Subject: Re: More Enron news from the Indian angle
Date: Tue, 25 Dec 2001 10:06:20 +1300


Salil,

Agreed that India has a chronic power shortage. Agreed that India has
problems with management and distribution of the power it does produce.
Agreed that India was/is a bad credit risk - but should Enron not be faulted
for taking this risk in the first place?  And given the devaluation of the
rupee, doesn't it make sense for India to avoid incurring debt to overseas
companies?  And could you explain more about how Maharashtra's claim about
expensive power was "fictitious"?  Of course, India needs more power, but it
has to be able to afford it somehow.  Other states would/could not buy
Dabhol power at the price Maharashtra was paying for it.  If,
hypothetically,  the Dabhol plant could have been built by an Indian company
without incurring massive overseas debt, then the price of the plant and the
price of the power it produced would have been lower.

I am not saying that the issue of foreign investment is a good guys versus
bad guys issue.  I am not saying that India is the good guy and foreign or
multinational corporations are the bad guys, pure and simple.  But it
sometimes seems to me that you are saying that India is the bad guy and
America is the good guy.  You are not even prepared to accept that Enron is
at fault for its own bankruptcy.  Now as a result of that bankruptcy, many
people have lost their jobs, and the American/global economic crisis has
deepened.  The only silver lining for India is that Indian companies now can
buy the Dabhol plant for a bargain price, and maybe they can use it to
produce affordable power for Indian people.

Margaret


> Margaret,
>
> I had half-expected something like this from you; it shows misreading and
> misdiagnosing the problem. The issue is NOT foreign investment here;
Enron's
> project could have been built by Tata, and still the problem would have
been
> the same.
>
> Let me recap: India has a chronic power shortage. When the wife of Shiv
Sena
> supremo Bal Thackeray died, it was because she developed anginal pains,
and
> in the dark hotel room (where power had failed) the family members could
not
> find the necessary medication before her cardiac condition worsened and
she
> succumbed. When the extremists who attacked the parliament of India on
> December 13, they failed to receive a phone call telling them to stop
> (because the parliament had adjourned) because the man who was to have
made
> the phone call on their cell phones had a power failure in his house, and
> could not see the live parliamentary session. In other words, the powerful
> and the dangerous are equally-affected by India's power shortages. Not
that
> the poor in many parts of India aren't affected, they are lucky to have
any
> power in some cases.
>
> Maharashtra, in 1990, was a surplus power state only marginally; it was
> widely expected that if the economy had grown at 7% a year, it would need
> more power, which the MSEB's chronically underfunded and relatively
> inefficient power plants would have failed to deliver. Which is why
> Maharashtra needed power, and Enron offered power.
>
> The agreement Enron and India signed ***was based on the new investment
> policy formulated by the Indian government***. As India nearly defaulted
on
> its payments in 1990, and had to pledge its gold reserves to the Bank of
> England (when Chandra Shekhar was the prime minister), it was not what you
> or I would call a good credit risk. Given the propensity of developing
> countries to devalue currency to boost exports, Enron sought payment in
> foreign currency. This meant there was an exchange risk involved, and
India
> had to bear that exchange risk. The currency did fall -- in 1990, it was
> about 20 rupees to a dollar, today it is 45-50 rupees to a dollar. While
> Indian economy continues to grow at 4%-5%, which is better than the
anaemic
> growth in the rest of the world, it has grown at a slower pace than
expected
> -- which is hardly the fault of the foreign investor.
>
> And as regards Maharashtra being forced to buy power it did not need. The
> leaders in India are surely aware that Maharashtra is part of a bigger
> entity called India, and in Southern India, some states have power
deficit,
> as has Madhya Pradesh, the state immediately to Maharashtra's northwest.
> Nothing prevented Maharashtra from creating a secondary market, of buying
> Enron's power, and selling the surplus to other states which needed power.
> Karnataka, to Maharashtra's south, too has power shortage. IT companies in
> Bangalore are relocating to Hyderabad and elsewhere because of that. If
the
> agreement with Enron did not allow such secondary sales, then that was the
> issue on which Maharashtra could have argued its case with Enron -- it did
> not. It created this fictitious debate about expensive power, about
> corruption charges (never proven despite a dozen court cases), when two
> successive Maharashtra governments, Congress and then the bitterly-opposed
> BJP-Sena government, ended up signing the deal with Enron. The BJP-Sena
> government had a deal which was even more of a sweetheart deal than the
one
> Congress signed, in which the price for the second phase was to be
> renegotiated. Sena opted for a bigger overall project, thus guaranteeing
> surplus power.
>
> The failure of the plant in Dabhol is because Maharashtra could not afford
> to pay, not because Enron did not deliver power. It was, and its future
> buyer will be able to deliver power. Maharashtra -- and India -- need to
use
> their local power grid better and create a secondary market, so that
surplus
> states can share power with deficit states. It does happen in some states,
> but that market needs to be more regularized.
>
> To use the Dabhol fiasco as some sort of an indictment of foreign
investment
> in India reveals a peculiar mind-set which sets about gathering convenient
> arguments after making up the mind. But hey, opinion is indeed free!
>
> Salil
>
>
> >From: Margaret Trawick <trawick-AT-clear.net.nz>
> >Reply-To: postcolonial-AT-lists.village.virginia.edu
> >To: postcolonial-AT-lists.village.virginia.edu
> >Subject: Re: More Enron news from the Indian angle
> >Date: Mon, 24 Dec 2001 11:01:25 +1300
> >
> >Amazing.  What I wonder is what those who tout the virtues of foreign
> >investment in India will say about this.
> >
> >
> >
> >----- Original Message -----
> >From: Thomas Palakeel <tjp-AT-hilltop.bradley.edu>
> >To: <postcolonial-AT-lists.village.virginia.edu>
> >Sent: Monday, December 24, 2001 4:34 AM
> >Subject: More Enron news from the Indian angle
> >
> >
> > > This is fresh out of Yahoo News.
> > >
> > >
> > >
http://biz.yahoo.com/rb/011223/business_utilities_india_enron_dc_1.html
> > >
> > >
> > >
> > >      --- from list postcolonial-AT-lists.village.virginia.edu ---
> > >
> >
> >
> >
> >      --- from list postcolonial-AT-lists.village.virginia.edu ---
>
>
>
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