Search the Internet          Tips  Sites: Finance, Investment

Enron's woes make Indian power firms anxious

India's private power producers demanded on Friday that the central government intervenes in Enron Corp's bitter row with Maharashtra State Electricity Board and state clearly if it wants the US energy giant to stay in India or quit.

"The government needs to decide whether we want Enron or not. In case they don't want Enron, they should spell out the reasons for it," Harry Dhaul, director-general of the Independent Power Producers' Association of India, said.

But central power secretary A K Basu said Enron and the Maharashtra State Electricity Board had to resolve their differences over the $2.9 billion project themselves.

"Basically the Maharashtra government and Dabhol have to sort it out," Basu told reporters after a meeting with Wade Cline, the chief executive officer of Enron India.

Basu stuck to the central government's stand that it would help implement any proposal emerging from negotiations between the Dabhol Power Co, 65-percent owned by Enron, and the MSEB.

Dhaul said the fate of Dabhol, India's largest direct foreign investment and biggest power project, would determine the future of domestic and foreign private investment in power and other infrastructure projects.

"It is an important issue. It is a benchmark for all future infrastructure investments of $1 billion plus."

On Thursday, Enron said the MSEB cancelled a disputed power-buying contract just five days after the Houston-based energy firm moved to pull out of the project.

WANT PRO-ACTIVE APPROACH

Dhaul said the central government should intervene in the dispute between Enron and the utility.

"We want a pro-active approach in supporting independent power producers."

Basu, however, said the government had advised Enron to thrash out the matter with the negotiation committee set up by the Maharashtra government. The committee is due to meet on May 29.

Cline refused to answer questions from reporters and only said the company would not renegotiate the power-buying contract on the basis of a committee set up by the state government.

"We won't renegotiate on the basis of the Godbole Committee report," he said.

The committee, chaired by a former bureaucrat Madhavrao Godbole, has suggested that the tariff be re-negotiated to make it cheaper and to remove the dollar linkage, which resulted in a steep increase each time the rupee fell against the dollar.

Dabhol has come under fire because of the relatively high cost of its power. Critics object to it charging Rs 7.1 per kilowatt-hour versus Rs 1.5 charged by other suppliers.

Dabhol Power Co is building India's largest power plant with a total capacity of 2,184 MW.

The first phase of the $2.9-billion project with a capacity of 740 MW began operating in May 1999.

The second phase that will add 1,444 MW of capacity, is expected to be completed this year.

YOU MAY ALSO WANT TO READ:
The Enron Saga
MSEB files petition with MERC
Lower DPC tariffs: High oil prices may affect talks
DPC asks Centre to resolve dispute
MERC asks MSEB to justify clearing DPC project
Govt to help Enron patch up with MSEB
Pacified Godbole withdraws resignation
CM asks Godbole to withdraw resignation; meet with DPC called off
DPC faces fresh Rs 4 billion penalty
Enron Indian lenders to lobby for government help
Enron's Indian lenders spooked by pull-out threat

Tell us what you think of this report