India: Ripped off by Enron (February, 2002)

Much of my earlier work is scattered around the internet. In an effort to collate them, I am publishing them here as individual blog entries, until someone teaches me a better way of archiving them on my blog.

This one is from the archives of Socialist Worker Online.


Squeezing superprofits out of India
Ripped off by Enron

Socialist Worker | February 15, 2002 | Pages 6 and 7

ENRON HAS become a household word in the U.S. over the past month. But it’s been that for longer in India. Over the last decade, the company has become a symbol of all that’s wrong with corporate globalization, privatization and the free market.

The story will be familiar to those who’ve followed the scandal hereessentially, Enron bought off politicians to get a sweet deal leading to more expensive electricity for Indians and superprofits for the company.

In 1991, the Indian governmentunder the “guidance” of the International Monetary Funddecided to privatize the state-run energy industry. U.S.-based multinationals Enron, Bechtel and General Electric jumped at the opportunity.

Together, they set up an Indian subsidiary called the Dabhol Power Co. (DPC) with the aim of building a huge power plant in the state of Maharashtra. Bechtel would design and construct the plant near Bombay, GE would supply the equipment, and Enron would operate it.

To seal the deal, Enron followed the same procedure it did everywhere elsespending millions to “educate” politicians and government bureaucrats on the “benefits” of privatized energy.

In 1993, Maharashtra’s state-owned utility company signed a contract for DPC to supply electricity. Enron and DPC claimed that they had complied with all environmental regulationsas well as a law that required public input on the project. But a Human Rights Watch report exposed them for ignoring dozens of complaints.

A grassroots movement to oppose the deal emerged, with activists taking to the streets to protest. The demonstrators were met with brutal violence and arbitrary arrests. In 1997, Amnesty International reported that Enron and its partners colluded with local police to organize the crackdown.

During 1995 elections, a right-wing alliance of the Bharatiya Janata Party (BJP) and Shiv Sena cynically exploited opposition to Enron to gain votes. After winning top posts in the Maharashtra state government, the BJP scrapped the deal.

Infuriated Enron bosses turned to their friends in Washington. Immediately, two Clinton administration officialsEnergy Secretary Hazel O’Leary and Treasury Secretary Robert Rubinput pressure on India’s federal government to reopen the deal. In India’s capital, U.S. Ambassador Frank Wisner regularly lobbied for Enron. He was rewarded for his hard work with a seat on Enron’s board of directors when he left office.

Within 18 months, the BJP had cavedfirst on the national level and then in Maharashtra, where the government signed a new contract. The renegotiated deal was worth an incredible $35 billion in payments from the state electricity board to Enronamounting to “one of the largest contracts (civilian or military) in world history,” wrote Abhay Mehta, author of the book Power Play.

Under the deal, payments to Enron are guaranteed by both the government of Maharashtra and the federal government. In other words, if DPC can’t sell its electricity at the prices that it sets, then the government will have to compensate the company! As collateral to assure Enron that it would get its money, the Republic of India “staked all its assets (including those abroad, save diplomatic and military),” Mehta wrote.

The DPC is by far the most expensive source of electricity in Maharashtrasome seven times costlier than the cheapest source in the state. The state’s industrial companies have actually begun to generate their own power with private generators.

And in May 2000, state officials decided to stop buying electricity from Enronbased on the calculation that it was less expensive to pay mandatory charges of around $220 million a year as required under the 1996 contract.

With Enron’s collapse, you might assume that the deal is off. But you’d be wrong. Enron is scrambling to sell off DPCoil giants Royal Dutch/Shell and TotalFinaElf are the leading bidders. So the bleeding of Maharashtra will go on.

But wait! There’s even more to this scam. In 1994, Enron bought “insurance” for its investments from the Overseas Private Investment Corporation (OPIC), an agency set up by the U.S. government to “promote” American business interests overseas.

In the weeks before Enron filed for bankruptcy, Enron and its partners, Bechtel and GE, filed claims with OPIC worth $200 million for their “losses.” If OPIC pays off, the money will come from the U.S. government, using taxpayer dollars. And the U.S., in turn, will add the amount to the bilateral debt that India owes the U.S.

This sordid story shows that corporations like Enron will stop at nothing to squeeze out more profits, wherever they can dig in their claws.