Enron power plant project resolved

PUBLISHED : Tuesday, 09 January, 1996, 12:00am
UPDATED : Tuesday, 09 January, 1996, 12:00am

INDIA'S Maharashtra state government yesterday gave Enron Corp the go-ahead to revive its huge power project after the US group agreed to reduce its tariff and construction costs.

In a move expected to help restore foreign investors' confidence in India, chief minister Manohar Joshi said last night his cabinet had approved a renegotiated contract with Enron and given the green light to two other power plant proposals awaiting approval.

'This is a historic agreement,' Mr Joshi said. 'This project will mean a lot and start an industrial revolution for the state.

Had it not been done, then power shortages would have become very frequent in the days to come.' Yesterday's decision, which will cut the cost of the project from about US$2.8 billion to $2.1 billion, follows five months of uncertainty after the right-wing Shiv Sena-BJP alliance last August said it would scrap what was expected to be India's biggest foreign investment because it was too costly.

Apart from the Enron project, which is a 2015 MW gas-based plant in Dabhol, the government also approved a 410 MW plant to be built by Reliance Industries and a 1,072 MW plant for Nippon Denro Ispat.

The announcement will be greeted with relief in Maharashtra, the country's most industrialised state, which was facing the prospect of a serious power deficit by 2000. It will also be welcomed by multi-nationals concerned about an apparently deteriorating investment climate.

Approval came after a lengthy cabinet meeting during which ministers debated the advisability of allowing the projects to go ahead.

Under the renegotiated deal, Enron has agreed to lower its tariff rate to 1.89 rupees per unit after its earlier rate of 2.4 rupees per unit was rejected by Mr Joshi's regime.

The state government had been bargaining for a further reduction to 1.86 rupees per unit, but Enron stood firm.

The BJP is understood to have been against reviving the Enron project, leaving it to Mr Joshi to convince its militant constituent, the Swadeshi Jagran Manch (SJM), that the state badly needed the three projects.