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It's On, It's On, It's Enron
Enron's Dabhol Power Corporation continues to generate more controversy than electricity.

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BUSINESS: DABHOL POWER PROJECT

It's On, It's On It's Enron

Does Maharashtra have excess power?

There are conflicting reports on this. The state has an installed capacity of 11,300 MW-including Enron's 695 MW in the first phase-but peak hour shortfall can be as much as 1,500 MW. Intriguingly, it's also claimed the MSEB is buying from Enron by keeping a capacity of 1,450 MW capacity idle. These include the 500 MW gas thermal station at Uran, the 650 MW coal thermal stations at Koradi and Khaperkheda and the 300 MW of the cheaper capacity of the Tata-bses system. Power from Uran costs only 80 paise a unit while it costs Rs 2 from the coal-fired stations. "There's no need for even phase I of Enron, leave alone phase II,'' says activist Pradyumna Kaul of the Enron Virodhi Andolan. Projections by Pune-based NGO Prayas show that there will be a power surplus of 9.5 per cent by the year 2004-05 in Maharashtra. What's not clear though is on what assumptions of demand increase are these projections based on.

Why can't excess power be sold to other states?

Private power producers are not allowed to sell to anybody other than state electricity boards. In Enron's case, only the MSEB, its sole customer, can sell this power. But MSEB officials are pessimistic about the outcome. "We won't have any buyers at Rs 4 a unit when there are cheaper power sources available."

But if Enron's power is sold through the Power Trading Corporation (PTC), MSEB will not have to incur the fixed power charge. It will be distributed equally in the western grid consisting of Maharashtra, Gujarat and Goa. Selling Enron's power through the PTC will bring down costs and ensure 100 per cent capacity utilisation.

Does India really need Enron phase II?

With as much 80 per cent of construction of phase II complete and trial runs due this week, this question is now academic.

This liquefied natural gas-fired project (2,184 MW) will be the world's largest private power project ($3 billion or around Rs 14,000 crore). Foreign equity investment of $685.7 million has flowed in for phase II and it achieved financial closure in May 1999. Indian financial institutions have also invested heavily in the project.

What is the way out?

The Democratic Front Government is split down the middle over scrapping phase II but it looks like the project will eventually be renegotiated. Chief Minister Vilasrao Deshmukh has set up a committee to examine the entire project. Among its briefs will be to examine renegotiation, find out whether DPC can sell its power to either NTPC or to neighbouring states, to lower electricity rates and finally to look into the legal and financial implications if phase III is scrapped.

Kirit Parikh of the Indira Gandhi Centre of Development Research advises the state Government to push Enron for more concessions. First a reduction in capacity charges. Enron obtained financial closure for phase II at a much lower interest rate as compared to phase I. Savings should be passed on to MSEB and capacity charges reduced. "Options for restructuring the DPC's debt should be explored," he says.

DPC officials are wary of touching the PPA a second time but have spoken of ways to reduce the financial burden. "We're looking at a mix of solutions,'' says McGregor. These could range from the sale of power to other states and blocks to Central bodies like the NTPC. But even if DPC went down the road giving concessions, they would be worth nothing if the MSEB is unable to pay up.

Another solution to the power tangle would be to allow the private producers to sell directly to consumers. That would keep the cash-strapped SEBs out of harm's way.

For MSEB the tonic lies in tremendous political will on the part of the state Government. The board has repeatedly asked for it to be allowed to collect its dues or disconnect defaulters, charge a more realistic tariff and even reduce subsidies from an astronomical 90 per cent to at least a manageable 40 per cent. Just recovering its dues from, say, rich sugarcane farmers will add Rs 5,000 crore to the MSEB's kitty. But in the power play of politics cutting subsidies is one trip no politician worth his khadi cap is willing to take.

Pg. 1

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