The fair price of equity of the foreign promoters was not more than $ 320 million. If the written down price of the 65 per cent equity held by Enron ($ 20 million) is taken into account, this was even lower. But, Bechtel and GE, who had purchased the Enron equity at this throwaway price had been given much more than their equity investment though the project had become sick and had been shut down as unviable. In any project which becomes sick, it is the equity holders who have to take the maximum hit. In the present case, apart from giving up its claim of Rs 401 crore referred to earlier, MSEB, which had 15 per cent equity in the project, had to forego its investment totally. A question also needs to be asked as to what sacrifices the Indian and foreign financial institutions were forced to make. After all, they were no less responsible for not carrying out the financial scrutiny of the project properly. Instead, they relied solely on the generous guarantees of the state government and the counter-guarantees by the central government.

‘Privatisation of Profits and Nationalisation of Losses’

Even a rudimentary examination of the basic features of the project should have made it clear to any analyst that it had no chance of success and that it would mean a financial ruin for MSEB and the state government. But, as is the common experience, multinational firms, in their pursuit of maximising their profits, hardly ever exhibit any social commitment or concern for the interests of their much weaker

joint sector partners from developing countries. The role of the Indian and foreign financial and legal consultancy firms appointed by the MSEB too left much to be desired. With all the political rhetoric of the on-going economic reforms and the talk of disinvestment in PSUs, restructuring of the Dabhol project has meant nothing but the nationalisation of a badly conceived and designed largest private sector power project in India funded by a notorious multinational. The PSUs such as NTPC and GAIL, which were not earlier prepared to touch the project with a barge-pole, have been coerced into taking over and running the project, reminding one of the heady days of social control over the commanding heights of the economy. This is yet another example of “privatisation of profits and nationalisation of losses”!

When the scandal is of such monumental proportions, it is no wonder that the “much educated” ruling politicians, and Economic and Political Weekly August 26, 2006 3642 bureaucrats are going out of their way to shower concessions on this project to bring down its nominal tariff as much as possible, with hidden subsidies. The state government has already announced a series of concessions such as in stamp duty, sales tax and so on. The centre has extended project-specific concessions such as of customs duty waiver for the naphtha to be imported for the project, waiver of capital gains tax, income tax concessions, grant of mega power project status and so on. It has even decided to refund the import duty levied on the project! Tax concessions are hardly ever given retrospectively for a specific project. But, political reputations and interests of so many influential power elite are involved in the instant case that no price is too high to pay to save them. According to some tentative estimates, the burden of subsidy for this project which will have to be borne by the tax-payers may be as high as Rs 10,000 crore over the next few years. No second-hand power project anywhere in the world would have cost as much. The authors of this article, who had raised their voice against the project, were branded by its proponents as enemies of Maharashtra who were responsible for plunging the state in darkness!

Scandalous cases like this make the government worry about the Pandora’s box which the Right to Information Act would force it to open and the skeletons which would tumble out of it. It is therefore no surprise that demands for information pertaining to this project and its judicial enquiry are stone-walled, whichever political parties are in power at the centre and in Maharashtra. It is an eloquent commentary that Parliament has had no time or inclination all these years to discuss this project, whether in its previous or the present incarnation, and the failure of governance across different governments at different points of time, at both the state and the central levels, and at both administrative and political levels.

Courtesy: Economic and Political Weekly August 26, 2006 Commentary