Volume 6, No. 7, July 2005


Enron & the Sell-out of India’s Power Sector


The imperialists have been eyeing India’s huge power sector to gain a share of the massive Rs.26,000 crore market. For that the numerous Electricity Bills passed by the Central government has aimed at the privatization of the power sector. This privatization hands over India’s power sector to the MNCs and the local compradors. The stranglehold of foreign capital of such a crucial sector as power has not only important economic implications but also implications regarding the sovereignty of the country. For foreign powers and their lackeys in India to have control over such a strategic sector as power they can hold the country to ransom by cutting off the supply.

Through this sell-out, while the MNCs gain a big market and huge profits it seriously impacts the lives of the masses. In order to maximize their profits the pliant government has raised electricity prices enormously and plans to raise them still further. The high rates are crushing not only the poor but also the middle classes, in both urban and rural areas. The peasantry, who is already neck deep in debt, has to now pay huge sums for their electricity bill in order to boost the profits of the MNCs/compradors. But the process has just started; once the privatization is complete the prices of electricity would have increased many fold. Not only this, privatization will badly hit the electricity employees who will have to face retrenchment, increased work-load and casualisation of labour.

The nefarious deeds of the parties in power show to what extent they are prepared to go to sell India’s power to the TNCs and in the process putting a backbreaking burden on the Indian people. The Enron episode goes to show the extent to which they will go. The agreement signed at the earlier stages of the economic reforms entailed buying power from Enron at Rs.7 per unit when at that time the MSEB was purchasing it at between Rs.1 & 2 per unit. That means to give windfall profits to Enron the masses would have to pay a minimum of Rs.8 per unit. All the major political parties were involved in the signing of this notorious agreement — at the Maharashtra level it was a first Sharad Pawar who was primarily involved; then it was Bal Thackery’s Shiv Sena;; and at the Centre the first 13-day government of Vajpayee did only one job, which was to sign a counter-guarantee for the Enron agreement. Even after considerable hikes over the past few years the electricity price is about Rs.3-4 per unit.

The recent events in Maharashtra — the power shortage and the public anger against the MSEB (Maharashtra State Electricity Board) — have been accompanied by the State governments decision to privatize power supply and to also re-start the Enron (called the Dahbol Power Corporation — DPC) company. The orchestrated campaign against the MSEB and the state-wise power cuts was a clear ploy to create the necessary environment for the immediate steps announced to privatize power distribution in Maharashtra and to restart the Dahbol plant at humiliating terms (once again). The present Finance Minister, has been the chief legal advisor in India of the collapsed Enron company for it to recover its dues. Also it is the present Planning Commission deputy Chairman, Montek Singh Aluwalia, who, as the then finance secretary, gave the Centre’s counter-guarantee to Enron. With such a bunch of Enron dalals and stooges in power we can well understand what would be the fate of the new deals being struck.

Background to the Sell-Out

It was the biggest foreign deal in India involving FDI of a massive $3 billion. The plant was to be based fully on LNG imported from the US oil giants in the Middle East. The two US TNC giants, GE and Bechtel, owned 10% share each in the Dabhol plant. The Indian banks (IDBI, IFCI, SBI, ICICI) have loaned a huge $1.3 (over Rs.6,000 crores) to Enron — unlikely to be ever recovered. In the first phase the plant began to generate 744 mw of power in 1999 and in the second phase another 1444 mw of power was to be added. The MSEB was to buy the full amount of the power or else pay a penalty of 90% of the value. This agreement was given a guarantee by the Maharashtra government and the first phase was counter-guaranteed by the Centre. So, Enron made sure that if the MSEB did not pay up, the money would be given by the Maharashtra government. And if the latter did not pay the Centre would have to pay.

Two years later, in 2001, the highly profitable MSEB which had been pushed to bankruptcy due to the high payments to Enron, rescinded on the agreement and stopped payments to it. Meanwhile, in the US, Enron, which had risen to become the seventh largest TNC in the US and was the biggest donor of the Bush election campaign, was involved in high level fraud and deceit. It went into bankruptcy cheating the American public of billions. In India, its two partners, General Electric and Bechtel, (both of which are also close to the Bush administration — both are heavily involved in Iraq) bought out Enron’s 65% share for a pittance of $20 million. {65% of a $3 billion project would amount to roughly $2 billion or $2,000 million!!}Now, these two giant companies own 86% of the DPC.

Since 2001 this DPC plant (of which only the first phase was ready) has remained closed. The Godbole review Committee, in a report presented in 2001, suggested the plant be restructured and re-negotiated. He openly stated that the government, while signing the agreement, had allowed the DPC to massively inflate costs and charge to huge amounts for electricity. The two mafia TNCs have clamped a case on MSEB for a huge Rs.26,000 crores for breaking the agreement. Besides this, the Indian Government has been forced to spend to spend crores in arbitration in international courts. Recently in London and ‘independent’ arbitration panel awarded Bechtel damages of $125 million (Rs.550 crores) from Maharashtra and its agencies. Now a US court has attached the 15% share of MSEB in the DPC as it has not paid this amount by the due date of May 27th. Bechtel’s two affiliate in Mauritius and Netherlands have filed two additional claims against the GOI to recover the value of their lost investments in DPC which could total $ 6 billion (i.e. a gigantic Rs.2½ lakh crores!)

Not only did Enron, in its two years rob the country (through MSEB) of millions of dollars; not only has it swallowed up the massive Rs.6,000 crores lent it by Indian banks; the TNCs now want to further rob the country of millions more through ‘damages’, ‘arbitration’ etc. and our servile rulers are quietly paying up as they themselves have swallowed crores of rupees while sighing the agreement and even now in finding a solution.

Reconstruction Package — A double sell-out

The government is now promising to pay all the foreign liabilities while it plans to not only write off the Rs.6,000 crores of Indian Bank loans, it is asking them to lend another Rs.1,500 crores to re-start the plant. To settle the issue the UPA government has set up a GoM (Group of Ministers) headed by the Defence Minister(???), Pranab Mukherjee, to organise the sell-out. It is asking the NTPC and GAIL to help re-start the plant.

The government has agreed to pay out a massive Rs5,600 crores bailout package to the foreign promoters and lenders of the dubious US power company and its contractors. The amounts include $ 230 million to offshore lenders; $450 million to Export Credit Agencies; $138 million to Overseas Private Investment Corporation; $111 to OPIC political risk insurance; and $350 million to GE-Bechtel’s stake and dues. This amounts to a total pay-out of a massive $ 1.3 billion to the imperialists. All these are amounts owed by the bankrupt Enron which now is being paid by the Indian government.

All the deals are being conducted in complete secrecy, without any disclosure to the media or even to parliament. And when the matter was raised in the Rajya Sabha the Minister of State for personnel, Pachuri, said "it is improper to give out details since the issue is at negotiation stage". So, the entire deal will be conducted secretly and finally it will be disclosed only when it is all over!!! The GE chief (CEO) was in India recently and he was given the importance more than that of a prime minister of another country. He met the Prime Minister and the ministers of power, finance and commerce and industry. After dragging the country through international courts he has now said he is willing to immediately start the plant — no doubt n his terms.

Not only this, the massive pay-out to the foreign lenders is planned to be done through funds taken from the Employee’s Provident Fund (EPF). In Feb.2005 the government set up a Gas and Power Investment Company Ltd (GPIC) for this purpose. The GPIC, of which the Indian Banks are a part, has asked the EPF Commissioner for the funds to be collected through bond floated by the GPIC. Such risky investments by the EPF go against its own rules which states that it must only invest in government securities. With the massive new investment pumped into the Dabhol plant amounting to over Rs.13,000 crores (Rs.5,600 to the foreigners + Rs.1,500 crores to be raised by GAIL & NTPC + the write-off of the Rs.6,000 crores lent by the Indian banks) it is clear that the DPC will be unviable unless the centre gives huge subsidies of the electricity charges are hiked up enormously . This is over and above the high cost of imported LPG that will be used as the main fuel.

But, revival they will to keep the imperialists happy.

High Cost to the Country and its People

While the Enron, BE, Bechtel and their Indian agents have made huge money without even generating much electricity the country will suffer gigantic losses and the people are being forced to pay the high cost of the electricity. These TNCs not only made vast sums in the first two years of payment at the rate of Rs.7 per unit, but also through penalties, arbitration agreements and fraudulent credit and insurance charges. Why should India pay all this when it has been defrauded by these companies? Why should the foreign creditors be paid and not the huge loans given by the Indian banks? Why should employee’s savings be used to pay the foreign creditors? The reason for all this is that those taking the decisions are their agents for which they get fat commissions. Those that struck the first deal are none other than all who are in power in key positions. And the chief person behind today’s economy, the Finance Minister, was de facto on the Enron pay-roll as their lawyer.

The people of the country must demand that all details of the agreements past and present be made public and not done in secrecy. They must try all these culprits in a public trial demanding the disclosure of the funds they swallowed, which should be paid back with compound interest. They must demand compensation from Enron and the other two TNCs. Electricity for the poor, middle classes and the peasants must be subsidized while that for the rich must be charged at high rates.




Home  |  Current Issue  |  Archives  |  Revolutionary Publications  |  Links  |  Subscription

<<  Previous Issue  | Next Issue  >>