The Enron Saga
 |
The Peak Load
The project generated much controversy in Maharashtra. Of the two main opposition parties (the BJP and Shiv Sena) , the BJP was in the forefront of the opposition to the project on a number of grounds. Their primary contention was that the deal indicated corruption at the highest level. In January 1995, elections to the Maharashtra state assembly were announced. Enron was made a key issue in the elections. Gopinath Munde, leader of the BJP, visited the Enron site and promised to throw "the project in the Arabian Sea". Business Line and Frontline carried long and detailed articles on the PPA, which had been kept secret up till then. |
|
In February 1995, the BJP and the Shiv Sena alliance won the elections.
The new ruling alliance immediately began investigations into the award
of the contract, the economics of the project and the consequences for
Maharashtra if the project were to go ahead. It went on to form a high
level official committee to investigate the deal. The first conclusion
reached by the committee was that the previous government had "committed
a grave impropriety" by resorting to private negotiations on a
one-to-one basis with Enron. Because of this, the Enron-MSEB arrangement
on Dabhol lacked transparency. The committee went on to conclude that
there was absolutely no compelling reason for not to involving a second
contender for Dabhol. On the question of capital costs and the rates for
power from the Dabhol plant, the committee concluded, "capital cost of
DPC project was inflated." It went on to say that because of the
denomination of tariff for power in dollar terms, the consumer would
have to pay a much higher price than was justified.
Based on the committee's recommendations, the GoM unanimously decided to
cancel the project. On August 3, 1995, the CM of Maharashtra announced
that the GoM had decided "to scrap phase I and cancel phase II of the
project." It looked as if the project would meet the same fate as that
of Cogentrix. (Refer Exhibit II). On November 3, 1995, Rebecca Mark,
CEO, Enron, met Shiv Sena leader Bal Thackrey and convinced him to
reconsider the decision. After the meeting, the GoM announced
renegotiations and constituted a renegotiation committee to revive both
phases of the project. On November 19, 1995, the renegotiation committee
submitted its report. The report claimed that the capacity was increased
by renegotiations to a binding 2184 MW and the tariff was lowered for
phase I. However, analysts felt that there was absolutely no decrease in
tariff.
After the renegotiations, the entire project was made binding upon the
MSEB . This voided the center's counter guarantee since it had been
earlier specified that any change to the PPA would render it void.
However, in May 1996, the GoI ratified the counter guarantee on the
grounds that if this was not done, the GoM would be liable to pay Rs. 86
lakh a day. On August 8 1996, a binding PPA was signed with contractual
binding payments by MSEB to DPC exceeding US $ 30 billion (Rs.1, 20,000
crore). Also in August 1996, a division bench of the Mumbai High Court
directed the CM of Maharashtra to file affidavits stating the reasons
for scrapping the project and then renegotiating it. On September 3,
1996, the CM filed an affidavit stating that all allegations of fraud,
misrepresentation and corruption made against DPC were on the basis of
newspaper reports. The various steps taken by the GoM, like reviewing
the project, canceling the project, filling a suit, renegotiating the
terms and conditions of the project and withdrawing the suit were all
done in a bonafide manner in the larger interest of the consumers and
the people of Maharashtra.
Advertisement...
