The Eron Scandal: Part 4, Trying to Rescue the Dabhol Plant

Trying to Rescue the Dabhol Plant
There is also clear evidence that Vice President twice discussed the Dabhol matter with India. There was a dispute over payments the Indian state owed owned Enron and its partners and the fact that Maharashtra State, in western India, had stopped buying power from the natural gas-driven facility. Other investors were General electric and Bechtel. In 1993, Enron entered a contract with Maharashtra state to purchase electricity from Enron’s $2.9 billion gas-burning facility there. Arundhati Roy and other journalists were critical of the corruption associated with getting approval of the project. Enron has been accused of hiring Indian police to beat critics of the operation, and Human rights Watch has published a detailed analysis of the whole sordid business. In 1997, the Indian police roughed up Indian fishermen who were against the arrangement. The wife of a protester was beaten and unclothed by the police. Nevertheless, the Clinton administration gave the project a clean human rights bill of health and loaned the Dabhol project $300 million. To be fair to the Clintonites, the human rights assessment was made by someone in the State Department who could have been deluded in some way by Enron and its other US partners. The company is also accused of pollution, diminishing the mango crop, and reducing the take of fishermen.

The contract was later repudiated and had to be renegotiated. After the 1995 elections in India, the contract was renegotiated. The Clinton administration helped Enron by pressuring the Indians to enter a new agreement. It was this involvement with Enron upon which conservatives build claims that Clinton was responsible for Enron’s collapse. It provided $12-$14 billion in long terms profits out of $30 billion that India would pay over a 20 year period. The World Bank had insisted that the plant’s energy would be too expensive, but Enron promised India that it would be able to bring costs to an acceptable level after the first phase of the plant’s operations. Initially, naptha was used in the plant, and there were plans to bring in liquid gas from Quatar, which fell through.

Enron announced in 1997 that it planned to spend about a billion dollars improving its pipelines in India . An important spur to allow them to ship natural gas to Korea and Japan, the world’s largest consumers of liquid natural gas. The main feature was a 400 mile extension from New Delhi to Multan, Pakistan. Building a line to that city would make available gas from a line to Iran as well as gas from Unocal’s proposed line through Afghanistan. The latter line had not left the planning stages, and Unocal claimed to have abandoned the project after President Clinton ordered missiles to be fired at a Al -Quaida facility in Afghanistan. However, Unocal was only the largest partner in the Central Asian Pipeline consortium. The other firms, including one from Saudi Arabia, said they would press on. Uncertainty over the CentGas line led the US Trade and Development Agency to fund a feasibility study of a line from the Caspian Mountains to a Turkish port. From there, the liquefied gas could be sent by ship to Pakistan, India, and elsewhere. Enron was hired to do the study, and GE Capital Services and Bechtel were expected to join it in constructing such a line, which would be much more costly than the one through Afghanistan.

A more immediate problem was that the power Enron’s Dabhol plant was selling was twice as expensive as that of its next nearest competitor. Part of the problem may have been that Enron was using much bottled gas to generate electricity. It may never be known whether Enron was counting on cheaper Caspian gas that would be delivered through pipelines to be built through Afghanistan. The Maharashtra state stopped purchasing gas in 2000, but it initially seemed that it would honor its contract to pay Enron ! $250 million annual fee. In 2001, it stopped making payments on the fee, and Cheney raised the question with Indian representatives. Cheney tried to help Enron collect what it thought it was owed or to unload the plant on India. Enron was willing to accept $2.3 billion. President Bush continued to pressure India to do business with Enron until after Enron announced in November 2001 that the SEC was investigating it. In 2002, Ambassador to India Robert Blackwill was still championing Enron’s cause in 2002.

Documents obtained under the Freedom of Information Act clearly indicate that Cheney raised the question of the Dabhol power plant with the visiting head of the Indian Congress Party. The State and Treasury Departments also actively worked on Enron’s behalf. White House aid Mary Matalin has insisted that Kenneth Lay and Cheney never discussed Enron’s financial conditions or the Indian debt. Other documents indicate that the National Security Council anticipated that Bush would discuss the Dabhol matter with Prime Minister Vajpayee, but subsequent e-mails indicated that neither Bush nor economic advisor Lawrence Lindsey should raise the matter. Lindsey had received annual payments of $50,000 as an Enron advisor.


The probability that Vice President Cheney tried to rescue Enron in India or that Chairman Wood’s actions benefited the firm also has attracted little interest. It is also clear that the administration’s efforts to rescue the Enron venture in Dabhol were unusual and unprecedented. In cases of that sort, it was customary for the Department of Commerce or State Department to pursue the matter. In this instance, it became a high priority for the National Security Council staff. Richard Cheney raised the matter with Sonia Gandhi, head of the opposition Congress party. Other agencies that were involved were the State Department, the Treasury, the Office of U.S. Trade Representative, and the Overseas Private Investment Corporation. The NSC also led an interagency “Dabhol Working Group.” Even after 9-11 made India’s cooperation against terrorism particularly important, President Bush was pressuring that Asian democracy to remedy the Dabhol situation.




Sherman has written African American Baseball: A Brief History, which can be acquired from LuLu Publishing on line.