The Dabhol power plant in the Indian state of Maharashtra is once again the centre of controversy. Enron, the company which owns the plant through its subsidiary the Dabhol Power Co (DPC), has threatened to pull out of the project following the refusal of the Maharashtra State Electricity Board (MSEB) to pay for power from the plant. The MSEB rescinded its contract in May and has since refused to take power from the station.
Dabhol was at the centre of controversy in the early 1990s when the Maharashtra government first cancelled the scheme, then reinstated it. A second stage of the project is nearing completion but foreign lenders have now stopped disbursing funds and have also cut off upkeep funding.
Enron has appealed to the Indian government for $1 billion in compensation. It says that a failure to reach agreement will result in compensation claims based on its contract that could reach $5 billion. It has also invoked a federal guarantee in the wake of the MSEB’s refusal to pay its bills. The government has already refused to honour an earlier guarantee claim.
The case has been complicated further by the Maharashtra government’s decision to institute a judicial inquiry into the original deal between DPC and the MSEB that led to the construction of the plant. Tata Power Co is believed to be considering purchasing of the project from Enron.
