Energy giant piles pressure on India
Friday, 24 August, 2001, 16:02 GMT 17:02 UK
The project is the largest foreign investment in India
In a veiled threat, the energy giant Enron has
raised the spectre of US sanctions against
India in its dispute over the $2.9bn Dabhol
power plant project.
Following an interview with Enron chairman
Kenneth Lay, the Financial Times reported that
Enron wanted US sanctions against India if the
company did not get back the $1bn it had
spent on building the plant.
The company later tried to qualify and play
down Mr Lay's statement, saying that it had
not lodged a formal complaint with the US
government.
Possibly responding to the pressure, the Indian
government has begun moves to resolve the
dispute, one of the bitterest in international
business.
Can't pay, won't pay
Enron launched arbitration proceedings this
year, after the plant's only client, the
Maharashtra regional electricity utility, refused
to pay its bills.
Mr Lay had told the Financial Times that "there
are US laws that could prevent the US
government from providing any aid or
assistance or other things to India going
forward if, in fact, they expropriate property of
US companies."
Mr Lay said that non-payment of bills
effectively constituted an expropriation.
Enron denial
But the firm said that this did not mean that
sanctions had been applied for, nor had a
formal complaint been lodged.
An Enron spokesman said he was confident
that the Indian government would move to
resolve the dispute, without the need for
punitive measures.
Later on Friday, Indian media reported that the
government had given financial institutions two
weeks to develop a plan to resolve the
dispute.
Finance secretary Ajit Kumar reportedly met
representatives of the Industrial Development
Bank of India and other banks, and set the
deadline for a plan to avoid the case ending up
in an international arbitration court.
Trade ties
Mr Lay's reported remarks will prove
embarrassing both to Washington and Delhi,
which have striven to improve ties in recent
months.
In July, the US government hinted that existing
sanctions against India, imposed as a result of
India's nuclear-testing programme, could soon
be lifted.
The US also recently granted India a range of
free-trade privileges, in the hope of winning its
support ahead of a fresh round of global trade
talks.
Price problems
The dispute centres on the high price charged
by Dabhol.
Maharashtra officials say the cost of power
supplied by Enron is nearly double the tariff
charged by Indian power producers, and used
it as an excuse to stop paying state debts to
the plant.
Enron maintains that its costs are higher
because Dabhol is a state-of-the art facility,
and because the regional electricity board is
not utilising the plant's intended capacity.
Earlier this year, the Indian government
announced that Enron had agreed to cut its
tariffs.
But the news did not defuse the dispute,
which has developed into one of the bitterest
rows in international business.
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