- Bombay High Court's passing remark after dismissing a bunch of petitions that had challenged the legality of the Enron power project.
- Business Today, February 21, 2001.
In 1996, Rebecca Mark, CEO, Enron Corporation, managed to wrest the controversial Dabhol Power Company (DPC) from the jaws of death. Five years later (2001), the survival of DPC was at stake. Both DPC and the Government of Maharashtra (GoM) have been accused of corruption and economic insanity. With the controversy regarding the price of power still raging and the latest payments crisis that the Maharashtra State Electricity Board (MSEB) faced, both Enron and GoM were desperately looking for a solution.
In June 1992, a team of officials of the Government of India (GoI) toured the USA with the aim of inviting power producers in the USA to invest in India.1 Prior to this, the government drew up a list of projects in which the private sector could participate.
In addition to the coal based projects, (Refer Exhibit II) there were two or three gas-based projects in the list. The Enron Corporation showed interest in setting up a power station in India based on the import of Liquefied Natural Gas (LNG).
Enron was one of the world's leading power companies and figured in the list of the 500 largest corporations in the USA. In 1993, Enron's total sales stood at US$ 7.1 billion (Rs. 22,000 crore). At the time of coming to India2, Enron's experience in building and running power stations was limited to a few stations in the US and the Philippines. (capacities ranging from 28, 105 and 110 MW stations in the Philippines and a 110 MW station in Puerto Rico, to 149 to 450 MW plants in the USA). In India, the size of the proposed station would be 2500 MW.
On 15 June 1992, a team of officials from Enron Corporation arrived in New Delhi. On 18 and 19 June, the team visited over half a dozen potential sites in Maharashtra and on 20 June 1992, the MSEB signed a Memorandum of Understanding (MoU) with Enron. The MoU specified that the MSEB would buy electricity and/or capacity from Enron which would build, own and operate (but not transfer) a plant of about 2000-2400 MW capacity. The power station would be built near Dabhol in the Ratnagiri district, about 300 km south of Mumbai. The MoU also specified that the MSEB agreed that there was a need to set up a 2000 MW plant to be run on LNG. The "electrical power purchase contract" would be a contract for 20 years and would be structured to achieve a price of US $ 0.073/kWh (Rs. 2.34 per unit at the then prevailing exchange rates)."
At the price quoted by Enron for a unit, MSEB would be paying a sum of US $ 1300 million (Rs. 400 crores) every year for the total capacity of 2000 MW. The total payments for 20 years would be around 35 billion US dollars.
1] Until 1991, the role of the private sector in the power sector was marginal. The few existing private companies had been operational even before Independence. The role for new participants, although not explicitly restricted by law, was extremely limited. In 1991, the law was amended to allow increased private sector participation. Private players were invited to set up plants for the generation of electricity.