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Maharashtra govt to review Enron project

Swati Kulkarni in Bombay

The Democratic Front government in Maharashtra, led by Chief Minister Vilas Deshmukh, declared on Wednesday that it would review the second phase of the Dabhol Power Company's power project in Ratnagiri district. The decision again puts a question mark on the project.

Deshmukh said that based on the review, the government would renegotiate the power tariff and other provisions of the deal with Enron Corporation. Scrapping the second phase of the project will be the last option.

Speaking to reporters at Mantralaya, the seat of government in south Bombay, the chief minister said that there were several options before the ruling coalition, but the government's primary concern was to get affordable energy from the project.

He said that the government was seeking legal advice on the matter and also on international law.

He disclosed that under the current power purchase agreement (PPA), the Maharashtra State Electricity Board has to pay the Dabhol Power Company Rs 970 million as standby charges every month, even though it may not buy a single unit of power from the project.

Deshmukh said that no official of Enron had met him on the subject thus far. "They have probably been meeting energy department officials and others," he remarked.

Replying to queries, he said that the state government has so far not written to the Centre to direct the National Thermal Power Corporation to buy Enron's power or take over the project.

However, he said that this was one of the options discussed during the talks with Union Power Minister Suresh Prabhu.

Deshmukh pointed out that the erstwhile Shiv Sena-Bharatiya Janata Party government in the state had claimed that its renegotiation of the deal would save farmers Re 1 per unit of power, but the price had now risen to almost Rs 8.

He, however, admitted that the rupee-dollar linkage in the original 1993 agreement was the main reason for the current high tariffs. No one had thought about this aspect of the deal and its future implications, he said.

About giving MSEB the freedom to recover outstanding dues from defaulters and about subsidies affecting its performance, state Deputy Chief Minister Chhagan Bhujbal said that the government had been giving subsidies to farmers for several years now, and the burden on this account is now Rs 35 billion.

He added that MSEB's losses had begun to mount only recently.

Intervening, Deshmukh said that concessions had been announced only for farmers from scarcity-hit regions of the state.

The chief minister said that the Maharashtra Electricity Regulatory Commission had never said that subsidising power was bad. It had only asked the government to foot the bill through its budget.

Deshmukh disclosed that MSEB's transmission and distribution losses had risen to 31 per cent annually and the MERC had asked to pare them to about 5 per cent. MSEB itself has admitted that reducing T&D losses by just 1 per cent would save it Rs 2.5 billion annually.

He clarified that the government had not prevented MSEB from recovering its dues or stopping the theft of power.

In response to another query, Deshmukh said that the government's decision to file a fresh affidavit in the Supreme Court would depend on the outcome of the review of the project and the renegotiation with Enron.

SEE ALSO:

Sucheta Dalal on the Enron fiasco

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