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'India has staked all its assets as surety to Enron'

On February 10, a group of US-based Non Resident Indians, who identified themselves by just their names and places they belong to, inserted a sensational advertisement in Bombay's Mid-Day newspaper on the ongoing Enron-Dabhol controversy.

Entitled 'Each one of you owes Rs 400,000 to Enron', the advertisement went on: "The Maharashtra government has been unable to pay the Dabhol Power Corporation Rs 1.59 billion. But it has entered into a contract which obligates it to pay Rs 4 trillion over the next 20 years. (100,000 = 1 lakh; 10 lakh = 1 million; 1,000 million=1billion; 1,000 billion=1 trillion).

"In other words, Rs 400,000 from each one of you.

"Any failure to do so will mean that the Central government will be contractually bound to pay this amount and then deduct it from Maharashtra's share of central revenues.

"If you are asking why it should concern you, just remember that without the share of central revenues, Maharashtra will not have any funds left to carry out any development programmes in the state.

"This means it will have no money for roads, drinking water projects, irrigation projects, education or primary healthcare or even pay for police and teachers.

"Is this a state of affairs you want your child to grow up into?

"Act now and find out why we have signed off all our assets."

Dr Om Damani, one of the signatories who issued the advertisement, elaborates on their campaign against the Dabhol power project, in this interview with Associate Editor Y Siva Sankar. Dr Damani is a graduate from the Indian Institute of Technology, Kanpur, and did his Ph.D in computer science from the University of Texas at Austin and currently resides in Cambridge, Massachusetts.

Could you introduce your group?

The advertisement was placed by us as individuals (and not as members of an organised group) to express our personal concern at the Enron deal. Most of us are academics or professionals currently based in the US.

What are the objectives of your 'group'?

As we mentioned, we are not a group. However, a couple of us, in association with a number of others, have formed a 'group' -- Enron Action -- which maintains the Web site http://www.altindia.net/enron

How is your group of NRIs related to the Enron controversy?

We are just concerned Indians.

Why have you issued press advertisements in India about the Enron controversy?

We feel outraged at the Enron deal. We felt that an advertisement was needed because the press has not sufficiently highlighted the scale of the contractual obligations.

The first issue is the magnitude of the liabilities. The government of Maharashtra has promised to pay Enron all sums that the Maharashtra State Electricity Board would have to pay -- currently at an exchange rate of Rs 47 to a dollar, the liabilities amounting to 35 to 40 billion dollars amount to Rs 1.64 trillion to Rs 1.88 trillion.

Assuming that the dollar-to-rupee appreciation is at the same rate as has been over the last 50 years -- that is, at about 6.5 per cent per annum, the amount payable is of the order of Rs 4.5 trillion.

A more detailed note is attached separately. Click here for details

Second issue is the nature of guarantees given by the Indian government and the State. Click here for the Government of India's guarantee. Click here for the government of Maharashtra's guarantee.

In effect, the Republic of India has staked all its assets (including those abroad, save diplomatic and military) as surety for the payments due to Enron. Click here for some striking excerpts from the guarantees.

What is your stance on the Enron issue?

We feel the deal should be scrapped.

We agree with the Maharashtra government when it claimed on oath in an affidavit filed in the Bombay high court (quoting 600 pages of supporting documentation) that the Power Purchase Agreement was "null and void ab-initio, inter-alia, on account of its being violative of several statutory provisions, public policy, consumer interest, public interest and interest of the state."

Further, the PPA suffered "from the vice of misrepresentation" by Enron and was "conceived in fraud". Click here for more details.

Your advertisement says, "The Maharashtra government has entered into a contract which obligates it to pay Rs 4 lakh crore ,(Rs 4 trillion) over the next 20 years." Please elaborate.

This is the estimated cash value of the power purchase agreement between the Dabhol Power Company and the MSEB over the next 20 years.

Details are in the documents hyperlinked from our earlier replies. Our estimate is based on the PPA of which we have a copy, but which remains secret from the public.

How realistic do you think is the fear that Maharashtra is on the brink of an implosion, so to say?

We never implied an implosion, but the figures for Phase-II of the Dabhol Power Project such as Rs 70 billion in the very first year (for merely 20 per cent of Maharashtra's power requirements) will certainly affect the state's financial situation drastically. This is roughly 22 per cent of the entire state budget.

We would also like to point out that the Enron deal has already hurt Maharashtra significantly. The MSEB is bankrupt, and the Maharashtra state government has defaulted on payments.

CRISIL has downgraded Maharashtra's credit rating to a speculative category. All these developments had been foreseen by the critics of the DPC deal, and yet would have been brushed off as unnecessarily alarmist even a few months ago.

What do you want the Indian public/ residents of Maharashtra to do in the context of your alarmist advertisement?

We think the advertisement can't be characterised as alarmist. If anything is alarming, it is that people are not aware of the magnitude of the crisis facing the state.

We hope an informed public will force their government to extricate them out of the current mess. People should write to Chief Minister Vilasrao Deshmukh and Prime Minister A B Vajpayee.

Given the likelihood of corruption in the signing of the deal, people should also write to the Central Vigilance Commission asking for a probe.

The central government has agreed to pay up for the counter-guarantee invoked by Enron recently. Maharashtra Chief Minister Deshmukh says this is a passing phase, which will improve once the MSEB revenue inflows get a boost. Do you agree?

Maharashtra almost defaulted on payments of Rs 900 million. Barring a miracle, the state will only find itself in a worse situation once Phase-II is operational. Payments will be of the order of Rs 6 billion a month ($ 125 million a month).

The fact remains that independent of the MSEB's revenues, we are paying too much for power from Enron. The MSEB has stopped buying much cheaper power from other sources (to illustrate: from the Tatas at Rs 1.98 to Rs 2.20 per unit) because of its contractual obligations to Enron.

What are your future plans to tackle the Enron imbroglio?

The Enron Action group plans a sustained campaign. It has put up the Web site mentioned above so that people have access to the facts and detailed figures of this case. We plan to spread awareness in various ways.

Who funds your activities?

The advertisement was funded by individual contributions of the people listed on it.

What kind of response have you so far elicited from your target audiences?

Surprise, astonishment, dismay and disbelief.

Have you espoused causes other than Enron? Do you plan to focus on any other India-related issues in future?

The group members are all Indians and are variously involved in issues relating to India in their personal capacity.

How did you discover that every resident of Maharashtra will have to pay up Rs 400,000 each for the said contract?

Unfortunately, this was not clarified in the advertisement, but the figure of Rs 400,000 is the burden borne by each of the ten million subscribers of the MSEB on the basis of the Rs 4 trillion justified in the attachments hyperlinked earlier.

You need to appreciate that these are conservative figures. A more pessimistic scenario -- for example, an Indonesia-like devaluation, or an increase in oil prices -- will take the numbers beyond comprehension.

Would you like to add anything else?

We hope the media will highlight the insanity of the deal. If you have any further questions about the details of the Enron deal, please contact Enron Action group at enron_action@yahoo.com

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EXTERNAL LINKS:

'Bankruptcy, not Enron, is the real issue'

A deserved downgrade for Maharashtra

Enron and Dabhol: A human rights perspective

Dabhol Power Project

Why the Swadeshi Jagran Manch opposes Dabhol project

MNC Masala: Dabhol story in a nutshell

Enron Intl announces financial closure of Phase-II of Dabhol project

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