Enron, India utility dispute intensifies
Enron, India utility dispute intensifies
BOMBAY (Reuters): A dispute between U.S. energy giant Enron Corp and an Indian utility has worsened ahead of a meeting on Tuesday to discuss the fate of the controversial US$2.9 billion project.
Analysts expect little progress at the meeting between Enron's Dabhol Power Company and a committee set up by the western Indian state of Maharashtra to renegotiate the power project's tariff.
The U.S. firm, which served a termination notice on May 19 of its agreement to sell electricity to the state-run local utility, has opposed the lower rates and has already said it considers the Tuesday meeting as a courtesy call.
The Maharashtra State Electricity Board (MSEB) also served a termination notice last Thursday saying Dabhol's plant could not meet capacity targets within a specified period.
Last week, Dabhol returned a cheque for $39 million to the MSEB and a Dabhol spokesman declined to comment on the issue.
But newspapers reported over the weekend that Enron had returned the cheque because it was annoyed with MSEB's contention the plant cannot ramp up to full capacity within three hours from a cold start as stipulated in the agreement.
Dabhol has contested this claim saying its plant is not built for such a purpose.
MSEB is the sole buyer of electricity from Dabhol under an agreement.
The two sides have been sparring for more than six months over the giant power project, being built in two phases. The first phase of 740 MW is already up and running while the second of 1,444 MW is slated for commissioning next month.
MSEB, which has defaulted on past payments of $48 million, has refused to buy power from the second phase stating it is too costly and rates should be lower.
The row is seen as a test case of India's ability to attract foreign investment in the power sector, which needs 100,000 MW over the next 10 years to meet growing demand.
But its ability to solve the issue also depends on cooperation among various political parties, which have been using the controversy to attack each other.
On Sunday, Vilasrao Deshmukh, chief minister of Maharashtra, criticized the federal government for not helping the state resolve the issue quickly, the Press Trust of India (PTI) said.
"Despite several letters, the federal government has not responded to the state's pleas to intervene in the matter," PTI quoted Deshmukh as telling reporters after a party meet in Bombay.
Maharashtra is ruled by a coalition headed by the opposition Congress party.