According to DPC, "The relationship, until now, was premised on trying to resolve interim disputes in good faith, while long-term solutions to difficult problems were being found and implemented."

Enron India managing director K Wade Cline, in a recent communication to the MSEB, said that any indulgences previously granted by DPC, both formal and informal, would no longer be observed. "Hereafter, we will expect that invoices submitted under the power purchase agreement (PPA) will be paid by the deadlines imposed in the PPA, and to the extent these invoices are not paid or MSEB does not otherwise fulfil its obligations under the PPA, DPC will enforce its contractual rights accordingly," he added.

Mr Cline's hard hitting submission, has come in the wake of MSEB's decision to slap a rebate (penalty) of Rs 400 crore for the alleged misdeclaration and default by the DPC on January 26 and later on February 13.

"We do not understand, why you chose not to follow the PPA dispute resolution process before refusing to pay for power properly sold to and consumed by MSEB," Mr Cline said. He added that the DPC has revised the form of availability declarations issued under the PPA and formally updated the curves included in schedule 6 of PPA to more accurately reflect the start up profile of the plant.

Interestingly, the MSEB has claimed that availability rebates are payable by DPC under clause 8.4 (b) (iii) of the PPA, as a result of the difference between the ramp up rates reflected in the existing schedule 6 curves and the actual start-up profile of the plant. MSEB has suggested that these rebates result in a significant net payment (of over Rs 249 crore) which is due from DPC.

Furthermore, MSEB has emphasised that this amount should be set-off against its existing undisputed liabilities to DPC, including a payment of Rs 102 crore due under the December 2001 invoice and certain payments, due as a result of interest accrued on delayed payments.

However, Mr Cline said that the DPC has rejected this "misinterpretation" of the availability rebate provisions of the PPA and disputes that any such payment is owing to MSEB. "Moreover, under the terms of the PPA it would be inappropriate to set-off these amounts against the undisputed and outstanding payments in respect of December 2000 and in respect of interest on late payments," he added.

Moreover, Mr Cline admitted that certain disputes (as defined in the PPA) exist between DPC and MSEB. These included: given the agreed start up protocol, as well as, MSEB's knowledge that the start-up curves in the PPA do not reflect the actual start-up profile of the power station, the question of whether any sum is owed to MSEB on account of the alleged misdeclaration, whether MSEB is entitled to set-off (or direct DPC to set-off) the sum claimed by it, against any DPC billing statement, other than that for January 2001 and whether (if it is not setting-off) it is entitled to assert that it is not obliged to pay and/or is entitled to be treated as having paid the sums owed by it to DPC, in terms of the December 2000 billing (or any sums which accrued prior to December 2000) or any sums which may otherwise become due to DPC by reason of the sum, which it claims that it is owed on account of the alleged misdeclaration.