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Godbole report hits out at DPC

Renni Abraham

The Madhav Godbole-headed Energy Review Committee's report on the Enron power project in Maharashtra has blamed the Dabhol Power Company as well its major shareholders, Enron, General Electric and Bechtel, for a lack of due diligence to ensure the absorption of the entire DPC power after Phase II is complete.

The report, submitted to the Maharashtra Legislature last Tuesday, relies upon the Central Electricity Authority clearance to DPC which stated: "Phase II of the project could only be taken up after the Maharashtra State Electricity Board and the state government ensures absorption of the entire power including off-peak power in or outside the state, together with the completion of associated transmission system matching with the commissioning schedule of the project."

The Godbole committee noted that: "It must be recalled that the CEA letter was addressed to DPC. It became the responsibility of DPC to ensure the entire power was absorbed."

The report further noted that it found that the financial institutions had exhibited poor judgement and lack of due diligence in accepting these projections without demur, as they indicated during their deliberations with the committee and as was evidenced by their agreement to disburse funds for Phase II of the DPC project.

"The decision of the financial institutions to fund this project seems to have been based primarily on the escrow account given by MSEB, the state government guarantee and the counter guarantee by the Central government for Phase I, rather than an independent and meticulous appraisal of the project," the Godbole report notes.

The committee also expressed deep concern at the apparent failure of governance that allowed for such decisions to be taken. "A government that takes decisions involving the incurring of liabilities to the extent of over Rs 60 billion a year (and rising) for over 20 years, in so cavalier a fashion, cannot at the same time, assert that the courts must presume it acts in the public interest," the Godbole committee report notes.

It further states: "We find that while the initial demand projections for DPC were flawed in that they ignored load types in their projections, the demand projection that was the basis for commencement of Phase II was based on patently untenable assumptions, given the information at that time. These assumptions have since been proved to be completely unjustified."

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