July 11, 2006
Kenneth Lay is dead, suddenly, of a heart attack. It must say something about the man that within a couple of hours -- yes, two hours -- of his death, there are people getting on the Web to say about him that he 'has faked his own death' to evade punishment for his crimes.
After all, it was Lay, AP reminds us, who 'help[ed) perpetuate one of the most sprawling business frauds in US history.' When his trial was over, one juror said that when listening to him, she 'felt (his) character was questionable."
Of such a man, it must be easy to think he would even fake his death.
Lay was to be sentenced on October 23, and faced life imprisonment for that sprawling fraud. That fraud was, of course, Enron, the company he founded in 1985 and built into a $100 billion giant by 2000 before it collapsed.
And, of course, here in India starting in the early 1990s, Enron came, saw and conquered. The Dabhol thermal power plant was Enron's baby. That plant is now being revived, and will supply power to Maharashtra. And that hides the entire can of worms that Enron really was in India. With Lay now dead -- and no, I don't believe he faked it -- it's a good time to take a peek into that can.
The thing is, Enron was never an energy company. Not that this should necessarily have been a strike. This was a company that came to India with the oldest motive in the book: to make money. That's all. It would do what it had to, to fulfill that mission. Hard to fault that, too. It's what businesses do, what business is about.
And anyway, we had our own mechanisms -- rules, and officials to enforce them -- in place to ensure that things remained above board, that we got our end of the deal too.
Yet on September 30, 1992 -- when the Dabhol plant was still a twinkle in the eyes of the Kenneth Lays -- the chairman of MSEB wrote to the Government of India, saying of Enron's Indian face, the Dabhol Power Company: 'public and judicial scrutiny of business policy and decisions as per the (Companies) Act will not be acceptable by a company like DPC.'
When I first heard this, then read it again in Abhay Mehta's excellent Power Play (from which the quotes in this article are taken), and every time since -- every time, it takes my breath away. Not only is this a company that starts operations in India by saying Indian law is not 'acceptable', but an important Indian official himself obligingly informs the government of their aversion to our law.
But there's more. (With Enron, there always was more). In March 1993, the finance ministry asked the World Bank to fund the DPC plant. One month later, the Bank said no. DPC power, the Bank predicted amid much other criticism, would 'displace lower cost (power) in the off-peak periods.' After its 'standard project economic analysis', the Bank concluded 'that the project is not viable.'
What happened then? Maharashtra's then secretary of industries, energy and labour, U K Mukhopadhyay, wrote to the Government of India suggesting that the Bank be persuaded to review its decision. The Bank wrote Mukhopadhyay, 'does not support the project. It, however, points out very clearly that this project would be a very good project if it was not coming up in India.'
You want a fine reason to finance DPC, you got one right there. But it still didn't impress the Bank, who wrote back in July that year: 'We reconfirm our earlier conclusion that the Dabhol project� is not economically justified and thus could not be financed by the Bank.'
The end? Of course not. Less than six months later, the foundation of the whole Enron presence in India had been hammered out. (Naturally). That's the Power Purchase Agreement (PPA) that MSEB and Enron signed: from all accounts, an incredibly complex affair that nobody could fully follow. In those pre-RTI (Right to Information) days, a consumer organisation tried to get a copy of it from DPC. Their reply, and I quote:
To a country as yet unused to the phenomenon of privatisation this may be difficult to understand, but in a competitive market a PPA is the one document that affords companies an edge over the other players in the field. (Therefore) such a document is zealously guarded by all companies.
A good lesson in the ways of the market and privatisation. Thank you, Enron! Only, 'competitive market' and 'other players' are not quite accurate. There were no other players, no competitive market, no "edge". DPC bid for no contract. All of its power would be bought by one customer, MSEB.
The phenomenon of privatisation, all right.
Want more? There's plenty, because Enron's is a long saga of chicanery, evasion and betrayal.
Complete Coverage: The Enron saga on rediffEnron first came to Maharashtra during the time of Sharad Pawar's [Images] Congress rule. The Bharatiya Janata Party's Gopinath Munde promised to 'throw Enron in the Arabian Sea' and his BJP-Shiv Sena coalition rode that slogan all the way to power in 1995. Once there, Munde's Sena-BJP government scrapped the project in a blaze of righteous rhetoric about how it was 'anti-Maharashtra' and 'conceived in fraud.'
Then, in November 1995, Enron's CEO, the famous Rebecca Mark, visited the Sena's leader, Bal Thackeray. Two weeks later -- yes, two weeks -- the project had been 'renegotiated' and restarted, bigger and better (for Enron) than in Pawar's time. So much for being 'anti-Maharashtra.'
One final detail. That November, the renegotiation committee claimed that DPC power, when it came, would be Rs 2.22 a unit. To calculate that figure, it assumed that the dollar was worth Rs 32 and would remain so for the next 20 years. (This is important because this price was tied to the dollar, not the rupee).
Only, that November the dollar was already at Rs 35, and in the decade since has risen as high as Rs 48. No surprise, then: when DPC first started supplying power to MSEB in 2000, The Hindustan Times reported that it was priced 'between Rs 3.01 and Rs 4.25 (per unit).'
In the US, Enron eventually sank under the weight of its 'sprawling' frauds, and Kenneth Lay was tried. But at least those things happened.
In India, what has happened to the Pawars and Mukhopadhyays, Thackerays and Mundes -- men who were, above all, charged with protecting our interests in such deals?
Answer: nothing. In his book, Abhay Mehta remarks on exactly this:
The problem lies mostly with us -- the Indian nation state of India
and all that term represents or should represent. At the core...
lies our inability to deal with or look after our own interests and to
take responsibility for our actions or the lack thereof.
And if Kenneth Lay's death makes us think about that a little, he will not have died in vain.
My blog: Death Ends Fun