The ugly American

Nothing speaks more eloquently of US hypocrisy than its officials continuing to defend deposed energy giant Enron’s interests in India (the Dabhol plant), despite the company being in all manner of trouble in the US, including Congressional investigation into the possibility of it funding various US politicians to help mould energy policy to suit its interests. Sure, we all recognise that Enron’s best bet — especially now that it is down in the dumps — is to get India to begin buying Dabhol’s overpriced electricity all over again, and that as someone who accepted its liberal donations quite willingly, the George Bush administration, is honour-bound to advance its interests. But surely the US doesn’t want the impression to spread, any further, that there’s one set of ethics for the White Anglo Saxon Protestant world and a different one for poor Brown-Blacks in developing Asian nations?

First, it was Ambassador Robert Blackwill who spoke of how India not honouring her contracts was sending a bad signal to potential investors. The honourable Blackwill, in his address to the Indo-American Chambers of Commerce in January, then went a step further, and launched a broadside on India’s high import barriers — on Californian grapes and wines — saying that discerning Indians were being denied the choice to make purchase decisions. He followed this up by a righteous quote from his boss’ collected works that went roughly along the following lines: when the US negotiates for open markets, it was providing new hope for the world’s poor; when it promoted free trade, it was actually promoting political freedom. (Presumably then, the recent unilateral US imposts on steel imports are to be explained as a means to check the spread of too much political freedom, the kind America’s new-found ally Pervez Musharraf doesn’t seem to like too much either.)

And now, following in Blackwill’s footsteps, is department of energy assistant secretary Vicky Bailey, who came to India a few days ago to say, more subtly, that the doubt cast on sanctity of contracts by the Dabhol episode would mean the death of potential investments. C’mon guys, one-sided power purchase agreements of the Enron-kind have been opened up and renegotiated in the past in many parts of the world, and if contracts are so sacrosanct, what is Enron being prosecuted — or is ‘persecuted’ the better word? — for in the US? If Enron’s a rogue company in the US, it sounds hypocritical for the US government to turn around and say that what Enron did in developing countries was still perfectly legal.

Besides, those in US electricity firms (such as Cogentrix, for instance, in the pre-China Light days) will tell you that most of them thought Enron was getting a sweetheart deal anyway, so they weren’t too bothered by what happened to the Dabhol deal. India’s power sector has lots, and lots, of problems, but Dabhol isn’t the biggest of them.

Having said that, it would be unfair not to say that it is the stupidity, or collusion, of successive Indian governments that has given the US a stick to beat us with. First, the manner in which the project was cleared. At a meeting chaired by him, based on a presentation made by Enron, the then Finance Secretary Montek Singh Ahluwalia had said the cost of power offered by Dabhol appeared to be a fair one. This statement was then quoted by all concerned as the Official Scripture and the Central Electricity Authority, whose job it was to examine the project’s techno-economic feasibility, cleared it saying that since Montek had said the price of electricity was fine, this meant the cost of the project itself was also fine — after all, how can the project be over-priced if the electricity itself is correctly priced? Check the files if you think I’m joking.

Anyway, none of this apparently convinced the Shiv Sena-BJP, which felt there was some hanky panky with the project and threatened to throw Enron into the Arabian Sea when it came to power. And it did just that, cancelled the (at that time) 695 MW project, and then curiously agreed to a 2,400 MW one on terms that were even more favourable to Enron!

What takes the cake, of course, is what the government is doing with the project now. It has cancelled the project, but obviously cannot pursue the charge that Enron bribed politicians to get a sweetheart deal. So what does it do to prevent Enron from going to the arbitration court? Government-owned financial institutions (FIs), that have lent Dabhol over Rs 6,000 crore, are now trying to invite bidders to buy out Enron’s stake. But, as this column has argued earlier, no one is going to buy a 2,400 MW power plant until the State Electricity Boards are made viable (you can sell power only to SEBs), and that can’t be done till ... The only workable solution is for the public sector NTPC to buy out Enron, but that’s not acceptable to the power ministry. So, as they have been doing for the last six months, the FIs will keep tripping over themselves, finding new ways to try and market the Dabhol plant.

Meanwhile, let’s settle down and wait for the next American who comes calling.

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