


Since the commissioning of the plant in May 1999, the mseb has paid Rs 1,60=
7=20
crore for the power it has bought from Dabhol. If the same watttage of powe=
r=20
had been bought from Indian-built power plants fired by indigenous coal, th=
e=20
payment would have been approximately Rs 736 crore. In the first=20
year-and-a-half of its operation itself, the dpc had drained the Maharashtr=
a=20
exchequer of nearly Rs 1,000 crore.

The Central Electricity Authority (cea), in fact, pointed out that the Dabh=
ol=20
plant was not the least costly option. The mseb had other inexpensive=20
alternatives like the four units of Kaparkheda, but they were in a=20
preliminary stage. The report notes: "...if the mseb had made efforts to=20
seriously pursue these projects, they might not have remained in their=20
preliminary stages". It adds that the members were of the opinion that "the=
=20
mseb and the Maharashtra government erred seriously, based on information=
=20
available at that time, in proceeding with the dpc as a base-load factor ev=
en=20
when its capacity was reduced." The failure seems to have been compounded b=
y=20
the laxity of the Union power ministry, finance ministry and the cea. It=20
quotes the cea as saying that since the Union finance ministry found the=20
tariff reasonable, no further examination was required

Strangely, Bal Thackeray's Shiv Sena, when it came to power together with t=
he=20
BJP in Maharashtra, filed a writ in the court and then renegotiated the dea=
l.=20

After the new Shiv Sena-bjp government took over, its CM, Manohar Joshi,=20
appointed a renegotiating committee in 1996 which made the right noises,=20
actually managing to reduce the tariff. But certain things remained=20
inexplicable. No fresh clearances were required from the cea, which also sa=
id=20
that "since no cost increase was involved...fresh formal clearance wasn't=
=20
necessary." Says the committee: "This only adds strength to the suspicion=
=20
that the cea didn't consider the economic aspects of the project at all.=20
Indeed, given the non-availability of any official record of the meeting on=
=20
June 24, 1994, with the Committee and the nature of this letter dated=20
December 23, 1994, the Committee is doubtful whether the economic aspects o=
f=20
dpc were discussed at all.''

The credibility of the Shiv Sena-bjp government has been seriously=20
questioned. "The Committee finds it unexplicable (sic) why there was no=20
mention of any reduction in capital cost of the project from $2,828 million=
=20
to $2,501 million as agreed by dpc in the summary report of the renegotiati=
ng=20
committee," the panel observes.Says lawyer Prashant Bhushan: "It is strange=
=20
that the Shiv Sena-bjp government first filed a writ in the court and then=
=20
coolly renegotiated the deal." The committee further spells out the losses=
=20
incurred through the deal. "Subsequent to the commissioning of the dpc, the=
=20
financial deterioration of mseb has been rapid. While the mseb was in profi=
t=20
in 1998-99, it plunged into huge losses of Rs 1681 crore in 1999-2000."=20

Significantly, the World Bank in 1993 had predicted the system's inherent=
=20
weaknesses. In a letter written to the then power secretary, R. Vasudevan, =
a=20
top bank official had said that "after a detailed review of the analytical=
=20
framework and costing assumptions, we reconfirm our earlier conclusion that=
=20
the Dabhol project, as presently formulated, is not economically justified"=
=20
and that in "our assessment the project is too large to enter the mseb syst=
em=20
in 1998. The proposed base-load operation could result in uneconomic plant=
=20
dispatch, as already existing lower variable cost coal power would be=20
replaced by the higher cost lng power."

Enron's persistence and the 'gullibility' of the Indian side can be gauged=
=20
from high-ranking Enron official Joe Sutton's letter to a key Indian=20
official, Ajit Nimbalkar: "I recently met with the World Bank and have been=
=20
following the articles in the India papers. I feel that the World Bank=20
opinion can be changed. We'll engage a PR firm and hopefully manage the med=
ia=20
from here on. The project has solid support from all other agencies in=20
Washington."

The key question in the Enron deal is whether a developed state like=20
Maharashtra needs outside intervention in the power sector at all? For the=
=20
first time the Godbole committee has raised objections about the viability =
of=20
such a project. According to the report, the mseb has been one of the bette=
r=20
performing boards in the country and has, despite a faulty transmission and=
=20
distribution (T and D) system, managed to consistently earn net revenue=20
surpluses on an accrual basis.

Maharashtra accounts for nearly one-fourth of the gross value of India's=20
industrial sector. It's one of the few states to achieve 100 per cent=20
electrification. Since '95, the mseb has been adding to its generation. "Th=
is=20
improvement, which has been largely due to renovation and modernisation=20
undertaken by the mseb, exceeded its own expectations at a time when the dp=
c=20
was being considered," the report points out. Following a policy of=20
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=20
been much. In fact, the subsidy claim decreased from Rs 630 crore in 1995-9=
6=20
to Rs 355 crore in 1998-99, until in 1999-2000 it increased nearly five-fol=
d=20
to Rs 2,084 crore due to the sudden increase in the gap by 26 paise per uni=
t=01*
from 15 to 41 paise=01*an increase of 173 per cent. "The increase in the su=
bsidy=20
claim by Rs 1,729 crore is due to the increase in the gap principally becau=
se=20
of the increase in power purchase costs," says the committee, adding:=20
"Without the dpc and without problems of T and D loss, the mseb could be=20
financially healthy."

But can that happen now since Enron is here to stay? The committee has come=
=20
up with some far-reaching recommendations: make public all Dabhol-related=
=20
documents and agreements, restructure the Dabhol project itself to bring do=
wn=20
the cost of power, restructure dpc financially, allow sale of dpc power=20
outside Maharashtra, re-examine ppas in accordance with least-cost plans, a=
nd=20
thoroughly reform the mseb.The committee know this can become reality only=
=20
with political consensus and through forming of public opinion. The questio=
n=20
is, can that be achieved in an unstable political environment?

With Priya Sahgal=20

Making Of A Scam=20

? 1992: Centre invites Enron to set up 'fast track' power project=20
? Dec 1993: First PPA signed with MSEB=20
? 1994: Enron starts construction=20
? 1995: Sena-BJP govt scraps Enron=20
? 1996: State govt renegotiates project=20
? 1996: 13-day Vajpayee govt approves counter-guarantee=20
? May 1996: State cabinet clears PPA=20
? May 13, 1999: Phase I commissioned=20
? Jul 1999: Financial closure for Phase II=20
? Oct 2000: MSEB defaults on payment, subsequently stops paying monthly bil=
ls=20
? Feb 6, 2001: Enron invokes Central government's counter-guarantee
---------------------------------------------------------------------------=
---
----------------------------------------------------------BUSINESS STANDARD=
,=20
Monday, April 23, 2001
MSEB revenue collections up at Rs 968 crore in March , Renni Abraham=20

The Maharashtra State Electricity Board's (MSEB) revenue collections in Mar=
ch=20
2001 stood at a record Rs 968 crore. This was largely due to the=20
disconnection drive on defaulter connections -- pegged at nearly 20,000=20
disconnections a month -- which resulted in compliance by consumers. With t=
he=20
Dabhol Power Company (DPC) monthly financial burden issue now a topic of=20
discussion among arbitrators on the negotiating table, the MSEB has turned =
to=20
putting its house in order.=20

As if to ward of any criticism of its fiscal condition that could be termed=
=20
as the facilitator to the entire DPC tariff crisis, the state electricity=
=20
board has put matters relating to its performance on record. For instance,=
=20
MSEB has recorded the highest power generation in the year ended March 31,=
=20
2001, at 45930 units, compared with the previous year's 45582 units, making=
=20
it the top SEB of the country in this respect. Similarly its power stations=
=20
recorded the highest availability percentage at 86.1 up from 84.6 per cent=
=20
last fiscal. Plant load factor is up to 72.78 per cent, compared with 71.7=
=20
per cent in 2000.=20

The Parli power station has recorded the highest ever generation in the ten=
=20
years of its life time in 2000 at 4545 million units, which made it eligibl=
e=20
for the meritorious productivity award under the eligibility guidelines=20
issued by the Government of India carrying a cash award of Rs 12.5 lakh. Al=
l=20
other power stations in the state, without exception, also fulfill the=20
eligibility criteria for the cash award, a senior MSEB official said.=20
Similarly, the Chandrapur power station became the first power station of a=
ny=20
state electricity board to get the ISO 9002 certification.=20

A senior MSEB official said: "Earlier MSEB was suffering from too much=20
interference in its day to day functioning. The agriculturists were touted =
as=20
the major reason for its deteriorating accruals, while theft of electricity=
=20
during the transmission and distribution stage was conveniently camouflaged=
=20
under this head. In the recent past, the government has authorised MSEB to=
=20
take steps to curb this misuse of power by its own officials, many of whom,=
=20
including a chief engineer have suffered suspensions