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Thursday, 6 September, 2001, 15:55 GMT 16:55 UK
US warns India on Enron
Dabhol plant
Enron is awaiting a response from the Indian authorities to its proposal
The US ambassador to India has warned that the long-running dispute between Enron and Maharashtra state is deterring investment in India.

"I know this personally from speaking with some of the premier American business executives with major investments in Asia," the new ambassador Robert Blackwill told businessmen in Bombay.

Enron's $2.9bn (2bn) investment in the Dabhol power plant is the country's biggest foreign investment, but it has become mired in arguments about the high price Enron charges for its power.

In previous interviews, Enron has alluded to the possibility of sanctions being used against India, prompting fresh efforts by the Indian government to resolve the dispute.

Enron caution

Some optimism exists that a resolution could be reached shortly, with a leading Indian trade body forecasting a "win-win" solution to the row within weeks.

Separately, a survey suggests that people in India would be willing to pay more for power if the service was reliable, pointing to a softening in public attitudes.

However, an Enron spokesman displayed slightly more caution.

"Enron had expressed willingness to the government of India more than a month ago to forego expected profits and negotiate terms that would allow the Indian authorities to acquire foreign stakeholders' interest," an Enron spokesman told the BBC's World Business Report.

"To date, we have not received any such response," he added.

High price

The dispute centres on the high price charged by Dabhol.

Maharashtra officials say the cost of power supplied by Enron is nearly double the tariff charged by Indian power producers, and used it as an excuse to stop paying state debts to the plant.

Enron maintains that its costs are higher because Dabhol is a state-of-the art facility, and because the regional electricity board is not utilising the plant's intended capacity.

Earlier this year, the Indian government announced that Enron had agreed to cut its tariffs.

But the news did not defuse the dispute, which has developed into one of the bitterest rows in international business.

Jimmy Mogal, Enron spokesman
"We have not received any response from the Indian authorities"
See also:

24 Aug 01 | Business
Energy giant piles pressure on India
25 May 01 | Business
India's power crisis escalates
11 Jul 01 | South Asia
Energy giant appeals to India
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