Enron chief threatens US sanctions against India

London, Aug 24: IN a new twist to the Dabhol power plant controversy, US energy major Enron Corporation has threatened India with new American sanctions unless the company and its partners get back the full $1 billion in costs incurred in building the project in Maharashtra.

“There are US laws that could prevent the US government from providng any aid or assistance or other things to India going forward if, in fact, they expropriate property of US companies,” Enron chairman Kenneth Lay said in an interview published in the Financial Times on Friday.

The threat, according to the leading London-based financial daily, comes at a sensitive time as the Bush administration is trying to improve its long-strained relations with India.

Two weeks ago, US deputy secretary of state Richard Armitage predicted an early lifting of the sanctions imposed in the aftermath of May 1998 nuclear tests.

However, Enron spokesperson Mark Palmer said in Huston that Ken did not make any kind of threat and he was responding to a question about what might motivate the Indian government to help break the deadlock.

Mr Palmer was quoted by Bloomberg as saying that the company has not been in contact with the Bush administration regarding any form of US sanctions against India.

It also quoted spokesmen of both the White House and the State Department as saying that they knew of no request from Enron for such action.

Mr Lay, who is known to have warm relations with the Bush administration, said “if they try to squeeze us down to something less than cost, then it basically becomes an expropriation by the Indian government, and that would send an incredibly damaging signal to the international capital markets and investment community as to making any future investments in India”.

He said Indian government had indicated that it wanted to solve the problem quickly and amicably. Both sides are working with an international reconciliation team.

The Financial Times quoted Mr Lay as saying alternatives to continuing with arbitration remained. “We have very very tight contracts, and we will enforce those contracts.”

Maharashtra State Electricity Board (MSEB) owes the Enron-promoted Dabhol Power Company (DPC) $64 million in unpaid electricity bills for eight months.

DPC, in which Enron has 65 per cent interest, shut down the 740 mw phase-I in May after MSEB refused to buy power saying it was too expensive while construction work on 1,444 mw phase-II has been stopped since.

Enron initiated arbitration proceedings and issued a pre-termination notice to the Maharashtra government after the government of India refused to honour its counter-guarantee to the project on advice of the state government which claimed a rebate of Rs 410 crore as capacity charges.

Pre-termination notice expires in November after which Enron will approach lenders for termination of the $2.9-billion project.
Back home, Indian financial institutions led by IDBI met the Union finance secretary Ajit Kumar on Wednesday to work out an out-of-court settlement of the issue.

(PTI)