Cheques and balances by Sucheta Dalal

Cheques & Balances by Sucheta Dalal

February 18, 2000

The Enron saga: Is the tide finally turning

The Godbole panel has an onerous responsibililty, which it has to discharge within a very short timeframe; it is only fair that all members should either make an effort to attend the meetings or allow themselves to be replaced

T has been a tough week for Dabhol Power Company and its promoter, the controversial Enron Corporation of the USA. Just as it is getting ready to revive its threat to invoke the sovereign guarantee for the second time a few significant developments suggest that the multinational is fast losing the perception battle; and its claim that Maharashtra’s power problems are entirely due to the mess in the State Electricity Board is beginning to wear thin.

l Firstly, the committee headed by Madhav Godbole has begun its hearings, but the two academics who are been perceived and accused of being Enron sympathisers have failed to attend the initial meetings. This begs the obvious question about whether the country is so short of power sector experts that the committee is forced to function without the busy/reluctant academics. The Godbole Committee has an onerous responsibililty, which it has to discharge within a very short timeframe; it is only fair that all committee members should either make an effort to attend the meetings or allow themselves to be replaced.

l The second blow this week was a brilliant piece by Congress leader Mani Shankar Aiyar titled ‘It is an Enwrong’ (The Indian Express, Feb 20) which compares Enron and its gift-bearing emissaries to East India Company officials’ efforts to secure trading rights along the Surat coast in the early 1600s. Aiyar’s views are not necessarily those of his Party, but one cannot fail to notice that his condemnation of Enron’s power rates has come at a time when Sharad Pawar, the Congress’s coalition ally in Maharashtra, is seen cozying up to the BJP led government.

Political observers believe that a BJP-Pawar deal could leave the Congress in Maharashtra out in the cold. History, says Aiyar teaches us that “you cannot let in multinationals with deep pockets without their becoming players on our political scene”. The contract, he believes ‘built in provisions’ for us to be “taken for suckers twice” but is willing to concede that this may not have been apparent during the first negotiation and the later re-negotiation. He concludes: “It is the solemn, sanctified bourgeois right of international companies milk us for what we are worth. It is the sovereign right of an independent country to say, ‘No’.

l An even more practical and hard-hitting suggestion came from T Thomas, former Chairman of the multinational Hindustan Lever (Business Standard, Feb 23) and former director of Unilever plc. He says, “In some ways what Enron has done is like a clever insurance salesman who sold a dumb policy to an innocent widow, whom he treated with sweetness for a while”. Unfortunately, the State and Central government is no ’innocent widow’ and should have known what they were signing.

Thomas says that no multinational can hope to operate in a country without the goodwill of its people and recommends that “Enron has probably to be educated in the power of a host country”. Thomas believes that the government, instead of wringing its hands and pleading helplessness, should turn the heat on Enron and force it to the negotiating table by asking it to explain how it spent the $20 million on ‘educating’ Indians. However, what he describes as seduction of ministers and bureaucrats by “the fatal attraction of Rebecca Mark’s logic,” is in fact the very political presence, which Aiyar warns about. Maybe if more people of Thomas’s stature were emboldened to speak out against the Enron deal, then politicians too would be pressured to act in the interest of the Indian people.

l Another important development is the fact that Enron and its sister company are among the 13 main accused in litigation filed in connection with the California power crises in the USA. These companies have been accused of creating ‘illegal short supplies’ and ‘manipulating the market’ to ‘dangerously destabilise Califonia’s economy’. The suit - People vs Dynegy et al., filed in San Francisco has called for an injunction “to stop the alleged anti-competitive behaviour of companies and refund an estimated $1 billion in illegal profits”. The second and third accused in this case are - Enron Energy Services Inc and Enron Power Marketing Inc. The company is also among those who are being investigated by government for profiteering from what its Chairman has described as ‘a self-inflicted’ crisis. It remains to be seen whether claims of ‘iron-clad’ contracts and ‘market forces’ will be upheld by the US courts, when one million Americans affected by the power outages are furious about their high electricity bills. Just as the Californians claim that deregulation is a failed experiment and want the laws to be changed, so too can we Indians claim that Independent Power Produces (IPPs) with dollar-denominated returns and sovereign guarantees are a failed experiment which should be scrapped.

l If that were not enough, the American investigation against Enron, has led to internet webzines throwing out interesting details about the company’s closeness to the Bush administration. More or less on the same lines as Mani Shankar Aiyar, Uri Dowbenko an internet columnist and CEO of Integrated Entertainment writes in his column titled ‘How to create a phony power crisis - The Bush-Enron connection’ (http://www.onlinejournal.com/Special_Reports/Dowbenko020201/dowbenko020201. html) that Kenneth Lay, Chairman of Enron Corporation is a major corporate and personal contributor to George W Bush’s presidential campaign. He says Federal Election Commission records show that Enron chairman Kenneth Lay donated more than $350,000 directly to Bush campaigns since 1997. He also gave another $100,000 to Republican candidates and fund-raising committees and Enron Corporation, including employees, also donated $1.5 million in soft money to Bush and Republican committees. Lay and his wife, he says, recently donated $10,000 to the “Florida Recount Fund,” and another $100,000 to the “Presidential Inaugural Fund.”

l He also says that Frank Wisner Jr who as US Ambassador to India, “muscled the company into lucrative overseas contracts, most notably in India and the Philippines”. Wisner, it would be recalled, was ally of Enron and had promptly joined the company as a director when he left India. The US online magazine details how it did not matter whether it as a Bush administration or Clinton one that ran the government in the USA - Enron had close links both. It simply “educated’ US policy makers and got them to ink deals and allow it to “sign multi-billion dollar deals overseas, with US taxpayers guaranteeing their performance.”

Now that communications technology has shrunk the world, details about the aggressive consumer campaign against Enron in the United States has been zapping across internet sites and email networks to those who are following the controversy. With a review of the tariff already underway and at least four public interest litigations still pending in various courts, Enron would be wise not to ignore the message of these disparate developments. They are an indicator that the tide of public opinion is slowly but surely turning against the company.