At 8.47 AM on November 26, 2015, Union Railways Minister Suresh Prabhu, who hails from Maharashtra, cheered as the Dabhol Power Plant started supplying power to Indian Railways. Prabhu was cheering because the rate (Rs 4,70 per unit) at which the Dabhol plant will supply 300 MW to Indian Railways will help the minister save Rs 1,000 crore a year in electricity costs. Though the Dabhol plant has the capacity to generate close to 2000 MW of power, it has to make to with 300 MW at the moment (more details later on why). This is almost like full circle for the Dabhol Power Plant which traces its antecedents back to another leader from Maharshtra, Sharad Pawar and to the early days of the P. V Narashima Rao led Congress regime in 1991-92. The Dabhol story is a classic case study of crony capitalism, “power’ politics and India’s hesitant and flawed attempts to integrate with the global economy. It is also a warning for the future.
When Narendra Modi took over as Prime Minister in May 2014, power shortages were a crucial factor hindering the growth of the Indian economy. It was stated loudly and clearly that private, including foreign investment is a must to eliminate power shortages from the country. Exactly the same sentiments were echoed almost 25 years ago when P. V Narashima Rao took over as Prime Minister in June 1991. That was the genesis of the Enron controversy, or scandal or whatever you want to call it. The American power company (that eventually went bankrupt in 2001) Enron announced a major power project to be located in the Ratnagiri district of Maharashtra at place called Dabhol. At that time, it was the largest foreign investment in India. Set up as a joint venture between the Maharashtra Power Development Corporation, Enron, General Electric and Bechtel, the project was to set up a 740 MW naphtha based plant in the first phase and another 1700 MW gas based plant in the second phase. Sharad Pawar was bas a key politician from Maharashtra backing this “revolutionary” project. Construction began in 1992. But the project was mired in controversies from the start. The power purchase agreement between the Enron project and the Maharashtra based utility was kept a secret and all sorts of allegations about pay offs and crony capitalism threw thick and fast. Many independent analysts were of the opinion that the project was a white elephant that would cost the economy and the consumer dear, apart from setting all wrong precedents in the manner of attracting private and foreign investment. The Shiv Sena, then in opposition, was vehemently opposed to the project and the party Boss, the late Balasaheb Thackeray promised to throw the Enron project into the Arabian Sea if he came to power. Lo and behold, the Shiv Sena-BJP alliance did win the 1995 assembly elections and formed a government. Was the project scrapped? Not at all. Journalists from that era still remember how a senior Enron executive Rebecca Marks flew down to Mumbai in her trademark skirts and persuaded Thackeray to let the project continue. The photo op between the svelte Marks and Thackeray was one of the most watched in that era!
But the worst fears of independent analysts eventually came true. By 2000, it came to light that the state utility in Maharashtra was buying power from the Enron project at Rs $.67 per unit while it was charging Rs 1.89 per unit from retail consumers. It was also revealed that Enron was charging more than double what other power generation plants were charging for the same power. The controversy kept snowballing and came to a sudden end when Enron spectacularly collapsed in 2001, sending almost all top executives in America to jail. Not much was heard about Rebecca Marks after that!
Thousands were employed during the construction of the controversial power plant. Tens of thousands of families were looking forward to the plant for a livelihood. All that went up in smoke as the plant was moth balled after the Enron collapse. As usual, state owned entities in the form of NTPC and Gail came to the rescue in 2006 and formed a joint venture. After many tortuous stumbles and pitfalls, the revamped project went on stream as a gas based 1967 MW power plant. Ill-fated as the project is, the plant had to be shut down again in 2013 because the promised gas supply never materialized (That’s another story of its own on crony capitalism and “power” politics!).
Many efforts and negotiations and false starts later, the plant started operating again on November 26, 2015. But only 300 out of the total capacity of 1967 MW will be generated at the moment, to be supplied to Indian Railways.
Fingers crossed for what happens next. From Sharad Pawar to Suresh Prabhu, the Enron-Dabhol saga has indeed travelled a long distance. But has anything of substance really changed?
