Bastion of Free Speech

Just a few months ago Enron's stock market value was a whopping US$ 101 billion or over Rs.480, 000 crores. Its share price collapsed from US$ 90 each to a few cents each now. Enron is now well and truly down the tubes. It was nothing more than a house of cards drawn from a pack of lies. Its books were cooked, its profits boosted and not surprisingly its boosters have now left town. Enron Chairman, Kenneth Lay, a major donor to George Bush's election campaign and considered to be his close friend, would be lucky now to find even a mere telephone operator at the White House to take his call. Lay was mighty enough to lay down the line to the Indian government with a threatening "or else…" Does anyone remember Rebecca Mark, who made such a mark here with her power lunches and "education fund" of over US$ 28 million? LK Advani once asked who were the beneficiaries of the scholarships awarded from this fund, and chortled that they must have gone to the school for scoundrels for their education? Perhaps he should ask his valued colleague Pramod Mahajan or his political ally Bal Thackeray or his friend Sharad Pawar?

One need not shed any tears for Enron whose demise has left top management consultants like McKinsey's and top business professors from Stanford and Harvard with egg on their face. They having touted it as the corporation of the future and whose management style they breathlessly recommended to all those willing to pay and listen. Enron's hucksters in India were no less breathless when they touted it as the way to go. All of them used to warn that if Enron were stalled in India no foreign money would follow and that will be the death of us. Jairam Ramesh is now quiet. Tarun Das is now quiet. The pink papers have all shut up. Just to give you an idea, The Business Standard alone carried 685 stories on Enron/Dabhol in the three years preceding the collapse. Each of these stories was eulogistic to say the least. A particularly florid one about the inauguration of the first phase on April 17, 1999 by Prime Minister Atal Behari Vajpayee was captioned an exciting "Dawn breaks over Dabhol." Ambassador Wisner, who after his term as US Ambassador when he worked tirelessly for Enron, got his payback by becoming an Enron director after retirement, has wisely decided to lay low. And our leaders, who benefited from Enron's "education", are now appropriately celebrating Sharad Pawar's sixtieth birthday.

Enron's Indian operation, the Dabhol Power Company (DPC) in which it had a 62% holding, with the American construction-engineering giant, Bechtel, and equipment supplier, General Electric, together holding another 13%. The balance is with the Maharashtra State Electricity Board (MSEB). The Dabhol project involving an outlay of US$ 2.9 billion was intended to generate 2184MW of power and the first phase capable of 740MW went on stream in June 2000. Its high costing power with a peak power price of Rs.7 per unit was bankrupting the hapless MSEB, which was saddled with this exorbitantly priced power by its political masters - all of them without exception: Sharad Pawar and Bal Thackeray were as much involved in this as Narasimha Rao and Atal Behari Vajpayee. In the end, to save itself, MSEB had no option but to renege on the agreement it had with DPC. That finished DPC as its promoter Enron had envisaged - a perpetually ringing slot machine. DPC was up for grabs when Enron itself collapsed.

The 2184 MW Dabhol project was estimated at about Rs.10,000 crores, a figure generally considered to be highly inflated and with an assured rate of return guaranteed against rupee devaluation by the Government of India. If there ever was a sweetheart deal it was this! When Enron entered India it had promised to not only put in the entire equity but also bring in the loans for the project from overseas. This like other things promised turned out to be false. In the end except for its equity, about US$ 1 billion, it brought little else. Indian Financial Institutions, mainly the State Bank of India, IDBI and ICICI together have lent and guaranteed loans amounting to Rs. 6100 crores.

In December 1998, when the second tranche of loans and guarantees were to be sanctioned, I was the Advisor to the Finance Minister and in that capacity put up a note to him recommending that Indian FI's be advised to desist from lending Enron any more money as to do so would be contrary to the assurances given by Enron when it entered India. I told the minister that by lending Enron this money the FI's would be expending their sectoral limits to the power industry and Indian companies will find it difficult to raise money for the power projects sanctioned to them. I also told him that the Enron deal was such a sweet sweetheart deal that it was bound to go sour and therefore risky. The then Power Minister, the late Rangarajan Kumaramangalam was in full agreement with this. The Finance Minister, never one to take a position, suggested that I discuss the matter with the FI's.

Consequently I sent a copy of the note to each of the FI's soliciting their views. It seems they had agreed to reply to me through the Chairman, ICICI who wrote me an intriguing note. He agreed with the points made by me. But he argued that Enron was too good a commercial prospect to pass by. The then Chairman of SBI, MS Verma, who was an old chum of Yashwant Sinha from their Patna days, came by to meet me and advised me not to follow up on the note and let things happen the way they happened. Apparently the FM too had spoken to him and this was the product of their confabulations. The word to me was - lie low and don't make waves. To further soften me up, a leading economic newspaper carried a page one story on this and suggested that I was a Swadeshi type in league with S. Gurumurthy's lunatic fringe Swadeshi Jagran Manch.

I then went up to Home Minister LK Advani and briefed him about this situation. Advani typically kept his counsel and added to good measure that he did not understand economics and economic issues, which probably makes him the only Sindhi in the world not to do so. He however said that he would be speaking to the FM, which he did not. In the meantime Yashwant Sinha got a call from Brijesh Mishra, obviously prodded by NK Singh for Brijesh Mishra can truly claim as much ignorance on these matters as LK Advani feigns. Sinha then spoke to me and suggested that I was "exceeding my brief" by writing to the FI's. I then reminded him that it was his suggestion. Typically he gave me that broad smile of his with the fangs appropriately retracted. Yashwant Sinha now agrees that the FI's have indeed a major problem on their hands and is on record stating: "It has created uncertainties." With a smile, but naturally!

The media has been reporting that several Indian business houses such as the Tata's, Videocon, and BSES are interested in picking the Enron, Bechtel and GE stake in DPC. Now several issues will arise. The price they will pay will reflect the true cost of this project, which could be as little as 50-60% of its declared outlay. This is typical for any major project in India after all the local kickbacks and payments into numbered accounts in various countries are settled. The payoffs are not just to Indian politicians and bureaucrats but also to executives of the foreign company who use the ruse of paying off to pay themselves a bonus. This is standard operating procedure. So why should the Tata's or Videocon want to take the burden of loans advanced to a padded up project? Enron might be willing to take a hit. But are our FI's too willing to do so? If they do the cat will be out of the bag making it a fit case for the CBI to look into and haul in the gentlemen who lent the money. Like they did PS Subramaniam for lending money to Prime Minister Vajpayee's favorite IT company - Cyberspace. Are you reading Mr.Vittal?

Prime Minister Atal Behari Vajpayee once thundered that if the BJP came to power in Maharashtra it would throw the Enron project into the Arabian Sea. The BJP came to power with the Shiv Sena in Maharashtra and after a well-publicized visit to Matoshree, Bal Thackeray's residence, by Rebecca Mark, the deal was on once again. LK Advani was the BJP president then and should be able to tell us where the party got funds to fight the Lok Sabha elections the following year?

Vajpayee became Prime Minister in 1996 for a brief thirteen days and what did he do? Three things. First, he wanted the AEC to test the nuclear bombs. The scientists declined and wanted him to prove his majority in the Lok Sabha first. The second, at the behest of some persons close to him he wanted to cancel the Sukhoi fighter deal but the files did not move fast enough. Third and not the least, he got his government to agree to the counter-guarantee to Enron. Something which he and his party opposed all along. Such is the stuff our Prime Minister is made of!

But the matter will not be discussed in Parliament. We know what happened when UTI was discussed. The BJP's attack dogs will shriek that the Narasimha Rao government sanctioned it and so it is for Dr. Manmohan Singh to answer. They will ask Sharad Pawar to answer. They will ask Deve Gowda to answer. They will ask P Chidambaram to answer. They will ask whosoever they can ask to answer. Except their Prime Minister - who quite possibly thought he was inaugurating some other power plant on April 17, 1999!

Copyright(c) Mohan Guruswamy, 2001. All rights reserved.