Enron in India : A Still Incomplete Story
    By J. Sri Raman
    t r u t h o u t | Perspective

    Wednesday 31 May 2006

    If you want an illustration of "deafening silence," it is what you hear in the corridors of official and corporate India after the judicial verdict in the US on Enron and its extraordinary crimes. The eerie silence is about the Indian part of the Enron story.

    The silence is all the more striking when you contrast it with the noise made recently over the report of the Paul Volcker Committee of the UN over the food-for-oil scheme involving Saddam Hussein's Iraq. The political din led to a virtual (and surprisingly precipitous) dismissal last December of India's External Affairs Minister K. Natwar Singh, who currently faces an official inquiry as well.

    Strangely, no one has demanded an inquiry into the disgraceful episode of Enron in India, despite the role in it of several Indian political leaders and bureaucrats. The sensational story about the record court sentence handed to former Enron emperors Kenneth Lay and Jeffrey Skilling has not even elicited any significant recall of the sordid affair in the political quarters that matter and, consequently, in the mainstream media.

    Enron came to India as the first major Western response to India's "economic reforms" - and the first major warning against what these could entail. Enron brought the country its biggest ever foreign-investment project, which was to prove one of its biggest failures on the front of infrastructural industry. The multinational power corporation set up here, with Enron as the dominant partner, was to become a model of malfeasance and corruption, besides an enemy of the people and their environment in the area of its operation.

    Enron "came, saw and conquered," as a commentator once put it. The company's delegation came to India in June 1992 and, within 72 hours, signed a memorandum of understanding (MoU) with the Maharashtra State Electricity Board (MSEB) for setting up a liquefied gas-based power plant at Dhabol, 300 km south of Mumbai, India's financial and industrial capital. The $3-billion contract was hailed as the largest in the country's history of foreign investment and hyped as Enron's biggest-ever overseas project.

    Enron came to India after a minority government in New Delhi under former Prime Minister P.V. Narasimha Rao proclaimed a package of economic reforms and readiness for privatization in the power sector. Months of talks in the US had paved the way for the subsequently easy Enron entry, with then-US Commerce Secretary Ron Brown on hand in India to help conclude the terms of the MoU.

    Even so, the unbelievably attractive terms of the deal for Enron raised several uncomfortable questions. The counter-guarantee, signed by the government of the state of Maharashtra, made the Dhabol Power Corporation (DPC) a fail-safe undertaking, in contravention of all free-market principles, before a single watt of electricity was produced. The government committed itself to a counter-guarantee of about $35 million, to be paid in regular installments over 20 years for the 2,184-megawatt project, to be completed in two phases.

    Then-Maharashtra Chief Minister Sharad Pawar (currently India's Agriculture Minister) and his political associates found themselves on a mat. It was a far-right combine of the Shiva Sena and the Bharatiya Janata Party (BJP) that then unleashed an anti-Pawar and anti-Enron offensive. And they were helped not merely by a World Bank assessment that questioned the viability of the project on grounds of its excessively high cost and its reliance of locally scarce resources like liquefied natural gas. The Sena-BJP campaign got a shot in the arm from the war on the local people that followed as a corollary to the corporate undertaking.

    Human Rights Watch and other organizations have recorded repeated instances of the brutal oppression to which the farmers and the fishermen in the hamlets of the Konkan coast were subjected when they protested against the inevitable inequities of such operations. This included arbitrary land acquisitions and environmental degradation, causing scarcity of fresh water and contamination of fishing areas. Enron, of course, pleaded ignorance of and non-involvement in such incidents. In one documented example, however, the police used a company helicopter to monitor operations in which the protestors' homes were raided and even pregnant women dragged out and assaulted.

    The campaign helped the far-right combine in the run-up to a State assembly election, as the call to "throw Enron into the Arabian Sea" (to India's west) caught on. The Sena-BJP front wrested power in 1995 and announced in August a decision to scrap the project. In just three months, however, something happened to transform the situation.

    Rebecca Mark, then chairperson of Enron International, came down to Mumbai and called upon Sena chief Balasaheb Thackeray, who boasted of running the State government by "remote control." Within a week, "re-negotiations" with Enron resumed. And, in a mere 12 days, the government entered into a new agreement with Enron for a project thrice as large as the one the original MoU had envisaged after months of preparation.

    The critics of the Dhabol project had cracked jokes about the $20 million that Enron said it had expended on "educating" Indian public opinion. "I would like to see these Enron graduates," thundered top BJP leader Lal Krishna Advani in parliament. Not a squeak was subsequently heard about the price of the post-graduation that had made the honorable resumption of the project possible.

    This is only one of the areas that cries out for further investigation in order to complete the Enron story.

    For another dark area, we must move less than a year ahead from Mumbai to New Delhi. The same two parties shared power in a minority government of India, headed by the BJP, which took power in May 1996. The regime was to prove a 13-day wonder. Faced with certain failure in a confidence vote, on which a debate was raging in parliament, then-Prime Minister Atal Bihari Vajpayee called a "luncheon" meeting of his Cabinet. Here it was decided to give Enron a comprehensive counter-guarantee, pledging all state assets except the military and diplomatic assets to the company as collateral.

    The deed done, the government resigned rather than face defeat on the vote. The mystery of the mid-day move stays unsolved until today.

    There is no need for investigation, of course, about the roles played by succeeding US administrations in helping Enron in India. President George W. Bush and his men have taken particular interest in pushing the Indian interests of the Enron chief who, they say, he used to call "Kenny Boy" in the good old days when the Houston-based firm used to fund the Republican poll campaign heavily. Vice-President Dick Cheney was himself in New Delhi to talk to then-Opposition leader Sonia Gandhi in mid-2001 about the need to save the Dhabol Project that was already hopelessly in deep trouble.

    The supreme presidential effort as Enron's savior in India was to be made at a meeting of Vajpayee with Bush on November 9, 2001 - in an important post-9/11 summit, at that. "Talking points," the presidential staff let it be known, were ready on the subject. On November 8, however, came the stunning Enron disclosure of hitherto-undisclosed losses of $586 million. That took Enron finally off the official India-US agenda.

    India is now left holding the misbegotten Enron baby. The country has yet to draw promised power from the first phase of the project, officially completed in 1999. Renamed the Ratnagiri Gas and Power Private Limited and restarted on May 1 amidst much fanfare, the plant faces the prospect of no speedy recovery but only of an uncertain fuel supply.

    Now, obviously, India can hope for nothing like reasonable returns from its multi-billion investment in the business of a multimillion corporation of an unbeaten criminal record. The country, however, cannot afford to forget about the folly. Nor can the Enron story ever be complete without all the details of the company's Dabhol debacle.