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Tuesday, 6 February, 2001, 16:10 GMT
Enron cashes in India power bill
power plant
Lights out: Enron wants its money
By Sanjeev Srivastava in Bombay

US energy giant Enron Corp has cashed in an Indian Government counter-guarantee to recover unpaid bills.

The state-owned electricity board in the western Indian state of Maharashtra owes the company 790m rupees ($17m) in an outstanding bill for November 2000.


Its an unfortunate decision

Maharashtra Finance Minister Jayant Patil

The board has not paid Enron for electricity purchased from the Dabhol Power Company (DPC), a power plant built and largely owned by the US giant.

Enron is also soon to invoke another counter-guarantee for 1.52 bn rupees ($33 m) against an outstanding December 2000 bill.

Too expensive

"It's an unfortunate decision ," Maharashtra's Finance Minister, Jayant Patil, told the BBC.

"The cost of power supplied to the state electricity board was just too high and the state government could not afford to pay the same," he said.

The board began scaling down demand for DPC power last year on the grounds that it was too expensive.

But the board, which supplies power to most of Maharashtra including Bombay, is contracted to buy power from Enron under an agreement signed with the US company in 1993.

The $3.5-bn Enron power project is the largest foreign investment project in India.

Disappointment

This is the first time a foreign power company has invoked a central government guarantee to clear outstanding dues.

DPC president Neil McGregor said in a statement he was "disappointed", but added the decision to invoke the counter-guarantee was made after "considerable restraint" on the part of Enron.

Although the Enron move is likely to heighten tension between the US company and Indian authorities, the government will be keen to prevent the showdown from driving away other investors.

Badly needed funds

India desperately needs foreign investment in infrastructure, particularly power.

Four firms have already pulled out of power projects in India citing too much red tape.

But many Indians believe the Enron deal was doomed from the start.

Nearly all the mainstream Indian opposition parties as well as several non-government organisations opposed the project when it was signed in 1993, saying it was loaded in favour of the US company.

It is also the only one of eight "fast track power projects" cleared by India in the early-to-mid-1990s to have actually got off the ground.

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See also:

08 Jan 01 | South Asia
Showdown looming over Enron project
21 Dec 00 | South Asia
India casts doubt on Enron project
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