Independent Power Projects (IPPs) arc set up in multinational power giants on a contractual basis preferably on foreign soil. The contracts include power purchase agreements (PPAs), counter guarantee etc. Since they are based on contract and profit enhancement, they often have had friction with the local government. Enron in India in Croatia Nasacort in Philippines, RWE in Hungry are all in trouble. These IPP’s have been accused of human rights violation, corruption and basic economic insanity.

The enron project was producing tariff at Rs. 7.09 a units against Rs. 2.50 a unit that was envisaged in the 1990s. The dollar denominated tariff and imported naphtha based power has also made power more expensive. On the other hand the Maharashtra State Electricity Board (MSEB) facing paucity of funds expressed its inability to pick up its 30 per cent stake. After the God bole committee report which asked for renegotiation of the deal, the two sides have locked horns.

The US government has been pressurizing India to patch up with Enron. The whole issue has sent a clear message to India never go for an independent power project without having a thorough cost-benefit analysis.