Sucheta Dalal :Such a long journey...Mumbai to Bangalore
Sucheta Dalal

Click here for FREE MEMBERSHIP to Moneylife Foundation which entitles you to:
• Access to information on investment issues

• Invitations to attend free workshops on financial literacy
• Grievance redressal


You are here: Home » Column Topics » Financial Express » Such a long journey...Mumbai to Bangalore
                       Previous           Next

Such a long journey...Mumbai to Bangalore  

May 9, 2005


May one hope that major infrastructure projects can be rescued from the clutches of controversy?


As Maharashtra hurtles towards darkness, the recent Karnataka high court judgement offers a ray of light. On May 2, the court ended the long drawn wrangling over the controversial Rs 2,250 crore Bangalore-Mysore infrastructure corridor project and ordered that the chief secretary and another official be prosecuted for perjury and withholding documents.


It also quashed the government order constituting review committees to probe irregularities in land allotment, terming those as delaying tactics. Although the Karnataka government has sprung to the defence of its bureaucrats, the order has sent shock waves through India’s rusting iron backbone. If there were a similar inquiry and indictment in connection with Enron’s controversial and defunct Dabhol Power Company (DPC) project in Maharashtra, it would not only nail the role of netas across the political spectrum, but also the bureaucrats who abetted their decisions and delays.


Much of the crisis in Maharashtra today, including the delay in restructuring the state electricity board, MSEB, cracking down on power theft and leakage, exploring alternative power generation techniques, or clearing new projects, can be traced back to the Enron debacle and the efforts to revive it.


As long as the focus was on resurrecting DPC and as long as the bureaucracy was intent on deliberately weakening our case (to protect colleagues responsible for dubious decisions), the scope for focusing on the looming power crisis was limited. Three aspects to this bungling need to be flagged.


First, every major political party at the central and state levels had an important role in worsening the Enron mess. The Congress government of the 1990s is guilty in approving the DPC project, although it wasn’t in line with the new power policy. It also allowed large pass-through expenses, with built-in interest and inflation-linked escalation, that was bound to make its power unaffordable.


• A Karnataka HC judgement on irregularities in a B’lore project offers hope

• Much of the power crisis in Maharashtra can be traced back to Enron’s case

• Unless national interest is placed above all, nfrastructure will suffer


Enron’s original sweetheart deal happened during the Sharad Pawar-led state government. He now blames the power crisis on Madhav Godbole, an upright former bureaucrat, who exposed the messy political dealings, false capacity claims and large-scale theft and leakage. The bureaucracy did play a big role in favouring Enron. A former cabinet secretary led the lobbying and despite recent denials by Dr Montek Singh Ahluwalia, he was indeed, a big backer of DPC’s financial structure. The BJP-Shiv Sena government later compounded the mess, by cancelling the project (instead of renegotiating) and then fabricating a ‘renegotiation,’ which allowed DPC to balloon to thrice its size and remain just as unviable.


Gopinath Munde, who clambered to the post of deputy chief minister by promising to ‘throw Enron into the Arabian Sea’ and then presided over the bogus renegotiation, is another politician who shamelessly thunders about the power crisis these days. The Shiv Sena is worse. Its leadership was allegedly charmed by the gift of Walt Disney cartoon originals and it acquiesced to the trebling of DPC’s project. Yet, the Sena’s rampaging mobs are sent to attack MSEB officials today and its leader Uddhav Thackarey claims he is “with the people.”


Although a Congress-led government in the state and the Centre has ensured a scramble to help Maharashtra tide over the crisis and avoid political embarrassment, there is no indication that any long-term lessons are being learnt. There’s no serious effort on the promise to develop alternative generation technologies. In fact, local politicians harassed the wind-power project at Satara, claiming the windmills were causing drought in the district. The rain gods ended that ugly controversy last year.


Politicians still try to use the power crisis to clear projects without competitive bidding. The state signed memoranda of understanding with eight developers, without competitive bids. Of these, two industry groups have recently had banks and financial institutions write off several thousand crore rupees owed by them in loans and interest repayment. Having barely emerged from a financial crunch, they are confident the same lending institutions can be persuaded to forget the past and fund their ambitious plans once again. Fortunately, the Centre frowns on project clearance without competitive bidding.


An interesting aspect is the role of the central government. In modern-day economies, governments make no bones about using diplomatic muscle to support the interests of their companies, even those in the private sector. Through the six-year DPC drama, the US government and its Indian envoys openly lobbied for the notorious Enron and lost no opportunity to threaten or cajole the Indian government.


Why, even a fortnight before Enron collapsed, its discredited CEO, Kenneth Lay, was openly threatening India with US sanctions over the cancellation. When Airbus Industries lost an aircraft deal with Air-India, the French government openly threw its might behind the manufacturer. However, when it comes to protecting India’s interests, our government is nowhere in the picture.


Today, the public impression is that GE and Bechtel, Enron’s partners in DPC, continue to have the upper hand in the revival attempts. Yet, both have significant other business interests in India and would need to be seriously worried if the government saw them as being overly demanding, or obstructing, a viable revival plan.


Unless our governments, at least occasionally, put national interest ahead of petty personal aggrandisement, India has little hope to clear infrastructure projects without a riot or a court order.


Until then, every major infrastructure project in the country will remain mired in controversy, or languish at the mercy of endless committees.


-- Sucheta Dalal