Dabhol Debacle : Mixed Economy At Work

A mixed economy is not capitalism. It is rule by pressure groups. It is an amoral, institutionalized civil war of special interests and lobbies, all fighting to seize a momentary control of the legislative machinery, to extort some special privilege at one another’s expense by an act of government—i.e., by force. In the absence of individual rights, in the absence of any moral or legal principles, a mixed economy’s only hope to preserve its precarious semblance of order, to restrain the savage, desperately rapacious groups it itself has created, and to prevent the legalized plunder from running over into plain, unlegalized looting of all by all—is compromise; compromise on everything and in every realm—material, spiritual, intellectual—so that no group would step over the line by demanding too much and topple the whole rotted structure. If the game is to continue, nothing can be permitted to remain firm, solid, absolute, untouchable; everything (and everyone) has to be fluid, flexible, indeterminate, approximate. By what standard are anyone’s actions to be guided? By the expediency of any immediate moment.

In 1992, the intricate networks of the pull peddlers across the governments of 2 countries resulted in the creation of the Dabhol Power Plant project. Frank Wisner, ex-ambassador of the USA in India, enabled the creation of the Dabhol Power Company, an investment company owned by Enron, General Electric, Bechtel and Maharashtra state government’s Power Development Corporation, to get a $2.8 billion contract from the Indian government to construct a power station in India, thanks to Wisner’s influence on the Indian government.

Construction was planned in two phases starting in 1992. Phase one was set to burn naphtha, a fuel similar to kerosene and gasoline. Phase two would burn liquefied natural gas (LNG).

In March 1995, the ruling Congress Party in Maharashtra lost to a nationalist coalition that had campaigned on an anti-foreign investment platform. This coalition created a riot against the power plant in May 1995, by mobilizing hundreds of local villagers. The Dabhol Power Company did what it was programmed to do. It tried to protect its property by using force in retaliation to force of the rioters.

In 1996, the Indian government assessed the project as being excessively expensive and refused to pay for the plant and stopped construction. The Maharashtra State Electricity Board (MSEB), the local state run utility, determined that it could not afford to purchase the power (at Rs. 8 per unit Kwh) charged by Dabhol Power Company. The plant operator was unable to find alternate customers for Dabhol power due to the absence of an open free market in the regulated structure of utilities in India. The company kept trying to revive the project and spark interest in India’s need for the power plant without success.

Socialist groups cited the project as an example of corporate profiteering over public good. Over the next year Dabhol Power Company reviewed its options. On February 23, 1996, Maharashtra and Dabhol Power announced a new agreement. Dabhol Power cut the price of the power by over 20 percent, cut total capital costs from $2.8 billion to $2.5 billion, and increased Dabhol’s output from 2,015 megawatts to 2,184 megawatts. Both parties committed formally to develop the second phase. The first phase went online May 1999, almost two years behind schedule, and construction was started on phase two. Costs would now ultimately climb to $3 billion. Then everything came to halt. The MSEB refused to pay for all the power, and it became clear that getting the government to honor the guarantees would not be an easy task.

In 2000, it was selling electricity to the Maharashtra State Electricity Board for Rs. 4.67/kwh. While the Board was only charging residents of Maharashtra Rs. 1.89/kwh. In 2001 it was shut down, after the Maharashtra SEB, refused to pay the bills for Nov 2000 and Dec 2000.

The power plant Phase I which was re-named Ratnagiri Gas and Power Pvt Ltd (RGPPL) started operation in May 2006, after a hiatus of over 5 years. However, the Dabhol plant ran into further problems, with RGPL shutting down the plant on 4 July 2006 due to a lack of naphtha supply. Qatar based RasGas Company Ltd. started supplying LNG to the plant in April 2007.

The Dabhol Power Plant Project is operational as of April 2009 with 900 MW RLNG fired running capacity but there are problems due to non-availability of operational insurance, also the decision is largely dependent upon political developments in the country as well as performance of newly repaired rotors.

India’s energy sector continues to lose roughly $5 billion a year.

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2 thoughts on “Dabhol Debacle : Mixed Economy At Work

    • LOL! Thanks for reading it. I want to make India work, but I am too lazy to go all Gandhi about it. So I am expecting someone who reads shit like this to get it working.

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