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Maharashtra move may help solve Enron tangle

Y Siva Sankar in Bombay

Two measures that Maharashtra took on Wednesday signify the first step away from a showdown with Enron India over the Dabhol Power Project. Also of significance are the proposed reforms in the Maharashtra State Electricity Board.

"It is a good development that Chief Minister Vilasrao Deshmukh has written to the prime minister about the issue. This may lead to early resolution of the tariff problem," a top state government official told rediff.com.

"The second measure in constituting a committee to review the entire Enron deal raises hopes of an amicable settlement. Hopefully, the committee will offer a platform to work out a mutually acceptable formula," the official said.

At a media conference in Bombay on Wednesday, Deshmukh said steps are being taken to boost the revenues of the MSEB, so that the state-owned power utility can pay its bills.

He told rediff.com: "We have given all the necessary powers to the MSEB chairman to take any action, including disconnection of power supply lines, against defaulters. We need full police force for this. We are prepared to do this."

Would he delink MSEB from the state government? "No. How can that be? We have a very close 'connection'."

The chief minister said he is not aware that Moody's has revised its rating for Maharashtra and that this has implications for future foreign direct investment in the state. "The whole issue is slowly cropping up. There are so many other issues also. I can't predict about the impact on FDI at this point in time," he said.

In the wake of the precarious nature of state finances, the Reliance and Ispat power projects continue to be on hold, he added.

Asked if the state government is keen on clearing Enron dues, Deshmukh said: "Of course, we will clear outstanding dues. What we have done is, we have asked the MSEB to withhold payments because the revenue inflows are not healthy. Once revenues improve, we will decide."

Presenting the picture of a vastly relieved man, Deshmukh explained what he expects from his missive to Vajpayee. "I have requested the PM to intervene and offer us deliverance from this vexatious controversy."

Deshmukh clarified that the Godbole committee will merely make some recommendations on the Enron issue. "The Maharashtra Cabinet will then decide whether or not to accept these recommendations. Of course, they won't be binding on us -- recommendations of panels are never binding on any government. That is why they are called recommendations."

When his attention was drawn to outgoing US Ambassador Richard Celeste's recent remarks on Enron, Deshmukh nodded in agreement. (Celeste had warned the state government against scrapping the project. As Governor of Ohio, he had once faced a similar situation. However, he chose to honour the sovereign commitments, even if it involved a political cost. Celeste raised taxes and cut government expenditure.)

Will Deshmukh follow suit? He told rediff.com: "We are doing the same thing, no?"

Does this mean the state government will raise taxes in the coming budget? "How can I say that? It's a government secret, no? If I say that I'm going to raise taxes, tomorrow I will have to face morchas (protests)."

Meanwhile, officials said the MSEB has already begun its crackdown on errant power consumers. Since January 15, the utility has gone on a disconnection spree. Every day, some 20,000 disconnections are being effected. "This has helped MSEB's revenues to up to Rs 9.11 billion in January. Collections are up. In February, which has 28 days, revenues may range between Rs 8.75 billion and Rs 8.50 billion," an official said.

It is learnt MSEB officials have been threatened, even harmed, at some places by irate consumers.

Speaking on conditions of anonymity, a senior state government official told rediff.com: "The civil servants are trying to sensitise the political class to some harsh realities. Mindless subsidies and tariff distortions are at the root of the electricity industry problems in Maharashtra. They agree in private but lack the political will to do the right thing."

Asked about the responsiveness of the ruling Democratic Front coalition government to pragmatic suggestions, the official said: "The government will be as responsive as the media wants it to be."

Recalling how the problem of gold smuggling disappeared when levies were lowered, the official said rationalisation of tariffs would help resolve the crisis. "If you have 13 million consumers, and if you offer subsidised, almost-free power to 10.18 million, then there is bound to be wasteful, mindless use of electricity. There will also be huge demand for almost-free power.

"To meet such demand, power has to be bought from utilities like Enron's Dabhol project at international prices. However, revenues remain meagre. Business is not done this way.

"Moreover, the top-end segment of the consumers, mainly industrial and commercial establishments, who pay more, resent the present tariffs. Most of them are going in for captive plants. Others with average morality explore ways of slashing their power bills."

Efforts are on to cut line-losses due to theft in transmission and distribution stages.

Plans are afoot to rectify the "erroneous sample" used by the Maharashtra Electricity Regulatory Commission to determine plant efficiency. "There are 2.2 million water pump-set users in the state. The MERC's readings are taken from just 200 meters. Readings will now be taken from 2500 meters to determine the percentage of line-losses," the official said.

Energy audits are being introduced to make MSEB officials at divisional and sub-divisional levels accountable for power received and distributed. Any discrepancy will have to be explained and daily disconnection reports submitted.

Billing is being decentralised. Where one regional centre used to issue 300,000 bills, each sub-divisional office will henceforth issue bills to the tune of 30,000. "This will improve collections and empower officials to monitor the situation at lower levels."

Despite these problems, the MSEB leads India's state electricity boards in power generation, producing about 7,000 mega-watts out of 10,800 MW that all utilities generate in the state.

SEE ALSO:

Maharashtra announces panel to review Enron project

Enron invokes Union govt guarantee

Maharashtra govt raps Enron; CRISIL

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