Positive views on Dabhol problem - Meeting with Tata Power MD

By C. R. L. Narasimhan

Is a just denouement of the controversial Dabhol power project possible? At this stage, the outlook is depressing. The Madhav Godbole committee, trying to renegotiate the project, is facing an uphill task, with Enron, the chief promoter, not willing to give substantial concessions. And even announcing its intention to quit. Ultimately, whether the DPC can be revived or not will depend on how effectively the project is restructured. And that in turn will depend on finding a buyer for Enron's sizable stake and in concurrence with the new owner reworking the project to the satisfaction of all the stakeholders. That course looks daunting for now but is the only worthwhile option available.

The Godbole committee did a commendable job in identifying the faults of the original project. Those had contributed to a thoroughly one sided agreement. However, in its second incarnation of trying to renegotiate the project, the committee has apparently met with little success. Which shows how much more difficult it is to reconstruct a project than condemning it.

The DPC has been pointing out that it has iron-clad contracts in the form a power purchase agreement (PPA). At this stage, what should be of primary concern are: (a) Enron and its co-promoters have created worldclass assets in a critical infrastructure sector, (b) It is imperative to productively use those assets for the benefit of the whole nation, (c) The continuing failure to honour the PPA reflects poorly on India's image.

The urgency to renegotiate is obvious. There is already a time and cost overrun to the project. In that context the news that one of India's most respectable business houses would be interested in stepping into the shoes of Enron has created plenty of excitement. Recently in Mumbai The Hindu spoke to Mr. Adi J. Engineer, Managing Director of Tata Power. His views are both illuminating and realistic.

How it all began

Actually it was in reply to a shareholder at the recent AGM of Tata Power that the issue of (the Tatas) buying up the Enron stake in the Dabhol power project was first raised. Asked as to whether the Tata group was seeing an opportunity in the DPC, Mr. Engineer had merely said that like any company in the power sector "we will evaluate every opportunity but will only seize those opportunities that add value to our services." In Orissa where the privatisation of power distribution was undertaken a few years ago, Tata Power was the best equipped to take over the central zone. But the terms and conditions stipulated by the company were not accepted. The party which eventually took over is now complaining.

Referring to the DPC, Mr. Engineer - privately - shares the anxiety of those who say from a distance that you should not go anywhere near this particular project. As very experienced operators in the power sector, they will go in only if the terms and conditions are suitably altered. "And the terms and conditions will have to be altered because we already have a mega project on the ground that cannot be wished away, the contract may not be good from the buyer's or the consumer's angle but the plant is good as a physical asset. Can the whole thing be restructured to make it sensible for the country and the new buyers? These are some of the things that will have to be examined in detail and only when we are fully satisfied that it can be restructured will we think of getting in," he said.

The Godbole committee looking into some of the aspects will look at it from a government point of view. Tata Power has about 85 years of experience. We should be able to judge whether it makes sense... If it does and is acceptable to other parties then we move forward, he said. ``The issue is simply this: here is a private power company which is the largest in the country. It is but natural that the external parties who want to solve the problem will first look at a party with a proven record. That is the stage we are in. We are not saying that we are hell bent on taking it over. If we feel it can be turned around we will take a decision at the appropriate stage.''

Mr. Engineer would not like to comment on issues such as restructuring of the tariff as they affect the sensitivities of all the stakeholders of the DPC. But surely they will be addressed. For it is in the government's interest also to arrive at a solution sooner rather than later." We have to put our heads together to find out how this great asset worth thousands of crores is not allowed to rust and instead be put to use. Tatas have the longest exposure to the power sector and they are capable of solving it, but it cannot be done individually: the co-operation of all the agencies will be required.

The DPC ought to be seen as a problem that requires a national solution. "If in that process it is recognised that we are a company which has always stood by the shareholders and consumers then we will surely have a role."

The DPC (imbroglio) ought to be seen as a problem that requires a national solution, says the Managing Director of Tata Power. "We have to put our heads together to find out how this great asset worth thousands of crores is not rusted but used productively."

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