Word: maharashtra
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...secretaries of State and Energy to work with India to help that country maximize its domestic oil and natural-gas output. The provision was significant because Enron has a controversial $2.9 billion natural-gas-fired Dabhol power plant in India, but the plant's only customer, the state of Maharashtra, found Enron's prices too high and began buying power elsewhere. Enron was eager to get out of the Dabhol investment or get the facility back on line and had sought Washington's help. Cheney met with Lay on April 17, exactly one month before the final energy proposals were...
...most industrialized states, India twice negotiated and signed a deal in the 1990s with Enron to build a major power plant. It's now obvious the deal was far too sweet for the Americans, and India wasn't ready to distribute the juice rationally anyway. The result: consumers in Maharashtra like Treasurer can't afford the electricity bills anymore. (He's considering closing his 36-year-old business.) And since consumers aren't paying up, the state-owned electricity company has also been stiffing Enron since November. Last month, Maharashtra, which guaranteed the deal, defaulted on a $30 million bill...
...Enron deal was meant to be the solution?at $2.83 billion it was the largest single foreign investment in India ever?and an important litmus test for the country. Did the backward giant want to plug its gaping infrastructure gaps? The Maharashtra State Electricity Board agreed to buy all the power produced by Dabhol, and the pricing formula was shrewd: in the event of oil price increases or devaluation of the Indian rupee, the Electricity Board pays more. Well, oil has gone up and the rupee has gone down since Dabhol's 740 megawatt plant went operational two years...
...matter the rates, Maharashtra wasn't prepared for the electricity itself when it came down the wires. Because of institutionalized subsidies, only 10% of the power consumers in the state pay a market rate. Add in the higher cost of Dabhol's electricity, produced from gas rather than the cheap, local coal usually used by Indian power stations, and it was a formula for bankruptcy. "Since this power is so expensive," says Vinay Bansal, chairman of the Electricity Board, "the more we buy, the more we lose...
India can't afford to renege on its largest and highest profile foreign investment?and the Enron deal isn't even completed yet. The second phase of the project, with three times the capacity of the first, will be in operation later this year. Last week, Maharashtra set up a review committee to find a way to rework the deal but under the terms of the current agreement, India has to continue buying the electricity for the next 20 years?or pay $35 billion to get Enron out of the country. That is, if Enron doesn't already...