From: "Salil Tripathi" <salil61-AT-hotmail.com>
Subject: Re: Enron in India
Date: Wed, 28 Nov 2001 09:45:40 +0000


Paul,

Two of Arundhati Roy's pieces have got telescoped in the legitimate question 
you've raised. She has criticized the dam projects in Gujarat and Madhya 
Pradesh, not Maharashtra (though Maharashtra has some peripheral problems 
attached to the dam projects on the river Narmada. And in a separate piece 
last year, she criticized the privatization of power in India, particularly 
focusing on the contentious Enron deal in Maharashtra.

Her argument, in the case of the power project, is that the power is costly, 
that there was a cosy, possibly corrupt deal between the Maharashtra 
government and Enron, and that the people affected by the project were 
treated badly. She also has a philosophical aversion to privatization in 
general. She wrote the article sometime in mid-to-late 2000; these 
arguments, regarding Enron, have been made in Indian political circles since 
1992, when Enron announced its plans to invest in India. And the scrutiny 
the Enron deal has gone through has indeed been breathtaking; a less 
persevering company would have left India.

A few observations are in place:

State-run power projects in India are run notoriously inefficiently; there 
is massive corruption and favored elite and voting banks are distributed 
power for free throughout India, subsidized by those who have the misfortune 
of not having a political leadership to stand up for them. State-run power 
projects typically have losses exceeding 30% of capacity. The few private 
projects in India, such as the Tata group's projects for western India and 
the RPG group's projects in eastern India, have prevented mass outages. In 
fact, Calcutta was notorious for regular power cuts daily, a pattern that 
ended only after a private sector company took over the management of the 
Calcutta Electric Supply Company.

Secondly, the treatment of the affected people. Here, Ms Roy is on strong 
ground: opponents of the projects have been treated shabbily, some 
protesters beaten up. But in this, the issue is the way the Indian police 
treats protesters; this does not become a worse instance of abuses because 
it is related to privatization.

Thirdly, corruption: Some 12 cases have been brought against Enron and the 
state government by litigants in India, under India's admirably liberal 
public interest litigation process. Not one has succeeded in proving any 
corruption; not one has led to a single judge criticizing the project -- 
this is in contrast to the Narmada issue, where the Supreme Court itself was 
divided. Unlike the famous corruption scandals of India -- Antulay, Bofors, 
Bihar fodder scam, and the latest defence deal exposes involving leaders of 
the Samata Party, an ally of the ruling coalition -- there is no paper 
trail, no evidence, only presumed innuendo, that a project on such a grand 
scale in India could not have gone ahead without corruption.

The Indian press has focused on these issues in great detail. The business 
press and major magazines have by and large taken the pro-deal line; a few 
publications have taken an anti-Enron line. One issue that continues to 
recur, which Roy has also argued, is that in this deal India gave away the 
store. I wrote a story about the confrontation between Enron and India 
sometime in 1994 or 1995, and interviewed most of the people involved, 
including the project-affected, those who wanted to cancel the deal, and 
those who backed the deal, arguing it was the litmus test of India's 
commitment to foreign investment. One public official, whose incorruptible 
reputation is well-known, is Manmohan Singh, India's then-finance minister. 
During an interview with him, he said that India had created a power policy 
in 1991-92; Enron got interested in India after that. The power policy was 
announced in Delhi and then in Singapore at a conference, at which India 
offered guaranteed 16% return on capital to foreign investors. This was at a 
time when most investors around the world believed Vietnam and Cambodia 
offered better prospects than India did. Dr. Singh said India had to have an 
extremely liberal policy initially to get people to test the waters. Once 
they were comfortable, India could raise the ante. That's exactly what 
happened; subsequent companies did not get such deals, because the Indian 
policy was made slightly less liberal.

Now you could indeed argue that India didn't need Enron or foreign 
investment, in which case there's no scope for any discussion. You could 
also argue that India should have remained firm and not invited foreigners 
-- that's the way India was from 1947-1991, and was mired in what the 
economist Raj Krishna called the "Hindu rate" of growth of 2% a year. And 
India could also have said we can do it ourselves; but the extremely shoddy 
record of India's state-run power sector didn't inspire or enthuse anyone.

Now, turning to the current financial crisis: since 1999, Enron has ceased 
to be a power-producing company. The Dabhol project itself is co-owned by 
Bechtel and others, and Enron actually wants to get out and become a 
full-fledged contract-trading company. The Enron of 2001 is not the Enron of 
1991, or even 1999. So there is no link between Enron's current financial 
crisis (which has more to do with non-disclosure of sweetheart deals its 
managers entered into, exposing the publicly-listed company to huge 
potential liabilities) and its record in India. That will not, however, 
prevent some reporters from claiming in India, that, see, we were right 
along; Enron was a fraudster, not a company to be taken seriously. That's 
not true; Enron's record in Teeside in Britain and in Java (I believe) in 
Indonesia, is of a competent private sector producer. And its record in 
India, too, has been efficient, superior in fact than that of state-run 
power companies. And had it used natural gas (its original choice for fuel) 
and not naphtha (imposed on it by Maharashtra state subsequently), then its 
efficiency would have been greater, and more important, pollution in 
Maharashtra less.

Clearly, Roy has an ideological aversion to many of these arguments, but 
that does not make her arguments necessarily right, particularly on 
economic/efficiency grounds. And this is like repeating that old record, 
once again, she has raised an issue that's already known in the public 
domain, which has been written about and studied extensively, by fine 
journalists and economists, many of them critical too, in India and abroad. 
But then Roy is reaching canonical status with her panache, her vocabulary, 
her emotive passion, and so on, so none of that presumably matters to some 
readers of Roy.

If there's any interest in this list, I can dig out my earlier piece on 
Enron, though it will be at least a couple days.

Salil


>From: Paul Brians <brians-AT-mail.wsu.edu>
>Reply-To: postcolonial-AT-lists.village.virginia.edu
>To: postcolonial-AT-lists.village.virginia.edu
>Subject: Enron in India
>Date: Tue, 27 Nov 2001 09:06:28 -0800
>
>In postcolonial circles there's a lot of talk about Arundhati Roy's
>attacks on Enron's involvement in the disastrous Maharashtra
>dam-building project, but on the financial pages the news is all
>about the collapse of its stock price and the corporation's imminent
>bankruptcy. These stories seem to proceed in parallel without
>intersecting. Has anyone read anything about what sort of impact the
>bankruptcy of Enron might have on the dam project?
>
>Of course bankrupt corporations are necessarily out of business, but
>I'd be interested to know if what financial experts in India are
>saying.
>--
>Paul Brians, Department of English
>Washington State University
>Pullman, WA 99164-5020
>brians-AT-wsu.edu
>http://www.wsu.edu/~brians
>
>
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