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The Enron Story :
Controversial issues and the struggle
PRAYAS Monograph Series
Dr. Subodh Wagle
STORY
The Enron Story
(PRAYAS Monograph Series)
The Enron Story:
Controversial Issues and People’s Struggle
Dr. Subodh Wagle
PRAYAS
2
The Enron Story
PRAYAS
Amrita Clinic, Athavale Comer
Karve Road Comer, Deccan Gymkhana
Pune, 411-004, India.
Phone: (91) (212) 341230
Fax: (91) (212) 331250 (Attn: # 341230)
For Private Circulation Only
1C "O
,3'1
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Preface
The Enron controversy has at least four major categories
of issues: techno-economic, environmental, social, and legal or
procedural. In the past, the Prayas Energy Group has concentrated
its efforts mainly on the techno-economic issues. Many
researchers and activists have worked on the other issues in the
controversy and have published their analyses. Equally important
is the struggle waged by local communities affected by the project.
The Enron controversy—comprising the debate on these
controversial issues and the struggle by various organizations—has
tracked such a convoluted path, thanks to Indian politicians of all
hues, that common public has immense difficulty in remembering
the specific turns and twists and in understanding their
implications. This monograph intends to paint a brief but
comprehensive picture of the entire Enron controversy covering all
these aspects. It is hoped that such a comprehensive approach will
be helpful to the public to judge the prevailing situation.
To set a proper context for the monograph, it is necessary
to mention that the Enron project is not an isolated event but one
of the first manifestation of the ongoing process of privatization of
the power sector in India. This process is marked by excessive
political interference, abject neglect of the interests of tax-payers
and consumers, bypassing procedural and legal checks and
balances, and overriding existing regulatory institutions. It is
feared that such a process will result in skimming-off operations
by the nexus of corrupt politicians and bureaucrats as well as in
profiteering by unscrupulous businesses. Tracing the history of the
Indian power sector and situating this disastrous process in a
proper context are the topics which will be dealt in the
forthcoming monograph by the Prayas Energy Group.
I have drawn heavily from work of my colleagues in
Prayas—Girish Sant and Shantanu Dixit-especially in the technoeconomic matters. To cover the other controversial issues, I have
relied on works of many researchers and activists. It is difficult to
cite every source on every occasion in such a brief monograph.
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But I am indebted for the direct and indirect help from many
individuals (and their works) including, Sulbha Brahme, Winin
Pereira and his INDRANET group, Samaj Vidnyan Academy,
Abhay Mehta, and many activists especially, Yeshwant Bait,
Ashok Kadam, and Arun and Vijay Joglekar.
September 1997
Dr. Subodh Wagle
About the Author*: Dr. Subodh Wagle works as an Associate
Professor in the Indian School of Political Economy, Pune. He is
also a Member of the Prayas Energy Group, Pune. Dr. Wagle has a
Ph.D. in Energy' and Environmental Policy from the Center for
Energy and Environmental Policy, University of Delaware, USA.
His main research interests, apart from the electricity policy, are:
resource-livelihoods-people interlinkages, analysis of alternative
development models, and the politics of grassroots envirodevelopment struggles.
The opinions expressed in this monograph are author’s individual
opinions.
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5
I. The Project and the First Power Purchase Agreement
The Enron project is a product of the new economic policy.
(NEP) and concomitant liberalization and privatization of the
power sector which was initiated by the Government of India in
October 1991. The Enron project is the largest of the first batch of
eight “fast-track” power projects with foreign private capital that
have been cleared by the Government of India (GOI). The
respective state governments provided guarantees to foreign
investors assuring them to pay up all outstanding dues in case the
respective state electricity boards (SEBs) fail to pay. In addition,
GOI extended counter-guarantee to the Enron project against non
payment of the dues related only to Phase-I.
Enron
Development
Corporation,
an
American
multinational corporation, signed
a Memorandum of
Understanding (MOU) with the Government of Maharashtra
(GOM) on June 20, 1992 for construction and operation of a
thermal power project. The planned capacity of this single plant2000 megawatts (MW)—was about one fifth of the entire installed
capacity in the state of Maharashtra at that time. In April 1993,
two other American multinational corporations (MNCs)-Bechtel
Enterprises and General Electric Company (GE)—joined hands
with Enron Corporation to form a company called Dabhol Power
Company (DPC) that was registered under the 1956 Indian
Company Law.1 The shares of Enron, Bechtel, and GE in the
equity of Dabhol Power Company (DPC) are in the proportion of
80%, 10%, and 10% respectively. On December 8, 1993, Dabhol
Power Company entered into the power purchase agreement
(PPA-I) with Maharashtra State Electricity Board (MSEB).
1 DPC and Enron are used interchangeably in this booklet
functionally, they are a single company as officials of the US
multinational corporation, Enron still conduct affairs of DPC. Apart from
the legal advantages, the separate name (i.c. DPC) is often used by Enron
just to portray that DPC is an Indian company and dissociate from the
negative image of MNCs in the mind of the Indian public.
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According to the Power Purchase Agreement (PPA-I),
DPC would build a thermal power plant using combined cycle gas
turbine (CCGT) technology. The project, according to PPA-I, was
to have a total installed capacity of 2015 megawatts (MW) divided
into two phases of 695 MW and 1320 MW respectively.
However, only first phase was finalized and the government had
option to accept, renegotiate, or reject the second phase. In the
initial two-year period (Phase-I), the project was to rely on
distillate oil until facilities for utilizing liquefied natural gas
(LNG) are ready. The natural gas was to be imported from Qatar
where Enron Corporation had developed gas fields. It would be
brought in liquefied form by sea route using special tankers. The
total capital cost of the project was estimated at about 90.5 billion
Indian Rupees (Rs) (i.e., S 2.83 billion) or about $1.4 million per
MW. The respective share of Phase I and Phase II capital cost
were estimated as 29.12 billion Rs ($ 0.91 billion) and 61.44
billion Rs ($ 1.92 billion).
The plant was to be erected at a site about 250 kilometers
south of Bombay on the western coast of India. The actual site is
near the port of Dabhol, but on the other side of the estuary formed
by the river Vashishthi meeting the Arabian Sea. The villages that
would be directly affected by the project are Anjanvel (especially
the hamlets of Katalwadi and Borbhatlewadi), Veldur, and Ranvi.
These villages come under the administrative jurisdiction of taluka
(sub-district administrative unit) Guhagar and district Ratnagiri.
About 700 hectares of land was to be acquired from these three
villages. According to the Environmental Impact Assessment
(EIA) report submitted by Enron, about 2000 persons would be
displaced.
The Power Purchase Agreement (PPA-I) between MSEB
and DPC is a critical document which defines many important
details of the project. It was kept secret for about fifteen months
by both Enron and the state government despite persistent
demands to make it public. Finally, a national daily newspaper
managed to get a copy of the PPA-I and published selected
portions. At the same time, political parties opposing the deal won
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7
the elections for the Legislative Assembly in the state and formed
the new government. In this situation, Enron found it prudent to
publish the PPA-I officially.
The salient features of the agreement are:
•
•
•
•
•
•
•
•
A “Build, Own, and Operate (BOO)” type agreement.
MSEB would buy power from Enron at a negotiated
tariff for 20 years.
Enron would construct the Phase I plant with a
capacity of 695 MW (625 MW base load and 70 MW
peak load) in 33 months after financial closure is
effected.
Enron assured 90% (time) availability of the plant.
A two-part tariff method would be used to calculate
the payments to Enron. The two components would
be: energy charges (cost of fuel and other related
costs) and capacity charges (capital recovery charge,
operation and maintenance cost, insurance, and other
related costs).
The tariff would be calculated on the basis of 44.9%
efficiency for base load operation and 28.1%
efficiency for peak load operation.
Cost of the fuel would be passed on to MSEB.
However, responsibility of securing least cost supply
of fuel rests with an Enron subsidiary against the
payment of $2.5 million per year.
Government of India’s new policy directions
(restricting return on equity to 16%) would not be
applicable to this project. Hence, the profitability of
the project is entirely governed by the (secretly)
negotiated tariff.
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II. Techno-economic and Environmental Objections
The PPA-I was a target of serious objections from the
experts with a variety of backgrounds and representing a range of
organizations and interests. These objections could roughly be
classified in the following categories: techno-economic (technical,
economic, financial, legal, procedural, etc.), environmental
(ecological, safety-related, etc.), and social (displacement and
subsequent resettlement and rehabilitation [R & R] ).
In addition, there were allegations of favoritism and
corruption against the decision-makers in the government and
bureaucracy. These allegations were rooted in the lack of
transparency in the procedures, secrecy over the negotiation
process and documents, the extraordinarily rapid pace with which
various government clearances were granted for the project, and
the nature and number of extra-ordinary incentives and exemptions
offered to Enron.
Techno-economic Objections
The objective of this section is to provide the reader with a
brief introduction to major techno-economic objections. It is not
possible to discuss these objections and the debate they
engendered in detail mainly due to the space constraint. However,
some of these objections are discussed in detail in Appendix I.
•
•
•
Capital Cost: The project’s capital cost was said to be
very high compared with that of the other new power
projects including Enron’s own Tee Side project in the
UK
Capacity Concerns: A project with such a large
capacity for base-load operations was found to be
problematic considering the pattern of the demand for
electricity in the state.
Fuel Issues: Considering the fact that there are
alternative fuels available, importing such large
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3
quantities of natural gas at high costs was is said to be
imprudent.
Profit Allowance: Enron was allowed an exceptionally
high profit rate. It was estimated to be as high as a
28% internal rate of return (IRR) which was
equivalent to a little over 40% per annum of return on
equity in USS.
Electricity Pricing Issues: The negotiated tariff was
claimed to be very high when compared with the cost
of electricity from similar projects in the country.
Foreign Exchange Impact: The project involved a high
outflow of foreign exchange estimated to be between
$400 million to $650 million per annum only for
Phase-I. This would add to India’s already growing
balance of payments problem.
Risk Distribution: The PPA stipulated a skewed risk
distribution in which MSEB bore risk for everything
except timely construction and supply of fuel.
Special Incentives: Enron received many incentives in
terms of exemptions from taxes and duties from the
state as well as central governments.
Involvement of Multinational Corporations: All three
American multinational corporations involved in the
project were alleged to have adopted unfair business
practices and to have ignored environmental impacts
in previous projects.
Procedural Irregularities: The government was
castigated for avoiding the procedure of competitive
bidding, for maintaining secrecy during the
negotiation process, and for treating various
agreements and related documents as secret.
Technological Dependency: The choice of technology
in this case raised important problems. The turbines
to be supplied by GE had not been adequately fieldtested, whereas a competitive alternative to this
technology was available from within India.
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•
•
•
Enron’s Power Sector Experience; Enron is primarily
an oil and gas selling company and did not have an
established track-record of constructing and operating
such a massive (2015 MW) power plant. Enron
reportedly had operated about six power plants in the
world ranging from 28 MW to 450 MW range. Its
new plant at Tee Side, UK (1875 MW) had just been
completed only in 1993.
Corruption: Enron was also subjected to allegations of
bribery which were based on the revelations by a
high-ranking Enron official in the testimony before a
committee of the U.S. House of Representatives.
According to testimony, Enron spent about $ 20
million (Rs. 60 crore) toward “educational expenses”
of Indian officials.
Sovereignty Concerns: Sovereignty of the country and
credibility of the Indian judiciary was said to be
sacrificed by government’s acceptance of the clause in
PPA-I which stipulated that all disputes between
Enron and MSEB (or Government of Maharashtra)
were to be arbitrated in courts outside this country (in
London).
These objections against the project were raised by
environmental groups, consumer organizations, labor unions,
cultural organizations, political organizations, lawyers’ groups,
and research institutions. However, depending upon the concerns
specific to the particular organization, the focus and emphasis of
objections and criticisms raised by the organization were
different.2
2 For example, Mumbai Grahak Panchayat (Bombay
Consumers’ Council), a consumer rights organization, was primarily
interested in protecting interests of electricity consumers in the state.
Naturally, its criticism of the deal, rooted in its specific concern, was
focused on the techno-economic issues and issues of procedural and legal
propriety. By focusing on these issues, it aimed at securing a fair deal
for power consumers in the state without directly and expressly
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n
Environmental Objections
The debate on environmental objections involved detailed
arguments and counter arguments over chemical and thermal
pollution of air and water in an ecologically fragile zone like
Konkan. In brief, the critics claimed that the flue gases coming
from such a large power plant would affect not only the health of
people (especially in high rain-fall season) but would also pose
serious threat to the delicate horticultural plantations of mango,
betel-nut (supari) and other fruits spread in the entire taluka (sub
district). Further, the hot water released from the plant would be
hazardous for the marine life.
Enron, MSEB, and the Government of Maharashtra
(GOM) came out with their responses to these objections. The
main substance of the rejoinders from pro-project agencies could
be summed up as follows: According to the authorities, the project
was perfectly sound on environmental grounds. The fuel, natural
gas, is the most clean fuel available. Further, Enron would create
a green zone around the plant in order to contain the pollution
created within.
A comprehensive Environmental Impact
Assessment (EIA) report had been submitted by Enron to the
Ministry of Environment and Forests (MOEF) of Government of
India based on which MOEF had already granted environmental
clearance.
The critics of the project provided detailed counter
arguments to these responses from the pro-project agencies. These
could be summarized as follows: First of all, in Phase I of the
project the plant was going to use distillate oil and not natural gas.
The effects of pollution generated due to distillate oil were not
discussed and accounted for. Secondly, natural gas is not an
entirely pollution-free fuel as portrayed. It produces less amounts
of pollution for every unit of electricity generated when compared
questioning the necessity of such big projects or raising objections over
the destruction of livelihoods of local people.
tt
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to the other fuels used in thermal power plants. But, the power
plant using natural gas would certainly create some thermal as well
as chemical pollution. The huge capacity of the Enron plant would
become a matter of concern as the huge amount of total pollution
generated by the plant at one place would threaten the fragile
environment in the region. Emitting a large amount of harmful
gases at one location was expected to have adverse effects on flora
and fauna in the area surrounding the plant, especially the delicate
horticulture plantations of mango, coconut, and betel-nut. Finally,
similar concerns were expressed about the thermal pollution from
release of about 60 million liters of hot water per hour in the
Vashishthi estuary. Such a large amount of heat was expected to
have adverse impacts on the marine eco-system in the area and on
traditional fishing communities who are dependent on sustainable
harvesting of these marine resources.
According to the procedure, the Environmental Impact
Assessment (EIA) report is to be submitted by the concerned
industry to Ministry of Environment and Forests (MOEF), and
MOEF grants its clearance with the assumption (but without any
cross-checking) that the EIA is based on correct and adequate data,
proper methodology, and honest conclusions. However, Enron and
government agencies treated the EIA report as a secret document
and refused to reveal its contents even to the people affected by the
plant. Researchers from INDRANET group presented a detailed
analysis of the EIA report exposing many incorrect statements,
faulty interpretations, and biased conclusions.
They have
demonstrated how the allegedly scientific EIA studies were
manipulated to justify the project.
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15
III. Local People’s Concerns and Objections
The Locale, the People, and their Lifestyles
The narrow strip of coastline of the state of Maharashtra
sandwiched between the mountain ranges of the Western Ghats
and the Arabian Sea is called Konkan. Konkan is blessed with
fertile, mineral-rich soil, ample rainfall, large numbers of streams
and rivers, close proximity to the sea, and good climatic conditions
throughout the year. As a result, the local ecosystem is endowed
with a diversity of crops, horticultural plants, forest species, as
well as wildlife. The marine eco-system on the coast of Konkan is
similarly abundant and diverse in life-forms upon which fishing
communities in the coastal areas have subsisted for centuries.
The people of Konkan have lived austere but enriched
lives for centuries using the gifts of nature in a prudent manner.
They have not adopted intensive agriculture as the main source of
their livelihood because the local eco-system is not suited for it.
Instead, they have relied on a variety of sources for satisfying their
livelihood needs including horticulture, and a wide range of forest
and marine products along with agriculture. Their immense
knowledge of the local ecological system, accumulated over
generations, has taught them how to make use of these gifts
without endangering the natural system itself. For example, for
centuries, local people have been relying on manure and ash from
burning twigs and branches as the major sources of nutrition for
their agricultural crops. For the last two decades, there have been
efforts by the government and other establishments to convince
them to substitute these sustainable practices with chemical
fertilizers and pesticides in order to increase “productivity” of their
crops. Though local people are using chemical fertilizer to a small
extent, according to them, there are valid reasons for limiting the
use of chemical fertilizers and pesticides. The mineral-enriched
soil in the region and the porous laterite stone layers underneath
have very high water draining capability which enables the soil to
grow crops even during the season of heavy rains. However, with
such soil conditions, intensive use of chemical fertilizers and
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pesticides—as prescribed by the protagonists of “modem”
agriculture—is an invitation for ecological disaster. Many fanners
in the area are afraid that the toxic and hazardous chemicals in
fertilizers and pesticides applied in this geological situation would
seep down through the porous soil and stone layers. This, in turn,
would cause chemical contamination of large land-areas, streams,
underground water bodies, sea coast, and the sea water,
endangering the entire land and marine eco-system.
But this traditional wisdom and prudence is regarded by
mainstream officials and experts as “stubbornness” and
“backwardness” of the “lazy” and “ignorant” Konkan farmer.
Their austere lifestyle involving sustainable use of soil, water,
forests, trees,
and
marine
resources
is
termed
as
underdevelopment. The state and central governments, academics,
bureaucrats, industrialists, and even media representatives
subscribing to the conventional development model, have
supported the calls for “developing” Konkan and are joined by the
sons and daughters of Konkan who have migrated to the cities and
have been “successfully integrated” into the mainstream.3 with
these sources of support, the government has now decided to
“industrialize” the entire region by making maximum use of its
locational advantages and utilize its natural resources, especially
land and water. The investment in industries in Konkan in the
near future is estimated as Rs 600 billion according to the state
government’s statistics.
Until very recently (about 3 years ago), the state
government officially and actively promoted massive horticulture
schemes and programs to develop Konkan, and jiarticularly the
3 About one-fifth of the male populations from villages in
Konkan is estimated to have migrated in search of jobs. These migrated
male workers have great influence on village affairs. However, in
contrast to the impression created^ by the term-remittance economy—
often used to describe the economy of Konkan region, only about one
tenth of the village income is estimated to be coming from these
migrated villagers.
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>5
districts of Ratnagiri and Sindhudurg, on the basis of the
“California model.” This recent shift to the idea of “development
through industrialization” can be traced to the fact that there is no
scope for further industrialization of the two districts (Thane and
Raigad) adjacent to Bombay. The land, water, and air in these two
districts have been totally devastated due to the uncontrolled
industrialization of the area. Now the industries are targeting the
district of Ratnagiri for its land, water-sources, and mainly its
locational advantages, and, hence, the government’s emphasis on
industrialization of this area. This push for industrialization of
Konkan is further strengthened by the massive inflow of foreign
capital towards Bombay triggered by the new economic policies
that are liberal to industries. The recent completion of the longawaited rail-link between Konkan and Bombay was also an
important factor as it provided a dependable communication
channel which was a bane in this mountainous region with heavy
rainfall.
Concerns and Objections of People in the Affected Communities
Ironically, contrary to the debate among experts, local
people had no categorization of their objections as mentioned in
the earlier section. They were simply concerned about the effects
of the project on their daily lives, their livelihood needs, and their
future generations. They had been quite articulate about how the
project would destroy almost everything they had and valued.
Local people, in letters and petitions to the state government and
DPC as well as in interviews with the media, often pointed out that
their daily lives and livelihoods depended upon private, public and
common lands in the vicinity of their villages in very complex
ways. As against this, the compensation policy of the Government
of Maharashtra took a very narrow and typically urban-industrial
attitude. It envisaged that acquisition of lands would affect only
agricultural income of the land-owning families from acquired
lands.
The local people explained that they were critically
dependent on the land and other land-based natural resources for
their material needs (like food, fuel, fodder, fertilizer, and fiber),
for their daily activities like washing clothes and answering
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nature’s call (as there are no public or private latrines in the
village, village women were very concerned about this), and for
their emotional needs (as their deities and cremation grounds are in
the same land tracts). They also pointed out that many families
who do not own land—including those from fishing communities—
also depended for their livelihoods and daily needs on the
commonly shared resources from private, public, and common
lands. Hence, without access to these land-based resources,
sources of livelihoods of landless and fishing families would be as
severely constrained as in the case of land-owning families.
Further, in the case of the fishing families, the appropriation of the
estuary by the project as a waterway for large tankers and as a sink
for discharge of effluents and hot water from the plant would
result in serious threats to their livelihoods.
The villagers also stated in their petition that people in the
local area were not prepared to relocate or migrate as their lives
were rooted in communal solidarity. Because their land is home to
their ancestors, it would be a violation of responsibility to their
family and community to give up their land. According to the
petition, “[the villagers] have always experienced [a sense of
security in the] solidarity that emerges from the close social,
cultural, and emotional bonds among the members of the extended
family, hamlet, community, and village.” Further, the villagers
were apprehensive that the project and secondary economic
activities would cause an influx of uprooted from other parts of the
country, mainly males, into their areas, destroying the peace,
tranquillity, and security currently experienced by the local
communities.
Payment of one-time cash compensation even to all
villagers, according to local people would not compensate their
losses and help them to continue their present, local resource
based rural livelihoods and lifestyles. Neither would the cash
compensation be adequate for shifting to cash-based urban
livelihoods and lifestyles. The transformation to urban lifestyles, in
any case, would require a totally different material, psychological,
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17
and capability bases which cannot be created merely by a
compensation scheme or a vocational school.
According to local people, most of the livelihood earners
in the villages lack the knowledge base, enterprise, or skills
necessary for competing for the service-sector jobs or self
employment opportunities created by the project. Hence, it was
clear to them that, as far as they are concerned, most new jobs
would be of handymen, unskilled workers, gardeners, security
guards, and housemaids. Even for these menial jobs, which will be
small in numbers, they would have to engage in a cut-throat
competition with a large number of poor people coming to this
area from other parts of the country. Thus, the real issue is why
should local people be expected to sacrifice their current dignified
and (though austere) secure livelihoods and accept small numbers
of menial, insecure, and low-paying jobs? Local people were quite
clear about this danger and had expressed in a very articulate
manner that they were happy with their current lifestyles and they
prefer them even oyer the large cash compensation.
Thus, resistance of local people to the project was not
aimed at demands such as ensuring adequate and proper
environmental safeguards or fair compensation which are
meaningless demands as far as they are concerned. For them, the
project would certainly be a disaster for their livelihoods, their
lives, and future generations. They were convinced that if the
project were commissioned, any amount of compensation in cash
or alternative in-kind arrangements would not ameliorate the
disaster. In short, for local people, no correction in the project
design or compensation package can be an alternative to
cancellation of the project.
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IV. Grassroots Resistance, Cancellation of
the Project, and It’s Revival
Local Peoples’ Protest
On October 30, 1993, a public meeting of all villagers
who had migrated from the three threatened villages was arranged
in Bombay. At the end of the meeting, a committee was formed to
initiate joint actions-“Veldur, Anjanvel, Ranvi Vidyut Prakalp
Lok-Hakka Samiti” or the Committee for the Rights of People
(threatened by) the Veldur, Anjanvel, Ranvi Power Project. On
November 6, 1993, this Bombay-based committee sent a detailed
petition to DPC as a reply to its public notice. In the following
months, three village level dakshata (vigilance) committees were
formed in the three threatened villages. While the migrated
villagers had taken the first step, local villagers and their leaders in
the vigilance committees quickly became involved in various
political activities undertaken to challenge the Enron project. The
vigilance committees also monitored the activities of DPC,
government agencies, and their supporters at the project site.
The first initiative came from the MSEB Workers’
Federation which declared the first protest action against the
project on 2nd October 1993 which, unfortunately, had to be
canceled due to the devastating earthquake in September 1993. On
June 5, 1994, the Federation took lead in organizing a conference
at the nearby village of Shringartali in collaboration with the local
action committees, trade unions (of MSEB, BHFL, banks, State
Transport Corporation, as well as GOM employees) and many
other organizations such as Lok Vidnyan Sanghatana and Konkan
Sangharsha Samiti. In July 1994, these organizations formed a
joint front called Enron Virodhi Sangharsh Samiti (EVSS) and
organized protest actions in Bombay and Pune. A similar
conference was organized at Veldur on October 15, 1994 to protest
the proposed land acquisition. The initial efforts by the
government to acquire land using draconian laws such as MIDC
Act failed as local people successfully resisted the government’s
efforts to push the project with repressive tactics. On 29th
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13
October, 1994, using large police force, government officials
crushed the resistance of the local people and made the mockery of
legal provisions by unilaterally declaring that mandatory legal
procedures to transfer the land had been completed. On that day,
144 women and 55 men were arrested. People continued to resist
this forced acquisition of their lands. Again on 8th and 10th of
November, 1994, a large number of women protesters and local
men were arrested. Police used all sorts of tactics to harass the
arrested protesters in order to break their morale. BJP and
Shivsena, then in opposition, also joined the fray.
On December 8, 1994, the elections for the state
Legislative Assembly were officially announced. The BJP-Shiv
Sena made an electoral issue out of the Enron project. Their leader
Mr Gopinath Munde promised to ‘throw the project in the Arabian
Sea’ in a public meeting at Guhagar on 6th March 1995. At the
state level, the BJP- Shivsena alliance won the highest number of
legislative seats, and formed a coalition government in early
March 1995. The new BJP-Shivsena government announced that
the Enron deal would be thoroughly reviewed. Many of the
organizations and local people resisting the project celebrated their
victory.
Cancellation of the Project
On April 3, 1995, a high-level Cabinet sub-committee was
appointed by the state government under the chairmanship of Mr.
Munde, the minister in-charge of the energy department. The
Munde Committee was asked to review the Enron project and the
entire deal in detail and submit its report to the state Cabinet. The
committee invited representation from all those involved, as well
as the from public.
However, when the new state government appointed the
Cabinet sub-committee and actually started moving toward
cancellation, the pro-Enron lobbies became alarmed. Many
organizations and institutions within the establishment rushed to
the defense of the project. These included national and
20
The Enron Story
international media, academia, GOI as well as the governments of
the USA and UK, and the World Bank. In fact, a wide array of
mainstream institutions within India voiced strong support for the
project at that time. The mainstream media and its lead writers
launched a blistering attack on the new government and all
opponents of the project. The former Chief Minister Mr. Sharad
Pawar, himself, penned down a series of articles defending the
project. Many in academia also joined the pro-project side.4 When
the new government still remained adamant, the international
linkages of the mainstream establishment were activated. There
were official warnings from the US Departments of Energy and
Commerce. On behalf of the UK Government, the Chancellor of
Exchequer, Mr. Kenneth Clarke, issued a warning. Even the
officials of the World Bank tried to persuade the Indian
government to rescue the project.
In the meanwhile, when local people found the new
Government dithering over its promise to cancel the project, they
themselves, led by local women and using non-violence, stopped
the work of the Enron project on 12th May, 1995. About 400 local
protesters were arrested and put through the similar harassment by
the new government headed by BJP and Shivsena.
4 Some faculty members from Tata Institute of Social Sciences
initiated a research project studying the socio-economic impact of the
project on local population which was reportedly commissioned by
Enron. When local people came to know about this, they confronted the
researchers saying: “You did not bother about us for forty-five years
[after independence], and now when a foreign company like Enron has
paid you, you suddenly got interested in our problems”.
The Enron Story
21
Finally, the Cabinet sub-committee submitted its report to
the state Cabinet on July 18, 1995. Based on this report, the state
Cabinet made the decision to scrap both the phases of the project
on August 3, 1995. The decision created ripples in the state, the
country, and was even promptly reported in the USA. The
construction work at the project site was stopped on August 8th,
1995. In the following weeks, Enron initiated arbitration
procedures in London against MSEB and the Government of
Maharashtra, demanding compensation to the amount of $300
million. On September 6, 1995, the Government of Maharashtra
sued DPC in the High Court at Bombay for engaging in fraudulent
business practices and enticing government officials via corrupt
practices to get the project sanctioned.
Renegotiations and Revival of the Project
Despite all these developments, intense back-door
activities were ongoing to patch up differences between the new
government and Enron. The decision to cancel the project was
made and announced with a lot of bravado and jingoism.
However, right from the beginning, there was clear disagreement
over the issue of cancellation of the project between the two
parties in the ruling coalition and even within each party. The
counter-initiative came from Mr. Thakre (the supreme of
Shivsena) who prevailed over his party to insist on renegotiations
with Enron, the BJP leadership at the state level found itself under
severe pressure form its central leadership not to persist with its
earlier tough anti-Enron line. With the support of the more-thanwilling Chief Minister and the largely pro-Enron bureaucracy, Mr.
Thakre’s wish to invite back Enron was accepted as a government
decision without any resistance from BJP.
Finally, on November 8, 1995, the state government
announced the appointment of an expert committee to renegotiate
the deal with Enron (Times of India November 9, 1995). The
Expert Committee, with pro-project and pro-privatization
academics and bureaucrats in majority, was appointed to expand
the deal to include both the phases and to finalize the other details
22 The Enron Story
of the new deal and devise a set of face-saving measures.
Appointment of the renegotiation committee sparked another
round of protest at local level. On November 8, 1995, local village
committees organized a morcha (protest march) in which local
women participated in large numbers. In the first week of
December, the three village committees, the EVSS, another front
formed by the left political parties called Enron I latao Kriti Samiti
(EHKS), and other organizations organized a three-day hunger
strike in front of the main gate of the project site. The expert
committee submitted its recommendations to the state government
in late December 1995. The state government announced its
decision to invite back Enron on new terms on January 8, 1996.
V. The Renegotiated Enron Deal and Resurgence of
Grassroots Resistance
The salient features of the renegotiated Enron deal
according to the state government’s announcement are:
(a)
sanction for both Phase I and Phase II of the project with the total
capacity of 2450 MW; (b) reduction in capital cost by 35%; (c)
reduction in the tariff rate from Rs 2.4 /kwh to Rs 1.89 /kwh; (d)
reduction in the foreign exchange component of payments to
Enron by Rs 400 billion; (e) MSEB to get 30% equity in the
project; (f) use of indigenous naphtha as fuel in Phase I; and (g)
increased and continuous monitoring of environmental effects.
The renegotiated deal and its subsequent acceptance by Enron
were hailed by the government as a victory.
As the new deal involved changes only in some technoeconomic aspects, earlier objections other than those related to
cost, tariff, and foreign exchange remain unaddressed and
unanswered. Though the announcement mentioned
environmental issues, it merely involved some increase in the
control measures without addressing the crux of environmental
objections. As before, the renegotiation process itself, as well as
the details of the renegotiated deal were kept secret by the new
state government. It was pointed out by many that the new
The Enron Story
23
government used tactics similar to those employed by the earlier
government to push the deal through. The announcement of the
decision created another round of analyses, objections, and
allegations, this time against the new government.
Criticisms of the PPA-II
Girish Sant and Shantanu Dixit of Prayas, an independent
research organization from Pune, have carried out a detailed
analysis of the renegotiated deal. In an unpublished but widely
circulated note, the Prayas researchers pointed out that the BJPShivsena combine had' made a complete change in its position
during the period of three months between the announcement of
the decision to cancel the project and appointment of the
renegotiation committee5. During this period, the BJP-Shivsena
leadership, once in the government, se^ms to have unilaterally
resolved many contentious issues and satisfied itself on most of
the objections it itself had raised at the time of canceling the
original deal. This was done without engaging in any serious
analysis or without any interaction with experts or local people.
Stating this sudden and complete change of mind to be
inexplicable, the researchers refer to the official “Terms of
Reference (TORs)” of the renegotiating expert committee. The
TORs include: reduction in capital costs, tariff, and foreign
exchange fluctuation risk; shifting to alternative fuels; and
ensuring environmental “safe-guards.” This limited list of issues
demonstrates that the government had made decisions by default
on many techno-economic issues as well as other objections that
are not included in the TORs. Following is the list of technical and
political decisions that had already been made by the BJPShivsena leadership running the new government before the
5 Both the notes mentioned in the text could be obtained from
PRAYAS, Amrita Clinic, Athavalc Comer, Karvc Road, Deccan
Gymkhana, Pune 411004, INDIA ph: (91) - 212 - 341230.
Z4
The Enron Story
appointment of the expert committee, and without taking public in
confidence.
•
•
•
•
•
To reenter into a deal with a company which it accused of,
according to its own submissions in the High Court at
Bombay, having engaged into fraudulent and corrupt business
practices and having hurt the interests of the state and its
people.
To adopt the route of secret negotiations rather than the
competitive bidding route for the project, despite its own
earlier objections against such a practice.
To accept that such a large project at one location is
desirable/needed.
To accept that the financial implications of importing such a
large quantity of fuel and the resultant economic and political
vulnerability were not objectionable issues.
To commit to Phase II of the Enron project, which even the
earlier Government had refrained from deciding upon.
The researchers raised specific and strong objections
against two major aspects of the renegotiated deal.
First,
according to them, the commitment to the Phase II of the project
for base-load operation with such a large capacity and at such a
high cost was premature, if not unwarranted. In their opinion,
Phase II might prove a crushing liability for the power sector of
the state. Secondly, they also demonstrated that, if the route of
competitive bidding were adopted, additional saving of rs 8 to 10
billion could have been realized.
In an accompanying note, the researchers presented results
of their detailed calculations based on the formulae in PPA-II
(amended by the BJP-Shivsena Government). Following are the
relevant findings of the study.
•
The BJP-Shivsena government claimed that the tariff is
reduced from Rs. 2.4 per unit to Rs. 1.9 per unit in PPA II.
Such a comparison between tariff announced by the two
The Enron Story
•
•
25
governments is absolutely wrong. The tariff quoted by the
Congress government (Rs. 2.4 per unit) was the first year
value for the back-loaded tariff, whereas, the tariff quoted by
the BJP-Shivsena Government is a levalized tariff.
There is absolutely no reduction in Phase I capital cost in
PPA-II, while the capital cost of Phase II is reduced to some
extent6. But, here again, it must be remembered that the term
"reduction" is a wrong choice of the term. To be fair to the
earlier government, it had not negotiated the final figures of
capital cost and tariff for the Phase II and the figures quoted
from earlier PPA-I were merely first estimates which were
open for renegotiation or rejection. As against this, the new
government has negotiated the final figures for various
parameters for phase II in the PPA-II.
Coming to the tariff, according to the announcement of the
BJP-Shivsena government, the levalized tariff for the project
period would be Rs. 1.89 per unit but according to Prayas
team, it could rise to around Rs 3.00.7 Further, according to
6 This “reduction” in capital cost is on two counts. One portion
of this reduction is due to the separation of the regassification plant. The
rcgassification plant is no more treated as a part of the project. However,
the cost of the regassification will not go away, but will be levied as part
of the fuel cost. The other portion of reduction in capital cost is due to
reduction in the prices of power equipment in the international market.
However, the Renegotiation Committee appointed by the BJP-SS
Government simply forgot to reduce the cost of equipment while
negotiating the Phase-I cost.
7 The results of the calculations presented in the report of
renegotiation committee arc also deceptive. The final value of the
levelizcd tariff depends upon the assumed values of various parameters
and the rate of discount applied. These asssumptions include: a) constant
rupee-dollar exchange rate (assumed as Rs. 32 per dollar), b) constant
oil/LNG/naphtha prices in rupee currency, c) inflation in the USA (0 % )
and d) constant LNG price (at $3.46 per MBTU). Values of these four
parameters are assumed to be constant for next twenty years. As all of
us know, the rupee dollar exchange rate has touched rs 35 per dollar
even though the project is yet to start (it had already touched rs 35/mark when the Renegotiation Committee was pondering over the PPA-
26 The Enron Story
•
calculations made by the researchers, tariff for the first year
would be between Rs. 3.32 to Rs 3.45 per unit for various
scenarios, whereas, the figure according to government is rs
2.22. To illustrate the impact of assumed values of certain
parameters such as dollar-rupee exchange rate and fuel prices,
the Prayas team has worked out tariff for 20th year. For
different scenarios, the tariff for the 20th year can be as high
as Rs. 11.0 to Rs. 19.99 per unit. But, instead of showing such
sensitivity analysis, the government portrays a simplistic
picture of a constant tariff of just Rs. 2.32 per unit for the next
20 years by using unrealistic assumptions and by employing
economic tools in deceptive manners.
The researchers also point at the under-estimation of the total
payments to Enron from the MSEB. The total payment to
Enron would vary in the range of 2,20,000 to 3,24,000 crore
of rupees depending upon the chosen scenario in the next
twenty years as against the official figure of 77,000 crore.
Local People Strike Back
Local people reacted to the rapid developments that
led to the revival of the project with shock and anguish. Leaders
of the grassroots resistance were themselves in a state of shock and
disbelief. The new government, following the footsteps of the old
government, had issued prohibitory orders against any political or
II). The assumptions about the other parameters are said to be equally
deceptive as they help create the impression that tariff is low and would
remain fairly constant for next 20 years. Instead, based on the historical
data, the Prayas researchers used following values for these parameters:
a) 6% rate of rupees depreciation starting from the current rupees value
(the historical rate is 7%), b) US inflation at the rate of 3.5 per cent per
annum, c) LNG price according to the CEA estimate ($4.36 per MBTU),
d) increase in LNG/Oil prices at the rate of 1.5 per cent per annum. With
these assumed values, the two researchers have created a detailed picture
of tariff for next twenty years.
The Enron Story
27
protect activity in the project area from two days before the
announcement of the revival of the project to avoid any possible
“disturbances.” The new government also tried to intimidate local
people into submission. Mr. Baba Bhalekar, leader of the fishing
community in the threatened villages was arrested and detained in
jail by police without bail for more than a week. The BJPShivsena government did not release him despite repeated
demands from many organizations which had helped them win the
elections. He was finally released by the court.
Local people and activists took some time to regroup and
restart their resistance activities. A new committee was formed at
the local level. The new action committee of local people with the
help from Enron Virodhi Sangharsh Samiti (EVSS) and National
Alliance of Peoples' Movements (NAPM) continued to organize
protest activities at the local level. Elowever, on 2nd December,
1996, the CITU petition was dismissed by the High Court. Enron
restarted the project work immediately.
The next phase of the local protest began with the
dismissal of the CITU case. Between 12th and 17th January, 1997,
local people affected by the project organized Satyagraha (protest
by courting arrest) to protest the project work. Later, the local
action committee, EVSS, and NAPM announced to carry out a
large-scale Ishara (warning) Satyagraha on 30th January, 1997, the
Martyrs' Day and the death anniversary of Mahatma Gandhi. The
government made elaborate arrangements to foil this program. On
29th January, 1997, all local leaders and the main activists were
asked to leave the district. All entry points into Guhagar Taluka
were sealed. All activists coming from outside were arrested.
Police parties went around in the villages terrorizing local people.
Top police and government officials were patrolling the area from
above using a helicopter provided by Enron. Despite all these
efforts, about 10,000 protesters gathered at the four pre-determined
locations to protest the project and supportive government. Police
resorted to caning and tear-gassing them. More than 1200
protesters were arrested. Such a fierce resistance compelled Enron
to declare stoppage of work. On 7th February, 1997, residents of
28
The Enron Story
Arey village forced entry into the pump house and discontinued
water supply to the Enron project from their own source of water.
More government and police machinery was brought in to quell
the protest and re-start the project work.
From 28th April, 1997, again the local action Committee,
EVSS, and NAPM organized demonstrations in batches. On 17th
May 1997, about 4000 villagers from the affected and neighboring
villages participated in a protest demonstration. The protest
demonstrations continued till end of May, 1997, in which activists
from around the country participated. All these protesters were
given cruel treatment and harassed by the police. Unfortunately,
local judicial system failed to protect the rights of the arrested
protesters.
From 26th to 28th May, 1997, a "Konkan Vikas Yatra"
was organized in the three coastal districts of Maharashtra. The
Yatra visited all the sites where villages and communities have
revolted against the destructive development projects. During the
Yatra, trouble erupted when the government prohibited entry of
leaders of the struggle into two coastal districts. The participants
of Yatra courted arrest in the protest. The arrested protesters were
taken into the police custody and put into the buses. These
protesters were later assaulted and beaten up mercilessly by police
and some unidentified persons. Even women protesters, including
NAPM leader Ms. Medha Patkar, were not spared and were
subjected to indecent treatment.
On June 2, 1997, some villagers, mostly women
confronted a group of construction workers of Enron who tried to
use a jetty in the village Veldur. This led to what is described as a
“minor skirmish”. In the early hours of June 3, 1997, a posse
comprising personnel from state reserve police (SRPs) and local
police swooped on the village when most of the menfolks were
away for- fishing. The police stormed in the houses by breaking
doors and dragged men and women (including juvenile girls) to
the police vehicles. Twenty-six women and juvenile girls, who
were arrested and detained in the magistrate custody for a week,
The Enron Story
29
sustained various injuries on different parts of the body. This is the
latest reported incidence of police atrocities which seem to be
continuing despite similar reports from various human rights
organizations including the Amnesty International.
VI. Battle in the Court
In the debates over the Enron project, pro-Enron elements
often raise an apparently unassailable argument that even the
courts have repeatedly dismissed all petitions against the Enron
project. This often misleads common people and even the socalled experts to believe that, because the courts have not given a
single verdict in favor of the suits against Enron, there is nothing
wrong in the Enron deal and all the hue and cry against the project
is baseless and politically motivated. As a result, the common
people remain undecided and silent over such a critical
controversy of national interest.
That the courts have dismissed all the suits filed by the
opponents of the project, is, unfortunately, a fact. Prima-facie, it is
perplexing why anti-Enron petitioners have consistently failed to
elicit any response from the courts despite the ample evidence
indicating at corruption involved in the deal as well as at adverse
effects of the project on the health of the power sector and interests
of tax-payers and the public. A brief review of history of the legal
aspect of the Enron controversy might be helpful.
The first court case against the Enron deal was filed by
late Mr. Ramdas Nayak, a BJP activist from Bombay as early as
8th December 1993 on three major grounds: absence of
competitive bidding procedures, secrecy over the deal, and
possible harm to the public-interest. In August 1994, Justice Saraf
and Justice Dudhat of the Bombay High Court dismissed the
petition. The two main components of the judgment were: (a) the
agreement (PPA-I) can not be judged void just because the
bidding procedures were not followed and (b) courts have no
jurisdiction to judge the appropriateness or merit of government’s
33 The Enron Story
decision unless it is unreasonable and against public interest.
However, the Justices did not discuss the facts of the matter
(available then) or the other legal issues raised by the petitioners to
decide whether the government’s decision is reasonable and is in
the public interest.
This was followed by another petition in the Delhi High
Court against the clearance given to the project by the Central
Electricity Authority (CEA) and the guarantee and counter
guarantee provided to the project by the state and central
governments. However, the petition was dismissed by the court as
it felt that the petition raised the same issues which had already
been decided in the case of the Nayak petition. Later, another
political activist, Mr. P. B. Samant, filed a suit in the Bombay
High Court raising additional issues and citing the new evidence
which had become available after the dismissal of Nayak’s
petition. However, this petition was also dismissed by the Court on
the grounds that the issues raised in the petition are similar to those
decided in the Nayak case. Samant’s petition was not the only
petition against the Enron which was dismissed on this ground.
Organizations of people affected by the project, consumers’
organizations,
independent
researchers,
environmental
organizations filed petitions raising different issues and presenting
new evidence all of which, however, met a similar fate.
When the Shivsena-BJP government decided to cancel the
Enron deal entered by the earlier Congress government, it filed a
suit in the Bombay High Court requesting it to declare the PPA-I
null and void. In the petition, the new government had claimed
that Enron had resorted to fraudulent and corrupt means to get the
deal cleared. It also claimed that the PPA-I violated many legal
provision (including those in the Indian Electricity Act) and
principles of public policy and was against interests of the
government, consumers, and public in general. However, after a
lot of
back-door activity the BJP-Shivsena government
backtracked and renegotiated the PPA-II with Enron. The
government subsequently withdrew the petition despite the serious
The Enron Story
31
charges leveled against the Enron company and the deal in the
petition.
The next important legal event was the petition filed by an
activist Abhay Mehta and CITU (Centre for Indian Trade Unions)
on 26th April 1996. Learning from the earlier experiences, CITU
and Abhay Mehta had done a lot of ground work before filing the
suit. In the course of the case, they presented 2500 pages of
classified government documents as evidence to suppon their
arguments. The suit put both Enron and the new government in the
dock. The petitioners argued that the details provided by the
government demonstrated that the PPA-II (entered by the new
government) was not substantially different from the PPA-I. It
also argued that, as a result, many objections raised in the
government’s own petition against the PPA-I are applicable to the
PPA-II and, hence, it should be declared null and void. While
admitting the suit, Justice Shrikrishna observed that the suit raised
new grounds and presented new evidence. In the course of
proceedings, the government pleader tried to wriggle out of the
self-created legal morass by arguing that his government was
misled and acted in an incompetent manner in making such
allegations against Enron. When forced, the Chief Minister filed
an affidavit in which he pleaded that the government filed suit
only as a tactical move. In short, the government could not get out
of the awkward legal situation. However, despite such a strong
case put by petitioners for review of the government decision by
the Court, the Court decided that the issues raised in the CITU
petition have been decided earlier and declined to dwell on the
merits of the PPA-II or its implications for the public interest. It,
however, passed the strictures against the state government and the
manner in which Enron won back the project.
This' detailed chronology of legal failures of Enron
opponents is presented here in order to demonstrate that the
consistent failure of opponents of the project is not rooted in any
deficiency in their case or their efforts as many tend to believe. It
is rather rooted in the surprisingly consistent tendency on the part
of the courts to offer the same technical excuse which fails to stand
St- The Enron Story
the test of reason. In the Nayak petition, based on the available
information, the court ruled that there is nothing illegal on the part
of the government to resort to direct negotiations instead of
adopting competitive bidding procedures. However, it did not
comment on the merits of the PPA-1 or its implications to public
interest. The subsequent petitions by Samant and other aggrieved
individuals and organizations were dismissed by the Courts by
citing the principle of “res judicata." The principle of “res
judicata" is a public policy principle which is invoked to dismiss
petitions raising the issues which have been heard and decided by
the Court in the past. This is aim^d at saving precious time of the
Courts by discouraging repeated petitioning by litigious
individuals involved in private disputes. As retired Justice H.
Suresh has demonstrated in his article in Times of India ( dated
February 3, 1997), the Supreme Court had clearly directed earlier
that in the case of public-interest litigations, the government
agencies should not be allowed to escape public accountability due
to application of the principle of "res judicata."
It must be noted that these subsequent petitions were filed
with utmost care raising new issues and providing new evidence.
In fact, the most recent petition by CITU contained massive
evidence and new information (including the PPA-I which was a
secret document at the time of Nayak case and was made available
to public by the government only in March 1995). However, the
Court still preferred to take recourse of an essentially technical
excuse of "res judicata." Secondly, in the course of the CITU
case, the new government indirectly agreed that the PPA it signed
is the same PPA which it had called anti-govemment and anti
public in its earlier petition to the same court. Thus, if government
was taking such a contradictory stand and failed to convince that it
is capable of protecting public interest, then, in order to protect
public interest, the Court should have looked in the merit of the
PPA.
When the CITU appealed to the Supreme Court, the
Supreme Court again refused to look into the merits of the case
and to go into the issue whether the new Enron deal is in the public
The Enron Story
33
interest or not. However, it decided to look into the conduct of the
new state government in the entire episode and to judge whether it
is against the public interest or not. The activists who moved the
Court and their supporters are still hopeful that while looking into
the appropriateness of government actions the court will have to
look into the merits of the PPA-II.
To sum up, the courts have consistently refused to go into
the merits of government’s decision on the Enron deal and have
consistently taken the recourse of technical excuse of “res.
judicata” while refusing to dwell on legality of government’s
conduct. Thus, it should be noted that the courts have not given
any clean chit to Enron or the Enron deal, it simply have refused to
comment on its merits. However, it is sad that these unfortunate
decisions by the higher courts have unwittingly aided the unholy
alliance of corrupt politicians, incompetent and corrupt
bureaucrats, big media running after green dollars, unscrupulous
industrialists, and decadent elite in repressing the justifiable
grievances of local people affected by the project and other
aggrieved sections.
VII. Alternative to the Enron Project
The issue of alternative to the Enron project has been
addressed at three levels. At the first level, focus is on the present
version of the Enron project. It could be said that both the pfAs
and the decision to bring in Enron are fraught with so many
techno-economic inconsistencies and blatant procedural violations
that an alternative could easily be envisioned simply by correcting
these short-comings. For example, one such alternative could be
evolved by correcting wrong decisions made in the case of three
critical parameters (corrections suggested by the researchers are
provided in the parentheses): (a) capacity (commensurate with the
realistic projection of demand); (b) choice of fuel and technology
(appropriate according to the usual planning criteria which were
flouted while sanctioning the project including the nature of the
demand i.e. peak or base load, fuel availability, available
34 The Enron Story
technological capability, economic cost, etc.); and (c) choice of
site (suitable according to the regional optimization plans prepared
by the CEA). At the second level, it is argued that the projects
planned by MSEB were commensurate with the realistic
projections of electricity demand in the state of Maharashtra, and,
hence, no private project was necessary. The booklet published by
MSEB Workers' Federation lists 10 projects proposals which were
submitted by MSEB to the central government for clearance
between 1980 to 1991 with the total capacity of about 7420 MW.
It is argued that, had the central government shown the same
enthusiasm to clear these projects as it showed in the case of the
Enron project, there would be no need of Enron or any other
private power project.
At the third level, experts have provided a series of
alternatives to not just Enron but to any large, centralized power
project using conventional fuel. Girish Sant and Shantanu Dixit in
their detailed research report on an alternative power plan for
Maharashtra have discussed sixteen types of alternatives to make
additional power available in the state of Maharashtra. These are
not futuristic, concept-level options based on economically
unviable or technologically fanciful gadgetry. Rather, these are
immediately implementable and techno-economically sound
proposals involving efficiency improvements measures and
decentralized generation based on fossil fuels and renewable
sources. A. D. Golandaz, in the above-mentioned booklet by
MSEB Workers’ Federation has also discussed various practical
alternatives.
Some major options pointed out in these two studies are as
follows:
•
Co-generation: The industries which generate steam for their
process requirements can also produce electricity with some
additional investment and in an economically viable way. The
industry may sell electricity (excess of its own consumption)
to MSEB. The total potential of co-generation in the state is
estimated to be over 1,000 MW.
The Enron Story
35
Pumped Storage: In Maharashtra, the major problem in power
sector is to satisfy the peak demand because 86 % of
Maharashtra's power comes from thermal stations which are
suitable for base load operations. The alternative of pumped
storage seems very attractive because it is an effective way to
convert base-load capacity into peak-load capacity. During
the period of low demand, the excess energy available in the
grid is used by pumped storage plants to pump water from a
lower reservoir to another reservoir at an upper level. At the
time of peak demand, water stored in the upper reservoir is
released to generate electricity. Though there is some loss of
energy, this measure is found to be economical compared with
the option of erecting new power plants.
Improvements in MSEB Operations: This includes
improvement in the maintenance and repairs of electricity
meters, metering of irrigation pump sets, and improvements in
billing procedures. It is estimated that about 1200 MW could
be saved through these measures by the year 2002.
Improvements in MSEB Equipment:
This
include
improvement in T and D network as well as generation
equipment. Though MSEB claims that T and D losses are
currently in the range of 17%, this is not an exact
measurement but an indirect estimate. Experts argue that
actual T and D losses are far more. A proper system of energy
accounting within MSEB would indicate the exact trouble
spots and problem areas and would help save lot of energy.
Similarly, there is immense scope for improvement in
efficiency of power generation plants. The old plants could be
re-modeled and modernized so that their productivity could be
increased. This would help to improve the power situation in
the state at the fraction of the cost of new power plants.
Captive Generation by Bulk Consumers: It is also suggested
that some bulk consumers of electricity may collaborate to
produce their own power. In fact, there are industrial captive
plants which remain under-utilized. The MSEB should assure
off-take of excess electricity at appropriate price. This would
generate another 500 MW of capacity in the state.
36
The Enron Story
•
Appliance Efficiency Improvements;
Improvements in
efficiency of appliances used by commercial, domestic,
agricultural and industrial consumers might save about 15 to
20 per cent of their present consumption.
In short, there are ample and diverse opportunities to
increase availability of electricity to satisfy the growing needs of
the state without bringing in large and costly projects like the
Enron project.
Conclusions
Thus, five years after the project was conceived, the Enron
controversy is far from resolved. In fact, it has proven to be a pre
cursor to another controversy (viz. a controversy over privatization
of the power sector) of wider dimensions. The state government
has consistently declined to make public the details of the project
and the deal between MSEB and Enron. The Chief Minister and
the Deputy Chief Minister had agreed to provide all information
and documents desired by protesters and to engage in a public
debate with them over the merit of the project. But the scheduled
debate was postponed four times and, finally, the exasperated
protesters had to present their case unilaterally to the public. Thus,
the issue of the merit of the project and the deal still stands
unresolved. Even the judiciary has consistently refused to discuss
the issue of merit. The CITU petition challenging the Bombay
High Court’s decision is put on the backbumers by the Supreme
Court, though the petitioners and their supporters are still hopeful
that while examining the conduct of the state government the
Court will have to look into the issue of merit.
At the grassroots level, the controversy is far from over.
On the one side, Enron — snugly ensconced inside the high fence
and fervently protected by its private security force, the state
The Enron Story
37
police, and the state reserve police — is working with a feverish
speed to complete the project work in time. On the other side, local
people affected by the project braving the intimidation,
harassment, and repression by police, refuse to budge from their
stiff opposition. Outside organizations and joint fronts such as
EVSS and NAPM continue to support the struggle of the people.
After the unilateral debate on 26th July, 1997, the local resistance
committee vowed to engage into another round of protest activity
to stop the project work. While this stand-off continues, the state
government is announcing entry of more and more industries and
hinting at proposals to acquire more and more land (from 700 ha.
For Enron to about 20,000 ha) in the same taluka. This may lead
to revolt by people in the entire taluka against their forced
displacement.
At the state level, threatened by the cancellation of the
World Bank loan, the state government had appointed
Rajadhyaksha committee to suggest ways to make MSEB viable.
The committee made 34 recommendations out of which 30 deal
with the conduct of state government. They include bringing in
complete
transparency,
establishing
accountability,
and
elimination of political interference in the working of MSEB as
well as encouraging public participation in the debate over power
sector reforms. Instead of correcting its own act by implementing
these regulations, the government is trying to falsely portray that
the report essentially recommends privatization. Further, under the
pretext of implementing the report, the state Energy Minister
announced a proposal of privatizing distribution in the theft-ridden
areas of Malegaon and Bhiwandi. The Chairman, MSEB, recently
announced that, to fulfill the liabilities which includes the bills of
Enron and the other two private power producers, the government
will have to privatize MSEB. These announcements have spurred
various MSEB unions into action. Thus, while the Enron
controversy continues to rage, a new controversy is already
shaping. But, as the government refuses to leant any lessons and
continues to be non-transparent, secretive, insensitive, repressive,
and autocratic, the future of local people, power consumers, tax
payers, and MSEB is coming under increasingly severe threat.
58 The Enron Story
Appendix-I: Debate on Techno-Economic Objections
The appendix is aimed at providing a brief idea of the
debate on some important techno-economic objectives. Many of
the details pertain to the first power purchase agreement, however,
most of the objections remain valid even for the second
renegotiated agreement.
Unwarranted Capacity Addition
Objection: Considering the present demand in the state of
Maharashtra, project with such a huge capacity (2015 MW) is
unwarranted.
Rejoinder: There is already some shortage of power in the
state. Further, due to the ongoing economic liberalization process
in the country, a large number of industries are expected to start
their operations in Maharashtra in the near future. This will result
in a steep growth in demand for electricity in the state in next two
decades.
Counter-argument: The critics accept that there is some
shortfall in supply currently, but it is mainly for peak demand. By
expediting work on the power plants appropriate for the peak-load
(especially pumped-storage plants and Koyna Hydro) that are
currently in pipeline, this problem of shortage in peak power could
be successfully addressed. Moreover, the Enron plant will be
utilized mainly as a base load plant, and, hence, can not be
justified using the excuse of current shortage in peak demand.
Regarding increased demand in the future, critics point 0U(
that the demand projections by all state electricity boards (SEBs),
including MSEB, have historically been exaggerated as these
projections have been used as bargaining tools in gaining
increasing financial allocations for the sector. Further, critics also
point out that the current demand projections by MSEB assume
20% per annum growth in industrial consumption of electricity (as
against the past trend of 7 % per annum). This, according to
The Enron Story
39
critics, appears overly optimistic in the context of the facts that
Maharashtra is the state with the largest industrial base and that it
is no more considered the most attractive state for future
investments according to the recent studies. Critics also allege that
the current demand projections — which are based on such
unsound assumptions and, hence, are grossly overestimated — are
created in order to justify the Enron project. It is also argued that
the otherwise planned growth in installed capacity in the state
according to the earlier plans (i.e., without the Enron project) is
adequate to satisfy the growing demand in the state, and a project
with such a huge capacity is unwarranted. These arguments are
largely echoed by the World Bank in its letters to GoM.
Choice of Fuel
Objection: Considering the fact that there are alternative
fuels available, importing such a huge quantity of natural gas from
Qatar as a fuel for this project is entirely unwarranted.
Rejoinder: The fuel situation in India has already been
worsening to the extent that the power generation in many states is
seriously affected. First, coal from Indian sources is of bad quality
with a high ash content. Besides, there are immense and complex
logistic and transportation problems affecting regular supply of
coal. Second, there are considerable difficulties in developing the
remaining hydro-electric potential because of the environmental
and social impacts involved. Finally, supply of natural gas from
Indian sources is inadequate and unreliable. Thus, imported
natural gas is a rational choice. Moreover, it is an environmentally
harmless fuel and its supply is assured.
Counter-argument: First of all, it is not correct to say that
natural gas is a completely harmless fuel on environmental
grounds. It is a better fuel when compared to other fuels (coal or
oil) used for thermal power plants as it creates less pollution per
unit of electricity generated. However, a huge plant using equally
huge amount of natural gas creating a massive pollution at one
place can certainly have adverse impact on ecological systems in
40
The Enron Story
the vicinity. (This issue is covered in the discussion on
environmental objections.) Second, regarding the hydro-power
sources, it is also pointed out that only 21 % of the total hydro
electric potential has been utilized till date. Utility of small hydro
electric and pumped storage projects for satisfying peak demand is
indisputable. They have little environmental and social impacts.
However, they are almost completely neglected by the planners.
Third, in the case of coal, there are economically viable
technological solutions for the problem of high ash content.
Regarding the transportation and logistic problems affecting coal
supply, it is advisable to try to solve these problems rather than not
utilizing the abundant deposits of coal in India. The suggested
solutions include political solutions (such as dealing sternly with
the coal mafia and politicians supporting them), technological
solutions (such as coal slurry transportation through pipe lines), or
policy solutions (such as importing coal from Australia as an
intermediate arrangement and developing coal-based plants near
the coast).
All these approaches are certainly preferable to the option
of relying on imported natural gas. Imported natural gas is
expensive, it involves squandering of precious foreign exchange,
and it breeds dependence on sources of energy located in the
foreign countries rendering the economy vulnerable to political
developments outside the country. Even the World Bank had
advised against using imported natural gas as fuel on technical and
economic grounds. It is argued that the cost of natural gas as a
fuel for generating electricity is quite high (rs 1.25 /kwh) when
compared with other fuels. The respective costs of fuel in case of
Indian coal and imported oil based thermal plants are about rs
0.55 and Rs 1.00 per kwh.
High Tariff
Objection: The negotiated tariff (i.e. cost of electricity
from the Enron plant) is very high when compared to the cost of
The Enron Story
41
electricity in other similar projects recently completed or currently
under construction.
Rejoinder: The cost of electricity from Enron plant — 7.5
cents/kwh (i.e. Rs 2.4 /kwh @ 32 Rs a dollar) — is comparable to
that from the other similar natural gas based plants, for example
from Kawas plant in Gujarat owned by National Thermal Power
Corporation (NTPC).
Counter-argument: The negotiated tariff is stipulated in
the PPA in terms of complex formulae. The formulae involve an
in-built 4% per annum increase in tariff (called back-loading)
which is in addition to the increase due to changes in gas price and
changes in dollar rupee exchange rates. In contrast, the costs of
electricity from the other Indian plants are flat (i.e. not back or
front loaded) and not dependent on dollar-rupec exchange rates or
fluctuations in international price of natural gas. Further, as the
analysis of the PPA suggests, the oft-quoted cost of electricity
from Enron plant — Rs 2.4 /kwh — is only for the first year (i.e.
1997-98) and is based on assumed dollar-rupees rate of Rs 32 per
dollar. This first year cost of electricity in case of the Enron
project can not be compared to the levelized costs of electricity
from other Indian plants.
Sant et al. made detailed calculations for arriving at the
cost of electricity from the Enron plant and its sensitivity to the
values of dollar-rupee exchange rate and plant load factor (PLF).
The tariff varies from Rs 2.4 /kwh in the first year to between Rs
8.75 /kwh and Rs 12 /kwh for the last year depending upon the
underlying assumptions. Further, their calculations indicate that
the cost of electricity from Enron plant, levelized over 20 years of
project-life, varies between Rs 3.44 / kwh and Rs 4.68 / kwh
depending upon the exchange rates and PLF.
Lack of Transparency and Avoiding Competitive Bidding
Procedures
42 The Enron Story
Objection: Critics raised objections against the decision of
the government to avoid competitive bidding procedures, to
maintain secrecy during the negotiations, and to treat various
agreements and documents as secret.
Rejoinder: Competitive bidding procedures are avoided
first because Government of Maharashtra or MSEB do not have
capability to evaluate the complex bids for such a huge power
project, and second because the delay involved in competitive
bidding procedures would have been disastrous considering the
urgency of situation. Hence, a faster route of direct negotiation
was adopted. Secrecy over negotiations and agreements was
necessary in order to safe-guard the business interests of Enron.
Counter-argument: Critics argue that the absence of
capability to evaluate and judge the bids is a lame excuse, as
similar capabilities and knowledge-base are required for
negotiating the equally complex details of the PPA. In fact, the
competitive bidding procedure would have ensured that the cost of
the project and the tariff remain competitive. Regarding secrecy,
the critics point out that, in order to safe-guard the interests of
power consumers in particular and those of people of Maharashtra
in general, it was essential that the deal was made public and that
an open and public discussion on the costs and benefits be initiated
before committing to the final decision. Critics also allege that
certain ulterior motives and other extraneous considerations
prompted the secrecy and lack of transparency. They argue that
protecting business interests of Enron would require maintaining
secrecy for a limited period.
However, as they point out,
according to Article 21.2 of PPA-I, the secrecy over all aspects of
this deal is to be maintained for three years after the agreement
period of 20 years is over.
The Enron Story
43
Appcndix-II: The Merits of the Renegotiated Deal
(Excerpts from a note prepared by Girish Sant
and Shantanu Dixit of PRAYAS)
There have been criticisms of various aspects of the Enron
(DPC) project, i.e., the need for the Enron project, its foreign
exchange implications, technically and economically viable and
better alternatives to the Enron project, etc. However, this note is
restricted to demonstrating that this project in its present form (i.e.
after renegotiation) is highly unjustifiable and damaging primarily
because it forces an additional burden of at least Rs. 500 crore per
year on MSEB and consumers in Maharashtra that could have
been avoided through a better contract for the same project. This
burden is the result of the utter failure on the part of the state
government to protect public interest by properly negotiating the
terms of the project that involves annual payments of about rs
4,500 crore.
In this context, in the following paragraphs we will
illustrate three important points: (i) the additional burden the
consumers in Maharashtra have to shoulder just because of a
“bad” contract that allows extra-ordinarily high profits to Enron;
(ii) efforts on the part of the government / MSEB to hide these
facts; and (iii) implications of this “bad” contract for consumers in
Maharashtra.
The Extra Burden Due to a “Bad” Contract
Enron is a negotiated project. This means that the decision.
on tariff (payments to Enron) was not arrived at by inviting tenders
from parties competing with each other. Instead, the tariff was
decided by direct and secret negotiations between Government of
Maharashtra and Enron. Hence, in the absence of detailed
information on various aspects of negotiations, the reasonableness
of tariff can only be established by investigating the
reasonableness of various components of the tariff. The tariff, in
this case, mainly depends on (a) the capital cost of the project, (b)
the quantum of loan and the interest rate of loan, (c) profits on
equity (d) fuel costs.
44 The Enron Story
Capital cost of the project ; One of the major justification
provided by the renegotiation committee in its Summary Report
for accepting Enron’s costs is the comparison between the cost of
the Tee Side plant in U. K. erected in 1993 (the only power plant
of comparable size erected by Enron) with the cost of Enron plant
at Dabhol to be completed in 1998. In the report, the committee
tried to prove that the revised Enron cost is comparable to that of
the Tee Side project after accounting for the cost differentials
specific to the Enron project. The methodology and calculations
employed to support this comparison are plagued with many
inconsistencies and logical problems. As the first step in the
calculations, the entire cost of the Tec Side project was raised by
16 % to account for inflation in the five years separating the two
projects. This increase also included a 16 % rise in the tum-key
cost or EPC (engineering, procurement, and commissioning) cost.
However, in reality, due to market slump, the actual EPC cost for
the Enron project was lower than that of the Tee Side project. The
renegotiation committee conveniently forgot to subtract this actual
reduction while making the comparison. As against this, the
committee treated the ‘soft’ costs (costs other than EPC cost, i.e.,
infrastructure development cost, insurance cost, higher financing,
consultancy and legal fees, etc.) in a different manner. The soft
(cost) items in the Enron cost-sheet whose actual costs were higher
than the revised costs (inflated by 16 %) of the Tee-Side plant
were identified. This cost differential in each of such items was
added to the revised (inflated by 16 %) figures of the Tec Side
costs. Further, the renegotiation committee conveniently forgot to
validate the soft cost figures quoted by Enron. Such an one-sided
comparison is not just faulty but dishonest.
Whatever the government may claim, in reality, the
renegotiation committee has achieved a reduction in capital cost of
only 10%
over the “first quote” from Enron.
From the
comparison given in the renegotiation committee’s report itself,
by accounting for difference in equipment costs amongst other
things, it can be concluded that the project cost could have been
The Enron Story
45
reduced at least by another 10% over and above the reductions
achieved by the renegotiation committee.
Financing costs : The interest rate for loans is another
issue where Enron has refused to give any details. The World
Bank loans are available at the interest rate of 6% p.a. For private
loans in US S, the interest rate is expected to be around 7% p.a.
But, without producing the loan documents or providing any other
justification, Enron asked the government and CEA to assume
interest rate of 12%. The government did not bother to check
reasonableness of this. This unsubstantiated inflating of the
interest rate will fetch Enron a hidden benefit ofRs. 150 crore per
year.
Profitability of Enron’s promoters ; Official estimates
ignore all such issues while allowing profits to Enron on its equity
over 30% in $ terms. However, in practice, the promoters of Enron
will get much higher profits. First, due to inflated capital costs, the
actual investments by the promoters will be far less and, second,
the actual payments to promoters will be higher due to higher
interest rates quoted. Moreover, Enron also expects to get
additional payments such as heat rate bonus, fuel management
fees, etc. Hence, including all these, Enron’s real return on equity
is over 50% in S terms.
For a project with all conceivable guarantees and entire
risk-coverage by MSEB and the state as well as
central
government, return on equity of 50% in S terms, is simply too
high. Even if a profit of 25% in $ terms is considered reasonable,
the consumers in Maharashtra would be paying Rs. 500 crore extra
annually. (It is important to note that private electricity companies
in the US are allowed a rate of return in the range of 11-12 % .)
This excessive payment could have been avoided if a proper
contract were negotiated for the project of same size at same
location and using same fuel!
Fuel Costs: Finally, though about half of the tariff amount
is linked to the price of fuel (the LNG), the government has still
46 The Enron Story
not declared whether LNG purchase contract has been signed,
leave aside disclosing the actual costs or making a copy of this
contract available to the public. Hence, all tariff figures being
talked about are nothing but sheer guesstimates. Moreover, in the
1992 Annual Report of Enron it is clearly stated that the primary
goal of Enron’s involvement in power sector was to “simply create
a market for gas”. Lienee, one can easily imagine that Enron’s
profit margin is higher through the sale of gas than from the
generation of power !
Thus, the reasonableness of all the four major components
of the Enron tariff is open to questioning. In this circumstances,
the only way the government can justify Enron tariff is by making
the entire deal explicit and open to the scrutiny by independent
experts and institutions.
The Cover-Up
The government has lied, misrepresented facts and
numbers, and misled the public to hide the high cost and high
profitability of Enron. Following are some examples :
The renegotiation committee claimed that levalized Enron
tariff will be Rs. 1.89 / unit. Levalization is an accepted tool to
compare tariffs of two different projects. But the committee simply
avoided calculating levalized tariff of the original deal and, thus,
avoided a fair comparison. As against the figure quoted by the
renegotiation committee, the real tariff in year 2001 is expected to
be Rs. 2.5 or more depending on $-Rs. exchange rate and LNG
price.(which is yet to be decided but is expected to be linked to oil
price).
The tariff calculated by the committee assumed dollar to
remain at 32 Rs. even though the dollar was already costing Rs. 35
at the time of renegotiations. Similarly, the lower naphtha prices of
1994 were used in tariff calculations which were conducted at the
end of 1995. The tariff is calculated in US dollar and that too after
removing the US inflation. The committee used such accounting
The Enron Story
47
gimmicks to hide the high cost of power and to contrive a low and
stable figure for tariff.
The renegotiation committee also talks about securing
many other benefits such as: equity to MSEB, multi-fuel facility,
use of Naphtha for Phase I, separating LNG regasification facility,
more environmental safeguards (tree plantation, monitoring
stations etc.), benefits for local community (such as hospital and
school),etc. Here again the committee has misled the public by
pretending that they have been successful in forcing unwilling
Enron to concede these substantial benefits. But the facts of the
matter are very different. Enron was demanding use of naphtha
since 1993. It had also offered equity to MSEB and was seeking a
separate venture for LNG regasification in MOU signed on 20
June 1992. Similarly, the Ministry of Environment and Forest had
directed Enron to plant 100,000 trees through it’s order dated
August 5, 1993. Benefits for the local communities that the
committee claimed to have achieved, were actually ordered by the
Bombay High Court in 1994 in a judgment over a land acquisition
suit.
Thus, in short, after renegotiation, Enron has obtained
what it had not been able to obtain earlier, and has promised to do
things which would cost very little and which it was expected to
do any way.
Implications for the Consumers in Maharashtra
Since
1980,
many
committees,
including
the
Rajadhyaksha committee, have suggested various measures to
improve MSEB’s performance and financial situation. However,
over past few years, the state government did not implement these
suggestions and allowed the situation to deteriorate further. As a
result, nearly half of electricity available for sale is not metered
and MSEB does not know where it goes 1 Thus, on the one hand,
the government has not allowed MSEB to grow in a healthy
manner, on the other hand, ministers have been declaring waivers
to influential persons having huge arrears. Moreover, such persons
48 The Enron Story
are rewarded by giving important positions in the government,
while, honest MSEB officials trying to stop this loot of public
money are pressurized and made to keep quiet.
Though it was mandatory on MSEB, the government has
not allowed MSEB to earn required profits. But, MSEB is used to
assure windfall profits to multinational companies. Would this
protect public interest ? In fact, due to the unjustifiably high bills
of the private projects such as Enron, Reliance, and Bhadrawati,
MSEB will soon be in tremendous financial difficulty. We had
requested MSEB to give us its future financial projections. For
reasons one can guess, MSEB officials have not made these
available. In our opinion, to pay off these private projects, the
MSEB will be forced to sell off its assets under the pretext of
privatization. MSEB with assets worth Rs. 20,000 crore will be
privatized, in the same spurious manner in which the Enron project
was brought in. The government is already planning this and the
MSEB chairman has already said this publicly . After privatization
only those who can afford to pay Rs. 5 or so per unit will get
power. The farmers and rural people will not afford this. And,
thus, it will be a total erosion of what we have achieved on social
fronts over decades in just five years.
The Enron Story
49
Appendix-Ill: Excerpts from the Report of
the Amnesty International
The "Enron Project" In Maharashtra — Protests Suppressed In
The Name Of Development
Amnesty International is concerned about the suppression
by state authorities in Maharashtra of peaceful protests against the
construction of a power plant by the Dabhol Power Company. The
DPC is a joint venture between three US based multinational
corporations. The project has met with opposition from local
people and activists from elsewhere in India on the grounds of its
social, economic and environmental impact, as well as political
controversy around its inception.
Reports from the Ratnagiri district of Maharashtra detail a
succession of incidents which have occurred in recent months in
which protesters and activists have been subjected to harassment,
arbitrary arrest, preventive detention under the ordinary criminal
law, and ill-treatment. Amnesty International considers those who
have been subjected to arrest and temporary periods of
imprisonment as a result of undertaking peaceful protest to be
prisoners of conscience, imprisoned solely for exercising their
right to freedom of expression.
A fact-finding team of the All India Peoples Resistance
Forum (AIPRF), headed by Justice S M Daud, a former judge of
the Bombay High Court, examined police harassment of villagers
protesting against the DPC, known as the "Enron project". Its
findings have highlighted the human rights concerns surrounding
the construction of the project. The team found that:
"In the name of maintaining law and order they [police] have...
prevented all forms of peaceful and democratic protest, used force
and violence while dealing with all forms of non- violent protest,
and resorted to a number of other subtle methods of harassment of
the agitators".
50 The Enron Story
Women, who have been at the forefront of local agitation,
appear to have been a particular target. A People's Union for Civil
Liberties (PUCL) fact-finding team that investigated the arrest of
26 women and 13 men on 3 June, 1997, concluded:
"The police targeted mainly women, some of whom were
minors and the arrests were made violently, in violation of the
legal, constitutional and humanitarian principles"
A battalion of the State Reserve Police, stationed on the site of
the power plant, the local police and company security guards
have all been implicated in the violations. Amnesty International
is concerned at the collusion of the police with those supporting
the construction of the project, which has
increased the
vulnerability of the protesters to human rights violations.
In a report released on 4 July 1997 by the Committee for the
Protection of Democratic Rights (CPDR) noted the increase in
violations by the police reported by the villagers despite "the
continued emphasis on constitutional and non-violent means of
protest".
The Government of Maharashtra's response to the protests is in
contravention of Article 19(1) of India's Constitution, which
guarantees freedom of speech, assembly and movement, and also
of the international standards to which India is a party.
Amnesty International is calling on the Government of
India and the Government of Maharashtra to ensure the right of
human rights defenders throughout India to peacefully protest
without fear of ill-treatment, arbitrary arrest, preventive detention
or other forms of harassment. In particular, the organization is
calling for a review of legislation which limits the rights to
freedom of expression and peaceful assembly, for a full
investigation into the reported violations and to ensure that the
perpetrators are brought to justice
The Enron Story
51
Ill-treatment of protesters and villagers by police
The police, including the Special Reserve Police on the site of the
company, have routinely used excessive force to suppress the
protests and whilst arresting villagers and protesters, and those
arrested have been held in conditions amounting to cruel, inhuman
and degrading treatment. Some of these incidents are detailed
here.
During the arrests that took place on 3 June 1997, after the
arrival of 135 police and SRP personnel in the village, a 23 yearold woman in the late stages of pregnancy, Dhanashree
Janardhaan Padval, was beaten. Others who sustained injuries did
not seek medical help because of the fear of police reprisals.
Another woman, Sugandha Vasudev Bhalekar — a 24 year old
housewife who was three months pregnant at the time of her arrest
on 3 June — testified to the Judicial Magistrate, on 9 June:
"at around 5 in the morning when I was in the bathroom,
several male police with batons in their hands forcibly entered the
house and started beating members of (my) family who were
asleep
Being terrified, I told them from inside the bathroom
that I was taking a bath and that I would come out after wearing
my clothes. I asked them to call for women police in the
meantime and to ask them to wait near the door. But without
paying any attention to my requests, the policemen forcibly
opened the door and dragged me out of the house into the police
van parked on the road. (While dragging me) the police kept
beating me on my back with batons. The humiliation meted out to
the other members of my family was similar to the way I was
humiliated
my one and a half year old daughter held on to
me but the police kicked her away."
**♦*
Git
,l-°
52 The Enron Story
Of the 26 women arrested, 25 were held in one room of 150
square feet with a washing area and toilet at one end and steel
mesh at the other, overlooked by a constable. According to the
PUCL team who visited the police lock-up on 7 June: "There was
no light or fan
The entire room stank". Amnesty International
believes that the conditions in the Chiplun police station lock- up
amount to cruel, inhuman and degrading treatment.
During the protests which took place on 15 May, the police,
including the SRP used excessive force against the protesters:
"The police and SRP personnel stationed at the project site
lathi-charged and dragged women protesters by their hair into
waiting police vans. Many women protesters also reported that
they were roughed up and manhandled by the police and their
dresses and sarees were tom in the process"
****
Amnesty International is concerned that the use of force in the
context of the Enron protests has not been in proportion to the
seriousness of the crime, and that excessive force has been used,
in a routine manner. The organization is-not aware of injury to any
law enforcement official, nor of any medical treatment received
by such an official, in contrast to the pattern of injuries received
by the protesters.
Article 7 of the ICCPR, to which India is a signatory, prohibits
the use of torture or cruel, inhuman or degrading treatment of
punishment. This prohibition is further reinforced
by the
Convention against Torture and Other Cruel, Inhuman or
Degrading Treatment or Punishment, which India has made a
commitment to ratify.
The targeting of women and children, contravenes the special
protections afforded to them in the ICCPR, the Women's
Convention and the CRC.
****
The Enron Story
53
Amnesty International urges the Government of Maharashtra:
•
to ensure the right of people to peacefully protest;
o
to order prompt and impartial investigations into all
allegations of ill-treatment of protesters, and to ensure the
perpetrators are brought to justice;
•
to order a prompt and impartial investigation into allegations
that police in the Ratnagiri region have systematically failed
to register complaints by villagers.
Appendix-IV: Chronology of Events
Date/Year
Important Events
June 18 & 19,
1992
Enron team visits possible sites on Maharashtra’s
coastline.
June 20, 1992
An MOU is signed between Enron and MSEB.
August, 1992
Enron submits its project proposal.
February 3,
1993
Government of India (GOI) gives its clearance.
March 12,
1993
GOI requests loan from the World Bank.
April 29,
1993
DPC is registered under Indian Company Laws.
54 The Enron Story
April 30,
1993
The World Bank declines to fund the project.
September
14,1993
GOM grants its clearance.
September
21,1993
DPC publishes the mandatory public notice.
October 2,
1993
First resistance: agitation is announced by MSEB
unions.
November 26,
1993
CEA grants its clearance (only on technical grounds).
December 8,
1993
PPA is signed between MSEB and DPC.
February 10,
1994
Government of Maharashtra furnishes its
guarantee to DPC offering to pay all out-standing payments in case of default by MSEB.
February 18,
1994
A Citizen’s Committee is formed to probe into
various implications of the project.
April 27,
1994
Protest march is organized at the district
headquarters.
June 5,1994
A large conference to register protest against the
project is organized jointly on project site by
various trade unions, environmental, local,
other organizations.
June 9,1994
Various federations of trade-unions and other
organizations form a joint front (EVSS) to oppose
the project.
The Enron Story
55
June 24,1994
GOM and DPC sign the “State Support Agreement.”
July 25,
1994
The High Court rejects an appeal by the Bombay
based Committee of the villagers against the forced
acquisition.
July 30,
1994
The Minister for Energy refuses to make the PPA
public in the State Legislative Assembly.
August 18,
1994
Public protest meeting at Bombay.
August 20,
1994
The High Court rejects the writ petition by late Mr.
Ramdas Nayak (BJP) against GOM and Enron.
September
21,1994
GOI signs a counter-guarantee for the project.
October 1,
1994
The High Court appoints a 23-member committee
of experts to look into various aspects of the project.
October 5,
1994
Public protest meeting near the site of the project.
October 28,
1994
First attempt by government agencies to complete the
procedure of acquiring land, foiled by local villagers.
October 29,
1994
Second attempt by government agencies to complete
the procedure of land acquisition with the aid of a
large police force. Police arrest 189 villagers
including 144 women who were resisting the
acquisition of their land.
October 30,
1994
The Expert Committee appointed by the High Court
gives the green signal to the project except on safety
aspects. The NGO representatives register their
dissenting opinion.
56
The Enron Story
November 1,
1994
In a public meeting in the affected village, villagers
vow to fight back repression by government.
November 8,
1994
The second round of repression; police arrest 233
villagers including 152 women.
November 10,
1994
The third round of repression; police crack-down
and arrest of 105 villagers including 88 women.
November 11,
1994
Strict prohibitory orders are clamped in the entire
taluka banning all kinds of political activities.
November 25,
1994
MOEF gives green signal without compliance on
many environmental aspects of the project by DPC.
December 8,
1994
Elections for the State Legislative Assembly are
announced.
December 11,
1994
Protest procession is organized in Chiplun.
January 18,
1995
A state-wide protest program of dharana (sit-ins) in
front of government offices by outside supporters.
February 23,
1995
The “State Consent Agreement” is signed.
February 25,
1995
The “Fuel Management Agreement” is signed.
March 1,
1995
Financial Closure is brought into effect.
March 6,
1995
Mr. Munde, who later became Deputy Chief
Minister and Minister for Energy in the new
government, visits the project site and assures
his full support to the struggle of local villagers.
The Enron Story
57
He publicly vows to dump the project in the
Arabian Sea if he wins election.
March 12,
1995
New government led by BJP-Shivsena assumes
power.
April 3,
1995
A Cabinet Sub-Committee under the Chairmanship
of Mr. Munde is appointed to review the project.
April 21-30,
1995
People from all over Maharashtra join local
villagers in the program of courting arrest to
protest against the project.
May 12,1995
About 400 villagers clash with outside labor
being used by contractors, destroy offices of
contractors. Work is suspended for 2 weeks.
June 5,
1995
United States Department of Energy warns Indian
governments about cancellation of the project.
June 6,
1995
British Chancellor of Exchequer warns Indian
governments about the cancellation of the project.
July 5,
1995
Opposition left parties organize a daily dharana
(sit-in protest) in front of the State Legislative
Assembly during its session.
July 18,
1995
The Munde Committee (Cabinet Sub-Committee)
submits its report to the Chief Minister.
August 3,
1995
GOM announces its decision to cancel the project
in the State Legislative Assembly on the basis of
recommendations of the Munde Committee.
Aug. 8, 1995
Enron stops project work
September 6,
1995
GOM sues DPC in the Bombay High Court for
engaging in fraudulent and corrupt business practices.
jig
The Enron Story
October 6,
1995
Ms. Rebecca Mark, CEO of Enron declares that a
new agreement will be entered within three months.
November 8,
1995
About 3000 villagers march on the local government
office.
November 11,
1995
GOM issues orders to appoint a Committee of experts
to renegotiate the deal on its behalf.
December 2,
1995
Fast by people affected by the project to protest
against the proposed revival of the project
January 8,
1996
The State cabinet decides to revive the project on the
basis of report of the expert committee.
January 9,
1996
Mr. Bhalekar, leader of the local fishing community,
is arrested for issuing a statement against the decision,
released by the District Court a week later.
March 25,
1996
A writ petition challenging the renegotiated deal is
rejected by the High Court
April 26,
1996
CITU files a suit questioning the renegotiated
project in the Bombay High Court.
April 28,
1996
“Ishara Parishad” (warning conference)
organized by various committees at the project site.
May 1996
Visits by various groups of NAPM activists from
outside the state to express solidarity.
December 2,
1996
The Bombay High Court dismisses CITU petition.
Enron restarts project work which was stopped
on August 8, 1995.
The Enron Story
5<?
January 12
to 17, 1997
Satyagraha by local protesters and their supporters
in batches. Assessment of arrested protesters.
January 30,
1997
Massive Ishara Satyagraha by activists of local
action committee, EVSS, NAPM, and other
supporting organization police let loose terror.
1200 protesters arrested.
February 7,
1997
Residents of Arey village forced government to stop
water supply to Enron from their village.
April 9,
1997
Protesters sit in-front of State Legislative
Assembly in Bombay
April 28 to
May 26, 1997
Satyagraha in batches by activists of EVSS, NAPM
and other supporting organizations coming from
all over the country.
May 29,
1997
Protesters in the police custody assaulted by
unidentified persons. Ladies were beaten up
and treated in indecent manner.
60 The Enron Story
Bibliography
Bidwai, Prafiil. 1995. “The Enron Deal Must Go: Albatross
Round Public's Neck.” The Tinies ofIndia, May 4.
Brahme, Sulabha. 1994. Enroncha Dabhol Veej Prakalp:
Deshvikavu Dhoranacha Assal Namuna (Enron's Dabhol
Power Project: A True Example of Policies Involving SellOut of the Country). Pune, India: Shankar Brahme
Granthalaya.
Ghosh, Jayanti, Abhijit Sen, and Chandrasekhar. C P. 1995.
“Life After Enron.” Economic and Political Weekly
(August 19): 2038-2041.
Menon, Meena. 1994a. “Pristine Konkan Coast Faces Industrial
Onslaught.” The Times ofIndia, April 10.
. 1994b. “Villagers Resent Land Acquisition for
Dabhol Project.” The Times of India, April 7.
Pereira, Winin, Subhash Sule, and Abhay Mehta. 1994a. “Enron
Update.” Indranet 3 (5-6): 4-18.
. 1994b. “Enron: The Power To Do It All.” Indranet 3
(2-4): 4-30.
Pore, Kumud. 1996. “Punha Ekada Enroncha Pandhara Haiti
(Enron's White Elephant: Once Again).” Lokaprabha
(January 13): 6-7.
Purkayastha, Probir. 1995a. “The Enron Caper.” Economic and
Political Weekly, (April 22,1995): 857-859.
. 1995b. “Enron: The Drama Continues.” Economic
and Political Weekly, (August 19): 2042-2043.
The Enron Story
61
Samaj Vidnyan Akadami. 1995. Paryay Asatana Enronche
Akraman Kashasathi? (Why Allow Enron’s Take Over
When There is an Alternative) Pune, India: Samaj
Vidnyan Akadami.
Samant, P B. 1995. “Enroncha Dabhol Prakalp: Shap ki
Varadaan (Enron's Dabhol Project: A Curse or A Boon?).”
Loksatta, April 16.
Sant, Girish and Shantanu Dixit. 1994. “Least Cost Power
Planning: A Case Study of Maharashtra.” Pune, India:
Prayas.
. 1996a. “Revival of Dabhol Project: Achievements or
Compromises.” An Unpublished Note (Prayas, Amrita
Clinic, Athavale Comer, Deccan Gymkhana, Pune, India,
411-004, India.)
Sant, Girish, Shantanu Dixit, and Subodh Wagle. 1995a. “Dabhol
Project PPA: Structure and Techno-Economic
Implications.” Economic and Political Weekly, (June 17,
1995): 1449-1455.
. 1995b. The Enron Controversy: Techno-Economic
Analysis and Policy Implications. Pune, India: Prayas.
Unique Features. 1995. “Ladhaee Sum Zali Ahe (The Battle Has
Started).” Anubhav, 1995( January): 8-19.
Wagle, Subodh. 1995. “Enron Negotiations: Bungling by the
Government.” Economic and Political Weekly XXX (49):
3127-3128.
. 1996. “TNCs as Aid Agencies? Enron and the
Dabhol Power Plant.” The Ecologist, 26 (4): 179-184.
62. The Enron Story
Glossary
AIPRF
All India Peoples Resistance Forum
BHEL
Bharat Heavy Electrical Limited
CEA
Central Electricity Authority
CITU
Centre for Indian Trade Unions
DPC
Dabhol Power Company
EHKS
Enron Hatao Kriti Samiti
EIA
Environmental Impact Assessment
EVSS
Enron Virodhi Sangharsh Samiti
GOI
Government of India
GOM
Government of Maharashtra
IRR
Internal Rate of Return
MIDC
Maharashtra Industrial Development Corporation
MOEF
Ministry of Environment and Forests
MOU
Memorandum of Understanding
NAPM
National Alliance of Peoples' Movements
NTPC
National Thermal Power Corporation
PLF
Plant Load Factor
PPA
Power Purchase Agreement
PUCL
People's Union for Civil Liberties
RC
Renegotiation Committee
SEB
State Electricity Boards
SRP
State Reserve Police
Selected Prayas Publications
Health Cell
1.
2.
3.
4.
“We Should Know this About AIDS” in Marathi
“Children and AIDS”
A Slide and Poster Set, Flip Charts for AIDS Awamess
Programs.
“Handbook for Animators” to conduct AIDS Awamess
Programs.
Energy Cell
5.
6.
7.
8.
“Least Cost Power Plan for the state of Maharashtra”
“The Enron Controversy : Techno-economic Analysis and
Policy Implications”
“Power from Sardar Sarovar : An in-efficient plan”
“Beneficiaries of IPS Subsidy and Impact of Tariff Hike”
PRAYAS
Initiatives in Health, Energy, Learning and Parenthood
Prayas is a registered charitable trust, a non-profit organisation.
Prayas’s main interest areas are Health, Energy, Learning and
Parenthood. The Health Cell is mainly dealing with problem of
AIDS. It conducts awareness programs for different groups; train
animators to conduct awareness programs; publish articles, booklets
for spreading the message; provide counselling services to HIV
infected individuals and their families; provide care and treatment for
the sick. It also co-operate with and conduct research in sexual
behaviour, and therefore contribute to better planning of effective
intervention strategies. We are also a part of different advocacy groups
striving to create an environment conducive to better strategies to
contain the epidemic. Energy Cell, mainly works on power policy
issues. It aims at developing credible, techno-economically viable and
socially desirable policy alternatives for power sector. It’s work
started with development of least cost, integrated resource plan for
Maharashtra. The group has prepared detailed techno-economic
critique of controversial projects such as Enron and Sardar Sarover. It
has also carried out in-depth analysis of claimed subsidy of nearly
1200 crore Rs. given to farmers ofMaharashtra in the form of
subsidised electricity. Currently, the group is working on power sector
reforms and privatisation policies being pursued by central and
various state governments. Learning and Parenthood Cell, is
experimenting about making education more enjoyable and
meaningful. It aims at creating awareness to make education and
parenthood more conscious and socially responsible. It has helped a
sister organisation “Palakniti Pariwar” in setting up a resource centre
and a playgroup for children from disadvantaged communities.
A list of selected Prayas publications is given inside.
The Enron Story : Controversial Issues and The Struggle
Requested Contribution : Rs. 20/- or USS 5 / For Private circulation only
Printed at: Shivani Printers, Dhole Patil Road, Pune.
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