Message-ID: <30158613.1075848222214.JavaMail.evans@thyme>
Date: Wed, 7 Feb 2001 04:06:00 -0800 (PST)
From: jimmy.mogal@enron.com
To: jimmy.mogal@enron.com
Subject: Economic Times Editorial / Downgrading of GOM Crisil rating
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Dear Colleague,
Having invoked the Govt Of India Gaurantee yesterday, this has no doubt=20
received front page media attention across the country. While we will be=20
circulating some of this around, I forward this particularly interesting=20
editorial from The Economic Times.  For those of us who question the state=
=20
governments stance refusing to pay and face the frequently encountered char=
ge=20
of high tariff etc,  here's what the countries most widely read and=20
influential daily has independantly to say in our support:


THE ECONOMIC TIMES
Wednesday Feb 07 2001, http://www.economictimes.com/today/07edit02.htm

A Deserved Downgrade, ( EDITORIAL)

THE rating assigned to four government of Maharashtra supported bonds has,=
=20
rightly, been downgraded by Crisil, following non-payment of dues to the=20
Dabhol Power Corporation by the state government. Predictably, Maharashtra=
=20
finance minister Jayant Patil has objected to the downgrade, but that only=
=20
shows how out of touch politicians are with commercial reality. This is a=
=20
problem not just in Maharashtra but in all states. Politicians have got use=
d=20
to the nawabi notion that rulers do not really have to pay their legal dues=
,=20
and any payments they actually make are a sort of favour.=20

Maharashtra was earlier regarded as one of the best state governments. But=
=20
now it is in fiscal difficulties, like all others. Mr Patil claims Dabhol i=
s=20
a special case, reflecting not fiscal distress but a political decision not=
=20
to pay. Sorry, Mr Patil, but any entity that believes it can default on=20
payment for political reasons deserves to be punished since it is=20
demonstrably unreliable. Many believe the Dabhol deal was a high-cost one. =
So=20
what? Dozens of public sector projects have suffered cost overruns, but tha=
t=20
is no reason for refusing to pay their dues. The whole point of commercial=
=20
rules is that you must abide by the rules of the game even when they involv=
e=20
a loss. You can legitimately withhold payment only if the original deal was=
=20
crooked and broke the law.=20

This was the accusation made against Dabhol in the mid 1990s, but detailed=
=20
investigation failed to unearth evidence of wrong-doing, and dozens of lega=
l=20
petitions were dismissed by the courts. Cynics say that lack of evidence in=
=20
India does not mean innocence. But that cynicism can apply to every single=
=20
power project in India, including public sector projects. In life, we all=
=20
make some good deals and some bad ones, and need to abide by them=20
nevertheless. State governments cannot escape this commercial rule. No stat=
e=20
should renege on a deal merely because it was a bad one. If it does so, it=
=20
deserves to be downgraded as an unreliable and risky economic partner. The=
=20
Crisil downgrade may not mean much of a rise in the state=01,s immediate=20
borrowing costs. But it will affect the state=01,s once-awesome reputation,=
 and=20
that could be a far higher real cost.=20