Enrons thievery hit India hard

HOUSTON – A detailed report by Human Rights Watch (HRW) on brutality at Enron’s $3 billion Dabhol Power Company (DPC) project in India may be one reason President George Bush and Vice President Richard Cheney have claimed “executive privilege” in refusing to divulge the records of their Energy Policy Task Force. When they negotiated the deal in 1992, Enron boasted that the DPC complex would be the largest electric generating facility in the world and the largest private investment in India since independence, the first of many lucrative investments in the subcontinent. Backed up by the U.S. government and the IMF, Enron had pressured the Indian government to privatize its nationalized electricity system. The ink on the 1992 privatization law was not even dry when Enron moved in, negotiating and signing within three days an agreement with the State of Maharashtra to build the complex jointly with General Electric Capital Services and the Bechtel Group. The HRW report said “the agreement was fast-tracked, running counter to the reservations of key Indian and international economists, academics, the Indian press, trade unions, opposition political parties and nongovernmental organizations.” The grandiose scheme included construction of a 1,624- megawatt power station fueled by liquified natural gas that Enron would ship in from Oman and Abu Dhabi in the Persian Gulf. Another part of the scheme was to build a captive power plant to provide electricity for an integrated steel mill designed to produce three million tons of steel annually. But protests by the Indian people, including a lawsuit by the Center of Indian Trade Unions, did not stop and construction ground to a halt. When India’s right-wing coalition government was elected in 1995, the terms of the project were renegotiated. In December 1996, the Bombay High Court rejected the lawsuit by the Indian trade unions as “without merit.” Enron CEO Ken Lay hailed the decision and vowed to forge ahead to complete both Phase I and II of the project. But the HRW report, released last month and based on interviews with hundreds of eyewitnesses and victims, makes clear that Enron’s political and legal “velvet glove” was also backed up with a “mailed fist.” Maharashtra State Police, at Enron’s behest, had established a station on the grounds of the Dabhol project. Enron reimbursed Maharashtra State for the salaries of these police. They performed like the “rent-a-cops” used to smash union picketlines in the U.S. Their assignment was to physically annihilate the grassroots movement against Enron’s foray into India. “During mass arrests at demonstrations in villages surrounding the project site,” the report charged, “protesters have been beaten with canes or otherwise assaulted by the police, in some cases sustaining severe injuries.” Detailing one such instance in June 1997, the report said, “Maharashtra police raided a fishing village where many residents opposed the power plant. They arbitrarily beat and arrested dozens of villagers including Sadhana Bhalekar, the wife of a well-known protester ... They broke down the door and window of Bhalekar’s bathroom and dragged her naked out into the street, beating her with batons. Bhalekar was three months pregnant at the time. In another instance in May 1997, police beat and arrested nearly 180 protesters who were demonstrating peacefully outside the company gates.” Meanwhile, India’s Central Electricity Authority (CEA) started examining the fine print in the Dabhol Power Company contract. They released a report charging that Enron had contrived an “all-in-one” contract in which both the costs of construction and operation were combined. The Maharashtra State Electricity Board would be contractually bound to pay for a set minimum amount of power even if it was not needed. DPC, on the other hand, would not be contractually required to supply any minimum amount of electricity. They calculated the annual cost of this deal at $1.3 to $1.4 billion (U.S.). Over the 20-year life of the contract, Maharashtra would have to pay at least $26 billion for construction of the plant and the power it generated or “almost nine times what Enron would pay in.” The CEA warned that DPC’s projected rates would be twice as high as the average national electricity rate in India. The contract called for DPC to pass on all these enormous costs to Maharashtra ratepayers. While Enron executives were negotiating this deal, their London-based law firm was in New Delhi demanding that the Indian government exempt the DPC – and Enron – from India’s accounting laws and from all “public or legal scrutiny,” the Wall Street Journal reported. These are the same accounting procedures and exemptions Bush and Cheney gladly extended to Enron here in the U.S. Faced by Enron’s thievery, the State of Maharashtra announced in June 2001 that it was terminating its agreement with DPC. Shortly after, DPC ceased operations. But the story did not end there. Enron insisted that the State of Maharashtra abide by the letter of their agreement and repay Enron billions of dollars. The Bush administration joined in the drive to force India to pay up. The president telephoned the Indian Prime Minister while Dick Cheney flew to India, like an Enron bill collector, and met with government and opposition leaders, including Sonia Gandhi, leader of the Congress party. Cheney too delivered the “pay up now!” line. The Wall Street Journal revealed that a special task force of the National Security Council was set up to strategize on how to squeeze India to pay Enron back. But Enron did not use its own money to build the DPC complex. That project was backed by approximately $200 million from the tax-payer funded Overseas Private Investment Corporation and by many millions more from GE and private banks. U.S. taxpayers, ultimately, will be left holding the empty sack.