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Wednesday, 13 June, 2001, 14:13 GMT 15:13 UK
'Breakthrough' in India power dispute
Bright lights: The state of Maharashta is disputing its electricity bill
Bright lights: The state of Maharashta is disputing its electricity bill

By Sanjeev Srivastava in Bombay

Global power giant Enron has agreed to reduce the prices of its power in India, following a row with the authorities there, according to Jayawanti Mehta, India's junior minister for power.

Enron has yet to confirm that its Indian subsidiary Dabhol Power Co (DPC) is ready to reduce its cost of power to 3.5 rupees ($0.07) per unit.

But the minister's statement raises hopes of an amicable solution to the protracted power tariff dispute between the US energy giant Enron and Indian authorities.

The global power giant has run into local difficulties
The global power giant has run into local difficulties
The $2.9bn, 2,180 megawatt Enron power project - the single biggest foreign direct investment in the country and once seen as the showpiece of India's commitment to globalisation - has been shut for a couple of weeks because of its dispute with the Maharashtra state electricity board (MSEB).

The dispute centres on the high price charged by Dabhol.

As well, the state electricity board and Enron are also locked in a dispute over non-payment of electricity bills. MSEB owes Enron nearly $64m in outstanding payments.

According to MSEB officials, the cost of power supplied by Enron is nearly double the tariff charged by Indian power producers.

Enron on the other hand, maintains that its costs are higher because of two reasons:

  • It is a state-of-the art plant

  • The state electricity board is not utilising the capacity production of DPC.

"If only 30-35% of the power produced in DPC is to be consumed the cost automatically goes up," a DPC spokesperson told the BBC.

No decision yet

Enron officials were unwilling to comment on the minister's specific announcement during a seminar in Delhi on Wednesday.

"I will only say that a number of proposals are being discussed and by no means have the two sides reached any understanding on the likely tariff structure," a spokesperson for Enron told the BBC.

The spokesperson also said that a number of other issues also need to be addressed before Enron can make any commitment on the tariff issue.

Second phase of project in doubt

These issues relate to the second phase of the Enron power project which is nearing completion.

Some Indian officials have made public statements that the second phase is not viable.

Enron officials are also keen that potential buyers of their entire power produce be identified first and the government gives a guarantee that those power purchase agreements will be fully honoured.

Enron says it needs these guarantees following MSEB's decision not to buy any power from the second phase of the Enron project.

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See also:

29 May 01 | South Asia
'Constructive' talks in Enron dispute
30 May 01 | South Asia
Enron plant 'shut down'
25 May 01 | Business
India's power crisis escalates
20 May 01 | Business
Enron warns India
23 Apr 01 | South Asia
Enron debates India future
06 Feb 01 | South Asia
Enron cashes in India power bill
12 Jan 01 | South Asia
Protest against India power project
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