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Wednesday, 30 May, 2001, 18:51 GMT 19:51 UK
Enron plant 'shut down'
Dabhol plant
The plant is India's biggest direct foreign investment
By Sanjeev Srivastava in Bombay

The controversy surrounding the $2.9bn Enron power project in the western Indian state of Maharashtra has deepened further with officials of the Maharashtra state electricity board (MSEB) saying it has shut down.

Enron logo
Enron are blamed for charging too much
However, Enron says it has so far not received any orders to shut down the plant - run by its subsidiary Dabhol - and so it is continuing operations.

According to an MSEB chief engineer, the shutdown came into force after they informed the Dabhol plant on Tuesday of their decision to not buy a single unit of power.

The plant had already issued a preliminary termination notice to MSEB nearly 10 days ago.

They stated they had no choice but to wind up their Indian operations because of non-payment of outstanding dues by the state electricity board.

Tariff row

At the heart of the dispute between the two sides is the power tariff arrangement.

Indian officials find the tariff too steep - nearly three times more expensive than the tariff charged by domestic power producers.

However, Enron officials maintain that their tariff is high because their plant is state of the art.

The Dabhol plant is believed to have offered to reduce the tariff by 10% in a meeting with a government-appointed renegotiation panel on Tuesday.

They are also understood to have communicated to the renegotiation panel that the tariff will come down by another 10% once the plant shifts to liquefied natural gas.

The Dabhol project is the biggest direct foreign investment in India and seen as a key test of the country's commitment to economic liberalisation.

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See also:

29 May 01 | South Asia
'Constructive' talks in Enron dispute
25 May 01 | Business
India's power crisis escalates
20 May 01 | Business
Enron warns India
06 Feb 01 | South Asia
Enron cashes in India power bill
08 Jan 01 | South Asia
Showdown looming over Enron project
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