Is world opinion more important than public interest?
May 30, 2001
For the first time since the dispute with Enron began, the Maharashtra State Electricity Board has shown some courage and independence by deciding to terminate the deal with the Dabhol Power Company.
Unlike the last time when the Shiv Sena-BJP government had mindlessly followed up on the election campaign rhetoric about "throwing Enron into the Arabian Sea" (when it had every intention of embarking on a shameful re-negotiation), MSEB, on this occasion, seems to have worked to a clear and decisive plan.
MSEB sent DPC a notice rescinding the power purchase agreement on May 23, mainly on grounds that the power company was unable to reach its full-declared baseload capacity of 657 MW within three hours, as stipulated in the contract. The MSEB's notice was based on a written admission by DPC that the power plant was unable to meet this contractual condition and other issues.
The notice was quickly followed up with a caveat filed in the Bombay high court to ensure that the escrow cover for Phase II that was to become operational on June 7, was not invoked. MSEB also gave a cheque to DPC for its past dues, which the latter refused to accept.
Of course, the situation in 2001 is vastly different from the cancellation drama in 1994. At that time Enron used to pooh-pooh anti-DPC activists' charges of the power being hugely expensive and unaffordable. Today, its high-cost power is an established fact. Moreover, the Madhav Godbole Committee, that was appointed by the Maharashtra government to scrutinise the deal, has made some shocking revelations which affirm that the project is against public interest and certainly not in the interest of the people of Maharashtra.
In fact, Godbole and Dr E A S Sarma (former Finance Secretary of India) who were part of the five-member committee and are both bureaucrats with impeccable track records, have also recommended a judicial inquiry into the entire Enron deal.
Interestingly, although DPC has refuted several MSEB charges, its discreet silence on the Godbole report indicates a tacit acceptance of its findings.
One would, therefore, expect a chorus of support from the people and from the intelligentsia for MSEB's actions in cancelling the project. But not in India. For some strange reason, we Indians are obsessed with international opinion, even if it is cleverly orchestrated to support the commercial interests of foreign multinationals. World opinion and approval is often considered more important than domestic public interest.
A day after DPC was scrapped, a leading national daily lamented in its editorials -- "Let us assume the worst scenario - that talks fail (between Enron and MSEB to renegotiate the project). What message would that send out to the international community?" This lament is echoed by several, inadequately informed intellectuals.
No developed country thinks like this. For God's sake, our message to the international community is that India is no banana republic and that it can stand up for its people and its rights.
In a similar situation, the Americans would have been waving their national flag and holding street marches and public demonstrations against Enron. Pradyumna Kaul, convener of the Enron Virodhi Andalon, says that in the vaguely similar situation in California, the head of the state has himself filed litigation against Enron and other power utilities. In Maharashtra, the chief minister maintains a worried and uncertain silence.
The Chinese, too, have never been overly bothered by international opinion; they would certainly never have allowed an MNC to dictate their domestic policy. Several African and Far Eastern nationals have also scrapped expensive power projects without any serious consequences in terms of damages.
But not us Indians. Seven years after Enron was first scrapped, we continue to whine and worry about what the world would think about us. In fact, the developed world is only contemptuous of a corrupt and venal nation that does not defend its interests.
We agonise over the fate of foreign direct investment into India and allow international media networks to convey the impression that Enron was the largest FDI project in the country. In fact, the $2.9-billion Enron project (both phases) has an investment of $ 1.2 billion by Indian financial institutions by way of direct loans or forex guarantees). It is these who would be the biggest losers due to the cancellation. Enron and its international lenders had smartly protected themselves by taking advantage of a corrupt and lackadaisical bureaucracy in Indian public sector lending institutions).
Enron has consistently exploited this weakness and continues to bargain from a position of strength. That is why it had the cheek to tell its lenders, especially its Indian ones that it was 'willing' to consider a mere 10 per cent reduction in tariff, that to on completion of Phase II, which is sometime in January 2002.
In fact, Phase I, which is a third of the entire project, is itself unaffordable and the rest of it is out of the question. It is, indeed, heartening that MSEB Chairman Vinay Bansal continues to counter DPC effectively and decisively. On Tuesday, Bansal announced that MSEB would no longer buy power from DPC and indicated that its legal team was fully geared to meet the challenge of litigation.
He needs all the support of the people of Maharashtra. The findings of the Godbole committee also need to be made widely known to the international community, especially the international press, so that they are correctly informed about the expensive project and the reasons for its cancellation. (For those who are interested, a full copy of the report is available on the Web site of the Pune-based NGO Prayas.)
In a nutshell the committee has said that:
It is "troubled with the failure of governance that seems to have characterised almost every step of the decision-making process on matters relating to DPC".
The demand projections on which the project was based were totally flawed and untenable.
MSEB has "made excess payments to the tune of Rs 9.30 billion per year" to DPC.
Tariffs can easily be halved after restructuring the deal.
The initial demand projections for DPC were flawed as they ignored different load types in their projections. These 'flawed' and 'patently untenable' demand projections were the basis for commencing Phase II and have since proved to be completely unjustified.
Further, it says that the manner in which DPC's tariffs were shown as lower than those of the government of India at the stage of project clearance involves a "combination of circumstances that go beyond the realm of coincidence".
In fact, Bansal's hands need to be strengthened with some people's action. Arun Agarwal of Bangalore who has fought several public interest battles (Cogentrix and Prasar Bharti being just two of them) says that people should petition the Chief Vigilance Commissioner N Vittal (email ID is: [email protected]) to initiate action, on the basis of the Godbole Committee, against public servants responsible for signing the Enron deal and burdening the people of Maharashtra with a high cost project.
Also, the demand projects with huge power shortages in future also seem false. The committee, while commenting on the Ministry of Power's tariff clearances for the project says: "It concludes that these assumptions (in projecting demand) were deliberately chosen to show that the DPC tariff was lower than the government fixed tariff.
As can be seen the entire demonstration of public interest owing to the lower DPC tariff is on extremely shaky ground and in the opinion of the Committee utterly unsustainable."
According to Agarwal, this and other findings of the Godbole committee establish clear grounds for trial under the Prevention of Corruption Act, which has provisions that presume wrongdoing when actions of public servants are patently against public interest.
But, typically, to initiate action in India is a Herculean task.