ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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MSEB's Tariff Revision Proposal

The Maharashtra Electricity Regulatory Commission (MERC) must take cognisance of the sharp deterioration in the finances of the Maharashtra State Electricity Board (MSEB) in deciding on the Board's tariff revision proposal submitted to it. Consumers must not be expected to pay for the inefficiencies of the MSEB.

Enron and Prayas: Some Reservations

Prayas has said in its note (EPW, June 9-15, 2001) that a judicial enquiry into the making of the contract with the Enron (Dabhol Power Corporation) would help us avoid the contract if the findings of the Inquiry Commission clearly show that the power was not exercised properly by the concerned authorities. While I support the demand for judicial enquiry because such an enquiry will help us reform the law and make the process of government contracts more transparent and inject greater accountability, I do not agree that an adverse finding by the Judicial Commission would help us rescind the contract. An adverse finding would certainly help in locating the responsibility on organisations as well as people who took those decisions. But, just because representatives of the Maharashtra Electricity Board or the Maharashtra government have not applied their minds, have not taken relevant considerations into account or have acted mala fide, which could have been the grounds for quashing their actions, may not be grounds enough for avoiding a contract with a foreign company where the government has specifically agreed to have all matters of dispute settled through an international arbitration.

Dabhol, Godbole Report and the Future

In the present state of the power sector in India, Dabhol power at its present tariffs is likely to be unacceptable to the extent of its capacity. The speediest way out of this imbroglio may well be to treat DPC as a stranded project and negotiate the lowest cost to move the foreign investors out of the project. This may mean that governments might have to take a knock because of stranded costs, to the extent that the price payable might be more than what an Indian investor might be willing to pay. Tariffs can then be based on those lower capital costs and without the dollar denominations

Lessons from Dabhol

The invoking of the central government’s counterguarantee by Enron-promoted Dabhol Power Company for payment of dues by the Maharashtra State Electricity Board (MSEB) and the setting up of yet another committee to review the project are significant developments in the reform of the power sector. Of the problems specific to Dabhol, a clear picture may be expected to emerge after the second review committee, whose composition is reassuring in terms of expertise and balance, submits its report. However, the Dabhol imbroglio offers some general lessons for power sector reforms, which can be ignored only at great cost to the economy.
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