Fwd: IndiaResists! Major Power Failure Turns Spotlight on Privatisation

By the look of it, it is not just California! India got screwed up too.

Best,
Sabri

-----------------------------------------------------------
Got a good story on Economic Globalisation and India?
post it to indiaresists@topica.com
----------------------------------------------------------

       Copyright 2001 InterPress Service, all rights reserved.
          Worldwide distribution via the APC networks.

                      *** 03-Jan-0* ***

Title: ECONOMY-INDIA: Major Power Failure Turns Spotlight on Privatisation

By Ranjit Devraj

NEW DELHI, Jan 3 (IPS) - When a massive power failure hit north India
affecting over 200 million people Tuesday, state-owned electricity utility
managers rushed for help to a big power plant run by a leading global
energy company.

But they backed off quickly when the U.S.-based 'Enron Corporation'
demanded three times the normal rate for supplying power from its Dabhol
thermal plant in western India, to re-start the stalled electricity stations.

Electricity was finally sourced from the government's own units to
partially restore power to north India Wednesday, but not before losses
running into hundreds of millions of dollars were caused.

What was perhaps the biggest power collapse in the country so far, has
given an edge to demands for speeding up privatisation of India's
inefficient state-controlled power utilities.

But it has also shown the costs of rushing headlong into privatisation of
the sector, say critics of Enron, which runs the world's largest private
power project in western Maharashtra state.

Maharashtra Chief Minister Vilasrao Deshmukh has even threatened to take
over the Dabhol Power Corporation (DBC), with which the state government
signed a controversial deal some years ago.

Enron was forced to renegotiate an earlier deal with the state government,
which was scrapped following a sustained campaign by people's groups and
protests by political opposition parties.

But the new power sale contract threatens to bankrupt the Maharashtra State
Electricity Board (MSEB), the state's electricity utility and the state
exchequer itself.

There is little that the Maharashtra government can do because of the
iron-clad counter-guarantee that Enron secured when it renegotiated the
deal with a predecessor state government.

Under the deal, concluded in the year 1995, the MSEB can ask Enron to cut
production only if it picks up the bill for capital costs and interest. It
must pay Dabhol a minimum of 220 million U.S. dollars a year whether it
needs the power produced or not.

The deal is also designed to pass on the effects of rupee devaluation and
hikes in international petroleum prices to the MSEB. Over the past year,
both things happened, pushing up the cost of DPC power to two U.S. cents a
unit, which is thrice the rate when the deal was signed.

''No business can survive if the customer does not pay its bills,'' said a
DPC spokesperson.  Enron owns 50 percent of the plant, while 'General
Electric', 'Bechtel' and the MSEB are major partners.

Says Grish Sant, researcher of people's group 'Prayas' (endeavour): ''The
whole Enron project was negotiated in a non-transparent, non-competitive
manner and the MSEB had at that time highly inflated its power demand
projections.''

The MSEB's hydro-electricity plants in the state produce power at a third
of what Dhabol charges. But the state utility has been forced to back down
production and even shut down some of its units as a result of the Enron
deal, says Sant.

According to Narayan Roy, a former chairman of the Indian government's
Central Electricity Authority, MSEB tariffs are now so high that many
energy-intensive industries in Maharashtra have switched to captive power
plants, causing a glut of expensive power in the state.

''The 1995 re-negotiation (of the Enron deal) was a piece of professional
dishonesty on the part of MSEB engineers who may have succumbed to
political pressure without realising that their actions would lead to the
bankruptcy of the board,'' says Roy.

Several power experts argue that it would be far cheaper in the long run to
make state-run utilities more efficient than to bring in foreign investors
who have little understanding of India's power system.

''The World Bank's foreign consultants are chartered accountancy firms with
no experience of the Indian power system or society,'' says Ashok Rao, a
top executive at the Bharat Heavy Electrical Limited (BHEL), a major public
sector corporation.

Rao says affordable electricity has been recognised as a major ingredient
in India's food self-sufficiency because it is used to power farm
irrigation pumps.

World Bank consultants have recommended that electricity produced in Uttar
Pradesh, the largest state in the northern region, be sold at roughly the
same rates that Dabhol now charges in Maharashtra.

According to Rao, very little is being done in India to curb the theft of
electricity by industrial units owned by powerful people. ''In the Indian
capital alone, about 50,000 dollars worth of electricity is lost every
hour,'' he said.

However, Enron has blamed MSEB's troubles on transmission losses and
failure to collect dues.

In full-page advertisements late last year in leading national dailies, the
company argued:  ''MSEB's financial crunch is attributable to a multitude
of factors, relating to transmission, distribution arrears etc., and not
Dabhol.''

''These factors afflict most utilities in the country today. Dabhol remains
committed to producing reliable, quality power,'' it said.

Payment arrears by the state-run power utilities now exceed five billion
dollars.

However, according to labour leader Dubey, whatever their demerits, the
state-run utilities have raised power production in India from 1,362 MW
half a century ago to some 86,000 MW today.

Dubey and Rao blame pro-liberalisation policies followed by successive
governments in the last ten years for starving the government power
utilities of funds.