Case 2 – The Rs 2,800 Crore Enron-sponsored Dabhol Power Project in Maharashtra

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The Enron Development Corporation of USA, which is one of the largest integrated natural gas companies in the world, started construction in Maharastra, in April 1995, on the 695, MW gas fired plant. But the new government of Maharastra – the Shiv Sena – BJP combine ordered a review of the project.

The BJP had opposed the deal on various counts when it was being struck between Enron and then the government of Maharashtra headed by Congress party.

Some of the counts on which the project was criticised were: (i) the social and environmental aspects of the project, (ii) the alleged bribes paid by Enron, (iii) the high cost of the aspects of the project, (iv) the lack of transparency, and (v) the absence of competitive bidding. The congress leaders alleged that cancelling the project was a politically-motivated decision.

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Also, it is pertinent to refer to the ruling by the Bombay High Court in 1994, when it threw out a petition filed against the project by one of the leaders of BJP. In a strongly worded verdict the court had said, “The proposal was deliberated at length for two and a half years, draft agreements were prepared from time to time, and it was ultimately the eighth or ninth draft which was finalized. Nothing was done secretly. There was total transparency at every stage of negotiation. There is nothing to show that anybody was being favoured for any specific reason.”

Also the government of India had taken a series of decisions concerning inviting private sector participation in the power sector and announcing a list of incentives. Firstly, the first few private sector projects were to be given the status of pioneer projects what later came to be known as “fast tack” ones, and were to be given every facility by the government. Secondly, for the first few projects, the government would not go in for public tendering. Naturally, Enron cannot be blamed for government policies.

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