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Showing Enron the door was light job, but how long will Kerala grope in dark?

D Jose in Thiruvananthapuram

Years ago, a senior external affairs ministry official who had seen something of the world wisely stated: "No country gives international organisations a red carpet welcome as does China. And the only place where they (international organisations) need armed escorts is Kerala!"

The statement, true to the tradition of all such statements, is a little blown-up, especially the Kerala bit (for the moment, let's leave the Chinese and their red carpets alone!). But only a little: if not an armed escort, foreign businessmen who come shopping in Kerala do need to be pretty nimble on their feet.

Or else, they would find themselves out on an ear, double-quick.

Which brings us to the Enron case, a case in point.

The rejection of the United States multinational's proposal for a 513 mega watts project in Kannur, though keeping firmly with the tradition, has bewildered many in the Communist-ruled state. The state is reeling under its worst power crisis, the government imposed 100 per cent loadshedding on industrial consumers last year, and the prospects, at best, looks as worst as before -- and the E K Nayanar government goes and calmly necks out the Americans who could solve the problem!

Enron, for the uninitiated, had proposed to enter the state in a big way. What made it impossible for them was not the objection of the Centre for Indian Trade Unions -- which had tooth and nail fought the Dabhol project in court and outside -- but a gentleman named V S Achutanandan who, incidentally, has quite a few bones to pick with the Kerala CM. Though Achutanandan does not meet eye to eye with the trade union lobby, he was as passionate as they about banning Enron. The Communist Party of India-Marxist politburo decided to reject the project after Achutanandan and CITU president S Balanandan spoke against Enron.

For his part, Nayanar, who had promise to make Kerala a power surplus state before he leaves office in 2001 and who was favourably inclined to the project, had to remain a mute witness.

So where does that leave Kerala? In complete darkness, that's where.

"Unless two mega projects are not put in place," warns a Kerala State Electricity Board official who requested anonymity, "Nayanar's dream will remain a dream."

Two projects in the next few years, he agrees, is distant possibility in a state like Kerala, which could not make any addition to its power generation capacity for more than two decades.

In which case, it is quite safe to assume, Nayanar's dream might even turn into an electrifying nightmare. Consider the situation: The installed capacity of the state will have to be increased from the present 1,500 mw to about 5,000 mw to wipe out deficit. This, at the present price level, requires an investment of Rs 110 billion. Besides, large investment is also required for creating infrastructure for transmission and distribution.

"The state would need about Rs 20 billion to improve the transmission system alone," confesses another senior KSEB official.

"Where will this money come from if the government shuts its doors to private and foreign investors? " asks Professor B A Prakash of the economics department, Calicut university, "The government seems to be wanting to get all the power projects monopolised by the government-owned KSEB. The financial position of the board and its way of functioning, however, do not give any scope for optimism."

The power deficit in the state has been galloping as a result of racing urbanisation. The deficit jumped from 28 per cent in March 1996 to 37 per cent in March 1997.

"Power shortage is one of the major reasons for the severe recession that Kerala economy faces today," Prof Prakash observes.

Cochin Chamber of Commerce president A K Ashraf is another person who doesn't believe in Nayanar's dream. He says the ongoing projects are not sufficient to tide over the crisis. "The government should not have put a spoke into the Enron project," he says, "It should have been more open in the light of the wave of liberalisation sweeping across the country."

The arguments that Enron's capital costs are exorbitant and tariff high have no basis, Ashraf says -- in any case, couldn't they have thrashed out the matter with Enron and K P P Nambiar (whose Rs 14.17 billion project is part of the Kannur package, envisioned to make Kerala a power surplus state)?

"What was the need for taking a hasty decision even before looking at the financial tie-up?" wonders Ashraf, "They should have allowed the Enron to come in first and then tried to solve the problem instead of saying a big no in the beginning."

Ashraf said the electricity coming from West Bengal was not a solution to the crisis. Many industrialists are not willing to purchase it as it is prohibitively costly. By bringing power from West Bengal, the government has imposed a severe financial burden on the KSEB.

Malabar Chamber of Commerce president P V Gangadharan, too, is a man who wants desperately to see the Enron in Kerala. The state will not have enough power by 2000 unless the Kannur project is in place, he pronounces.

Interestingly, Nambiar, the promoter of the project, appears to be the only one who's unperturbed about the political hue and cry going on -- he is sure his baby will make it.

"I am hundred per cent confident that the project will be implemented with Enron as the co-developer," he says, "I will fight it out."

The cost of the power generated by the Kannur project would be cheaper than that of the National Thermal Power Corporation's Kayamkulam project, Nambiar, a former secretary to the Government of India, said.

He said he had agreed to tie-up with the Enron after it showed willingness to invest another Rs 40 billion for developing the LNG terminal and the Azhikal port -- these investments would revolutionise Kerala's industrial scene.

"I am presenting the whole thing before the people of Kerala. Will they say no to it?" Nambiar noted that the people of Kannur have not raised any objection to the project.

Which is quite creditable, considering the local resistance encountered by similar projects in the past.

The Kannur project, incidentally, is the first major private initiative in Kerala. Earlier, Kerala had been shunning private investments in power sector as it had surplus power, thanks to the commissioning of the Idukki hydel project in the 70s. The scene took a turn for worse as more and more power intensive units came up in the public and private sector, lured by cheap power.

But to take on the fresh load, the government could not commission any project after Idukki. Several state proposals failed to pass the environmental test. Powerful local resistance was another reason, as hydel projects always resulted in largescale displacement of people and deforestation.

In this regard, the Silent Valley project is a glaring example. It was shot down by the environmentally-conscious people. The Lower Periyar project, promised by Indira Gandhi in place of the stalled Silent Valley, is still languishing for permission in the environment ministry.

Considering the mounting resistance to hydel projects, the previous Congress-led government had lined up several fuel-based projects in the private sector. However, with the Communist-led government assuming power in the state, many of these have been packed off. And the remaining, like the Kannur project, are finding it hard to overcome the ideological hurdles of the Communists.

All of which, combined, are likely to leave Keralites groping in the darkness.