Muddying a quagmire

ANY FAINT HOPES about the murky Dabhol Power Project crisis being sorted out by the contracting parties - the Enron Corporation, the Maharashtra State Electricity Board (MSEB), the State Government and the Centre which provided the sovereign guarantee in favour of Dabhol Power Company - now appear to have been ruined by the Maharashtra Government's resort to ``the theatre of the absurd''. The decision of the Vilasrao Deshmukh Government to have a judicial probe into the entire Enron deal abinitio is not a mere exercise in evasion of the responsibility of the State Government to strive for a process of renegotiation of the contract perceived to be loaded against the virtually bankrupt MSEB (which is unable to pay for power purchased from the Dabhol Plant-Phase I); what is involved is a brazen blackmailing strategy through which the State Government perhaps hopes to drive the Enron Corporation down to its knees to settle for an exit course at a substantial discount on its equity stake, estimated at $1.2 billion. The Centre is not blissfully unaware that its own obligation as a surety for the State Government is now seen as an empty promise with all its pervasive adverse image of the country as an undependable and vulnerable investment destination. The reported remark of the Union Minister for Power, Mr. Suresh Prabhu, that the new twist to the Enron tangle is ``unfortunate'' but that it would not affect foreign investments in the future, in the power sector in India, is indeed adding insult to injury.

The script, as it is unfolding in the Enron muddle, can leave nobody in doubt that from the very beginning the contract has had a large element of political manipulation driving it. The allegation that the Enron Corporation was able to manoeuvre itself into a power purchase agreement which was decidedly exhorbitant in power tariff owing to the ``padding'' of capital cost and the denomination of tariffs in U.S. dollar terms (apart from the use of naptha as feedstock) is said to have been corroborated by the Madhav Godbole Renegotiation Committee set up by the State Government. Assuming that a whole chain of bureaucratic scrutiny from the Power Ministry at the Centre down to the MSEB, over a four-year period, did not unravel the odious features of the Enron contract, how does it exonerate the MSEB, the State Government and the Centre now, from non-compliance with the contract in its different stages?

Political muck-raking, which is what is now being sought to be substituted by the Vilasrao Deshmukh Government (with the tacit approval of the Congress High Command) for an honourable modusvivendi on the Enron imbroglio, can never pass muster so long as the arbitration clause in the Enron contract cannot be wished away. It would indeed be a reckless misadventure for the Vajpayee Government to let the Maharashtra Government renege on the power purchase agreement with the Dabhol company and simply watch the disintegration of India's first-ever and much-vaunted mega power plant put up on the basis of foreign investment. Given the deplorable inadequacies in the power infrastructure in the country even after ten years of liberalisation and the demonstrated incapacity to add even 5000 MW of power generation capacity a year, it would be utter folly to abandon the Dabhol project without its full capacity of around 2000 MW being leveraged for the industrial advancement of the country.

Reports indicate that the U.S.-based Enron Corporation has expressed a desire to quit from the Dabhol project. The Indian financial institutions which have a substantial exposure to the capital cost of the project cannot afford to wait in supplication for some miracle to happen for the Dabhol project to stay afloat. It is no less a challenge to them as to the Vajpayee Government to find a way out of the morass. Let the project be revived as an earnest of India's commitment to development rather than be rubbished as a monument of political corruption.

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