'Dabhol future will influence investors'

By Mahesh Vijapurkar

MUMBAI, JAN. 23. The United States Ambassador, Mr. Richard F. Celeste, today met the Maharashtra Chief Minister, Mr. Vilasrao Deshmukh, in a bid to save the Enron Dabhol Power Company's future, welcomed the Government's plan to set up a review panel and gave the impression that the U.S. power major's subsidiary would possibly be willing to talk to resolve problems. He offered help wherever required. He wanted the Government of India also brought into the picture.

Mr. Celeste asked Maharashtra not to look at the Enron issue as a mere problem revolving round its own power utility that was almost irretrievably in the red and could not pay an independent power producer but realise that a whole lot of U.S. interests were deeply involved.

Major suggestions made today by Mr. Celeste, who yesterday proclaimed that ``India needs Dabhol power'', include a waiver of sales tax by the State Government for the naphtha now being bought by the Dabhol Power Company to meet its fuel needs, hedging against fluctuating fuel prices which are tied also to the rupee-dollar relationship and covering of forex risks.

Both the State Government and the Maharashtra State Electricity Board (MSEB) made known to Mr. Celeste that phase-II of $3- billion project's 1,444-MW component was the crux of the issue more than the 740-MW phase-I, which is already producing power and part of it is being bought. ``In the next two days, the panel, which would examine all issues, would be set up,'' Mr. Deshmukh told Mr. Celeste.

The MSEB officials told Mr. Celeste that in California too, consumers were resisting a higher tariff from expensive generation. ``What was happening in Maharashtra was something similar.'' Indian consumers were long used to a low tariff. They and the MSEB find such power ``unfeasible''.

According to sources, Mr. Celeste did not protest non-payment of bills or even the question mark hanging over on the future of the project, but suggested that this crisis should be used as an opportunity. He has already had a meeting with the Union Power Minister, Mr. Suresh Prabhu, who wanted a concrete proposal from Maharashtra on what manner of intervention was needed.

Mr. Deshmukh was wary of making any commitment except saying the State and the Centre were talking this issue over. Unless the findings of the review panel were available, the proposal could not be formulated. Mr. Celeste suggested a clear timeframe within which the recommendations could emerge. Engaging the Government of India even during the review stage would be helpful but a solution might be difficult without a role for the Centre.

Mr. Celeste made a strong pitch, saying how the future of Dabhol would influence further decisions by U.S. investors. Last night, he told a gathering at the U.S. Consulate that ``perceptions among American and other foreign investors will be affected by the challenge to Dabhol and how it is resolved.''

The American businessmen's ``caution increases dramatically in response to indications from any country that legal contracts openly arrived at might be subjected to re-negotiation, especially when a contract involves a several-billion dollar investment such as that made by Dabhol''. Dabhol's ``predicament has potential for far greater impact than on Dabhol itself. It feeds the concerns that India remains a less than reliable destination.''

Equity restructuring

PTI reports:

The Centre is likely to consider a Rs. 1083-crore foreign equity restructuring proposal of Enron corporation for phase-II of the Dhabol power project tomorrow.

The Cabinet committee on economic affairs is likely to deliberate on Enron's equity restructuring proposal.Equity restructuring of the $1.87 billion phase-II Dhabol project at Guhagar has been necessitated by the MSEB expressing its inability to invest its 30 per cent share, worth $128 million, in the project.

Meanwhile, the former chairman and CEO of Enron, India, Mr. Sanjay Bhatnagar, who was moved to Singapore to head the multinational's broadband services in Asia, has resigned.

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