• Cash Payments: The Enron deal is probably the largest financial deal in Indian history. Over a period of twenty years MSEB is contractually obligated to pay an estimated 30 billion US dollars. This translates into Rs. 140,000 crores at current exchange rates. A contract of this magnitude dwarfs deals like those of Bofors (Rs. 1500 crores at 1986 prices). Given this, the haste and the manner in which this deal was arrived at is amazing. The original MoU was signed in 1992 after three days' of discussions without any competitive bidding of any kind. We should point out that the final PPA is still a secret document. The ``renegotiation'' in 1995 ( which helped make the deal worse) was conducted over eleven days (when the commitee had a mandate for thirty days).
• Losses incurred: This deal has already resulted in the MSEB being driven to bankruptcy (and the state govt. almost defaulting). The average price of Enron power at Rs. 3.97 per unit (between Apr.'99 and Jan. '00) was at least twice that of power purchased by MSEB from other private producers. A difference of even 1 paise per unit costs the public Rs. 4 crores per year (based on average power purchase from DPC in '99-'00). By Nov. 2000 the price of power from Enron had shot up to Rs. 7.81 per unit. This had led to MSEB being restrained by the state electricity regulatory commision from purchasing any Enron power. Even then, MSEB had to pay (as per the PPA) a fixed sum of Rs. 90 crores per month -- for purchasing no power! Hence our estimate of a loss to the exchequer of Rs. 1000 crores per year. This figure will only multiply by a factor of at least 3 by 2002 when the second phase comes into operation. We find it difficult to believe that such an obviously bad contract could have been signed in good faith. The public should be saved from having to bear the burden of a corrupt contract.
• The role of the CEA: The Central Electricity Authority (CEA) is the statutory body to look into the details of the capital cost of any power project and see that it is reasonable. Since the price of power depends on the capital cost this is the safeguard provided to the public against over inflated costs of the kind that we are currently seeing with Enron. This authority was bypassed by Enron in connivance with the central govt. The mandatory techno-economic clearance for the Enron project was never given. Enron consistently refused to give a break-up of its capital costs to the CEA. A typical reply from enron to the CEA reads ``[The CEA's] request for more detailed costs of equipment/systems/works ... cannot be supported and is not deemed necessary.'' Given this the CEA finally examined only the technical aspects of the plant and not it's economics. It merely noted that the ministry of Finance (which is not a competent body to evaluate the costs of a power plant) had looked into the cost of power and found it to be reasonable. This was an abdication of the CEA's mandatory duties and has directly resulted in the current crisis. It also makes the contract illegal by violating sections of the Electricity supply Act. It appears that the CEA was pressurised by the ministry of finance and power.
• GoM suit: Many of the above strong, indirect indications of corruption in the deal were directly substantiated in a suit to the state high court in 1995 submitted by the Maharashtra govt. (copy attached as Document B). The govt. claimed on oath - giving 600 pages of supporting documentation - that, the action on the part of the MSEB in "unilaterally waiving compliance with various Conditions Precedent" was "effectuated and conceived in fraud" and was "not bonafide" and therefore rendered "the agreement as void". It went on to say that the "unholy haste" with which the Financial Closure was "achieved" was "clearly in order to reap the benefit of the huge sum of USD 20 Million" that were spent by Enron. The govt. also recognised what has now come true, namely, that the PPA was "contrary to the public policy of this country" as it would "cause a huge loss to the public exchequer on the purchase and sale of power" and "place an unconscionable burden on the electricity consumers of the State". This suit was mysteriously withdrawn a few months later when the govt. overnight changed it's stand and decided to ``renegotiate'' with Enron. This itself was malafide action on the govt.'s part.

We feel there is every reason to believe that this deal involved enormous corruption at both state and central levels. A thorough investigation leading to a nullification of the contract is the only hope that the public has of extricating itself out of a swindle that will unfold over the next twenty years. Our hopes rest on your organisation to do so, thus upholding our basic faith in the Indian democratic system.