15 Feb 2001
Rajesh Ramachandran
The Times of India
NEW DELHI: Is there a way out of the Enron imbroglio? Contrary to what `experts' and the government say, there seem several options available to the government. But to avail them would require some political will.
S N Roy, former chairman of the Central Electricity Authority, points out that just as Pakistan got a US power company to reduce its tariff by half, India too should get the Enron tariff reduced.
When asked whether it is ready to re-negotiate the power purchase agreement (PPA) and bring down the tariff, Enron did not respond. Instead, a public relations agency replied that ``tariffs are not high''.
Observers assert that even after ensuring a reasonable profit for Enron, the tariffs can be cut. K K Govil, director projects, Power Finance Corporation insists, ``The present PPA is heavily in favour of Enron. The PPA should be re-negotiated to get capital costs and rate of return calculated in rupees and not dollars.''
According to Govil, pegging the costs and tariffs to foreign exchange is unheard of. ``The capacity related incentive should also go. Ideally, the cost of a gas-based plant should be half that of a coal-fired plant. But in Enron's case it is not so. This too has to be rectified,'' said Govil.
The government is tight-lipped, but sources say the government may palm off the burden to utlilities like National Thermal Power Corporation, Power Trading Corporation or Power Grid Corporation. That will end the public scrutiny of the project, contrary to what is happening in Maharashtra now, and the account will be shared by central utilities, state electricity boards and others.
Also making the round is a politically powerful industrial house's name, which might broker the deal. But will all this help? Roy feels it would be a disaster: ``Impossible. How can the government force NTPC or PTC, a commercial enterprise, to buy power at Rs 5 a unit and sell it at Rs 2?''
Even at full capacity, Enron's power is expected to cost around Rs 5 a unit, much higher than the NTPC's selling rate of about Rs 2 per unit. Prasant Bhushan, fighting a public interest litigation in the Supreme Court, has another set of solutions: Nationalise the project by an Act of Parliament, paying Enron a token or fair amount as in the case of bank nationalisation. Or, the Maharashtra Electricity Regulatory Commission's statutory power should be invoked to override the PPA and regulate the tariffs.
The Supreme Court had earlier limited the petition's scope to accountability of the public servants. ``If the SC gives full leave, the project will be voided since there was much illegality involved. Most importantly, if a criminal investigation into the bribes is initiated, enough evidence could be unearthed in three months,'' said Bhushan.
Will all this deter foreign investment in India? Ashok Rao, convenor of national working group for power, feels the bogey of foreign investment fleeing is a blackmail tactic. He points out that India is a bigger power industry market than most of Europe, West Asia or Latin America. ``There is a global recession in power industry. So, most private power companies are just a front for power equipment manufacturers who have to sell their equipment in India. That is why they insist there should be no competitive bidding for equipment.''
Would it hurt much if the government synchronised people's needs with those of the investor.
Rajesh Ramachandran
The Times of India
NEW DELHI: Is there a way out of the Enron imbroglio? Contrary to what `experts' and the government say, there seem several options available to the government. But to avail them would require some political will.
S N Roy, former chairman of the Central Electricity Authority, points out that just as Pakistan got a US power company to reduce its tariff by half, India too should get the Enron tariff reduced.
When asked whether it is ready to re-negotiate the power purchase agreement (PPA) and bring down the tariff, Enron did not respond. Instead, a public relations agency replied that ``tariffs are not high''.
Observers assert that even after ensuring a reasonable profit for Enron, the tariffs can be cut. K K Govil, director projects, Power Finance Corporation insists, ``The present PPA is heavily in favour of Enron. The PPA should be re-negotiated to get capital costs and rate of return calculated in rupees and not dollars.''
According to Govil, pegging the costs and tariffs to foreign exchange is unheard of. ``The capacity related incentive should also go. Ideally, the cost of a gas-based plant should be half that of a coal-fired plant. But in Enron's case it is not so. This too has to be rectified,'' said Govil.
The government is tight-lipped, but sources say the government may palm off the burden to utlilities like National Thermal Power Corporation, Power Trading Corporation or Power Grid Corporation. That will end the public scrutiny of the project, contrary to what is happening in Maharashtra now, and the account will be shared by central utilities, state electricity boards and others.
Also making the round is a politically powerful industrial house's name, which might broker the deal. But will all this help? Roy feels it would be a disaster: ``Impossible. How can the government force NTPC or PTC, a commercial enterprise, to buy power at Rs 5 a unit and sell it at Rs 2?''
Even at full capacity, Enron's power is expected to cost around Rs 5 a unit, much higher than the NTPC's selling rate of about Rs 2 per unit. Prasant Bhushan, fighting a public interest litigation in the Supreme Court, has another set of solutions: Nationalise the project by an Act of Parliament, paying Enron a token or fair amount as in the case of bank nationalisation. Or, the Maharashtra Electricity Regulatory Commission's statutory power should be invoked to override the PPA and regulate the tariffs.
The Supreme Court had earlier limited the petition's scope to accountability of the public servants. ``If the SC gives full leave, the project will be voided since there was much illegality involved. Most importantly, if a criminal investigation into the bribes is initiated, enough evidence could be unearthed in three months,'' said Bhushan.
Will all this deter foreign investment in India? Ashok Rao, convenor of national working group for power, feels the bogey of foreign investment fleeing is a blackmail tactic. He points out that India is a bigger power industry market than most of Europe, West Asia or Latin America. ``There is a global recession in power industry. So, most private power companies are just a front for power equipment manufacturers who have to sell their equipment in India. That is why they insist there should be no competitive bidding for equipment.''
Would it hurt much if the government synchronised people's needs with those of the investor.
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