As the Enron arbitration is set to commence at London, large parts of Maharashtra are plunged in darkness due to power cuts. Activists fear that this state of affairs will be used to portray the cancellation of Enron’s Dabhol project as a bad decision. And several Indian politicians are reportedly happy about this projection and again pushing the ‘power at any cost’ theory. A few sobering facts would however correct the picture. In the run-up to cancelling Phase-I of the Dabhol project, the Maharashtra State Electricity Board (MSEB) would have paid out Rs 1,500 crore to Enron and would have recovered only around Rs 400 crore from consumers at the prevailing power tariffs. Had MSEB been forced to purchase power from Phase II, it would have been paying around Rs 5,000 crore to Enron every year and recovered only around Rs 900 crore from consumers. This means that MSEB would have lost roughly Rs 4,000 crore per year, or around Rs 20,000 crore in the last five years. Remember, these rough calculations are before international oil prices soared dramatically. As raw material costs were pass through, the losses would in fact have been dramatically higher, if Dabhol was still operational on the original terms. In fact, the state may well have been plunged into darkness well before 2005. Unfortunately, none of the politicians or bureaucrats responsible for the dubious deal with Enron has been brought to book.
Expressway hike
The problem of growing urban decay coupled with increased public activism and right to information should soon force politicians to pay for the debilitating impact of bad policy decisions. In Maharashtra, one such issue could be the 18% escalation in toll charges allowed to the private contractor who took over management of the Mumbai-Pune Expressway. The toll has been hiked despite the massive repairs that continue to block its large chunks. Top sources in the government say the escalation was built into the pact with the private party — Ideal Road Builders. Strangely, we have no response as to why the Maharashtra State Road Development Corporation (MSRDC) allowed the hike, when inflation has been running at 5% or less. MSRDC has long claimed that traffic on the Mumbai-Pune route was inadequate to make the project viable. Wasn’t MSRDC worried about this while agreeing to a hefty annual toll escalation? It is not even clear if there is a cap on the toll. The Expressway is a lifeline that would have aided urbanisation of smaller towns between the two city centres. Shrinking the distance to Mumbai has been one of the biggest factors leading to Pune’s explosive growth as an IT centre (the other is massive tax concessions to builders). Hinjewadi, on Pune’s outskirts , just off the Expressway is already a shining IT and education city and Talegaon is now attracting the IT crowd. The rapid urbanisation is the key to distributing prosperity in the State, but like in the ill-fated Enron project, the people of Maharashtra are clueless about the dangerous fine print in agreements signed by our politicians with private companies and contractors.
Moving ahead
The move from Mumbai to Delhi doesn’t seem to have gone well with one of the newest denizens of North Block. Corporate India is buzzing with rumours that Rakesh Mohan may be happy to leave the Finance Ministry and head for Washington when the post of India’s Executive Director falls vacant shortly. Meanwhile, SEBI is set for a big re-shuffle and the entry of several new faces at senior levels. Sources say many SEBI EDs are scheduled to leave the agency or return to their home cadres in the coming months. These include S.C. Das (Primary Markets), P.K. Mishra (Administration), R.S. Loona (Legal) and C.S. Kahlon (Investigation). In the past, the hunt for new EDs was often controversial or bogged down by lobbying, usually on behalf of officials from the three investigation arms of government. But Chairman M. Damodaran has managed to shake up moribund bureaucracies and recast payscales at institutions he has been connected with. SEBI insiders are watching to see the changes he initiates, especially after a tour of US bourses. So far, we learn that a senior banker from Corporation Bank is in the running for a SEBI post.
Choosing sides
In the Ambani tug of war to retain the loyalty of their lieutenants, it was never quite clear if Satish Seth, CEO of REL was sympathetic to Anil or Mukesh. We now learn that Seth, a trusted Ambani aide, decisively switched loyalty to Anil and resigned from a host of Reliance investment firms and trusts that he was a part of. Sources say it was Tina Ambani’s appeal and visit to Seth’s family that persuaded him to join Amitabh Jhunjhunwala in throwing his lot with the younger Ambani.
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