No need to re-examine Dabhol project, says SC

NEW DELHI, May 2: The controversial $1.2 billion Dabhol Power project of the Enron Power Corporation received a big boost when the Supreme ...

NEW DELHI, May 2: The controversial $1.2 billion Dabhol Power project of the Enron Power Corporation received a big boost when the Supreme Court today declined to re-examine the project and its renegotiation by the Maharashtra government. The court, however, came down on the State government’s changing stance on the project.Responding to a Public Interest Litigation (PIL) filed by the Centre of Indian Trade Unions (CITU), the court said, “It is not in the public interest to examine the authority of the contract at this stage.” It ruled that the question raised by CITU regarding the validity of the project as a result of the actions of the state government did not require examination at the present stage as it had already been gone into by Bombay High Court.

This opinion was expressed by a three-judge bench comprising Chief Justice JS Verma, Justice Sujata V Manohar and Justice M Jagannatha Rao.

With this, what could be the last legal hurdle in the way of the project has been removed. The Dabhol Power Company president and managing director Sanjay Bhatnagar said the company was delighted with Supreme Court decision and hoped it would put an end to litigations against the project. “We hope this will end all frivolous litigations against the project and we can concentrate on the project and commission the plant well ahead of schedule, ” he said.

The CITU PIL came in the wake of the re-negotiation of the project by the Maharashtra government last year, after it had been cancelled. CITU had alleged that though the project had been re-negotiated, the state government had still given Enron undue concessions. As such, it had argued, that the project should once again be re-examined and the various irregularities in its awarding be looked at — and that the role of the Maharashtra government also be examined.

While the government had cancelled the project because it felt it was heavily loaded in favour of Enron, the subsequently re-negotiated project didn’t extract too many concessions from Enron despite its assertions to the contrary. A large part of the so-called concessions that the government had got, in fact, were due to restructuring as well as repackaging of the project. In the event, it was evident that many of the so-called concessions could have been got even before the project was cancelled, and arbitration proceedings begun. So while the State Government had claimed that it had extracted huge concessions from Enron in the 695 MW Phase 1 of the project, the fact is that Enron offered no concessions in Phase 1. The concessions were in fact wrought by expanding the size of the project to 2,450MW- this was done by enlarging the size of phase 1 to 740 MW and including Phase 2 as well. Once the project’s size was increased, Enron passed on the benefits of economies of scale to the Maharashtra government. Besides, falling equipment costs internationally also helped.

Further, in order to make its renegotiated project look good, the Maharashtra government also decided to spin off part of the old project into a new one. The $495 million regasification project of the earlier Phase 2 was spun off into a new company and hence it was made to look as if savings of $495 million had been achieved in the overall new project. Actually