There’s a way out of Enron — Left parties told

This, among several other critical points, will be part of the representation expected to be made by them in the on-going debate in the legislature in Nagpur.

S G Aney, senior counsel, Supreme Court, has said the situation was ripe for invoking the financial exigency clause of the power purchase agreement (PPA — clause 6.2c of Schedule 8). Listing out options before the government, Aney states that under this clause the government can direct Enron to withdraw from the Phase II expansion project by paying up minimal damage charges. Aney, however, has not put a figure to it. The government has been throwing up figures of up to Rs 30,000 crore as the cost of exit from Enron phase II.

Aney states that the PPA violates Seciton 43 A of ESA, 1948 wherby the rate of return for Enron is as high as 25 per cent instead of 16 per cent permitted by law for any investor.

Another crucial clause in the agreement which stipulates that the plant has to function as baseload plant with 90 per cent plant load factor has also been cited as gross violation to Section 55 of ESA, 1948.

In the legal advice note, it is also pointed out that in the next two years, the entire capital base of Maharashtra State Electricity Board would be wiped out if payments are made as per the PPA.

The state government guarantee given to the project is also being challenged as illegal and contrary to public policy since it has given undue privileges to the company.

In fact, the reopening of the agreement or further negotiations on the project is permitted within the PPA under the head "effects of illegality, etc.." in Clause 22.4, he says.

This section provides enough legal framework for making the agreement invalid if declared by any competent authority (which in this case can be the state government).

Pradyumna Kaul, an anti-Enron activist, pointed out that the legal framework for scrapping Phase II has gained a new dimension with the Electricity Regulatory Commission Act 1999, where it specifies stringent tariff restrictions imposed on state electricity boards.