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Shall We Leave It to the Experts?
Enron's Power Project in India
Demonstrates Who Benefits from Globalization
by Arundhati Roy
18 February 2002
The Nation
India lives in several centuries at the same time. Somehow we
manage to progress and regress simultaneously.
As a nation we age by pushing outward from the middle -- adding a
few centuries on either end of the extraordinary CV. We greaten
like the maturing head of a hammerhead shark with eyes looking in
diametrically opposite directions.
I don't mean to put a simplistic value judgment on this peculiar
form of "progress" by suggesting that Modern is Good and
Traditional is Bad -- or vice versa. What's hard to reconcile
oneself to, both personally and politically, is the schizophrenic
nature of it. That applies not just to the ancient/modern
conundrum but to the utter illogic of what appears to be the
current national enterprise. In the lane behind my house, every
night I walk past road gangs of emaciated laborers digging a
trench to lay fiber-optic cables to speed up our digital
revolution. In the bitter winter cold, they work by the light of a
few candles.
It's as though the people of India have been rounded up and loaded
onto two convoys of trucks (a huge big one and a tiny little one)
that have set off resolutely in opposite directions. The tiny
convoy is on its way to a glittering destination somewhere near
the top of the world. The other convoy just melts into the
darkness and disappears. A cursory survey that tallies the caste,
class and religion of who gets to be on which convoy would make a
good Lazy Person's concise Guide to the History of India. For some
of us, life in India is like being suspended between two of the
trucks, one leg in each convoy, and being neatly dismembered as
they move apart, not bodily, but emotionally and intellectually.
Fifty years after independence, India is still struggling with the
legacy of colonialism, still flinching from the "cultural insult."
As citizens we're still caught up in the business of "disproving"
the white world's definition of us. Intellectually and
emotionally, we have just begun to grapple with communal and caste
politics that threaten to tear our society apart. But meanwhile,
something new looms on our horizon. On the face of it, it's just
ordinary, day-to-day business. It lacks the drama, the
large-format, epic magnificence of war or genocide or famine. It's
dull in comparison. It makes bad TV. It has to do with boring
things like jobs, money, water supply, electricity, irrigation.
But it also has to do with a process of barbaric dispossession on
a scale that has few parallels in history. You may have guessed by
now that I'm talking about the modern version of globalization.
What is globalization? Who is it for? What is it going to do to a
country like India, in which social inequality has been
institutionalized in the caste system for centuries? A country in
which 700 million people live in rural areas. In which 80 percent
of the landholdings are small farms. In which 300 million people
are illiterate. Is the corporatization and globalization of
agriculture, water supply, electricity and essential commodities
going to pull India out of the stagnant morass of poverty,
illiteracy and religious bigotry? Is the dismantling and
auctioning off of elaborate public sector infrastructure,
developed with public money over the past fifty years, really the
way forward? Is globalization going to close the gap between the
privileged and the underprivileged, between the upper castes and
the lower castes, between the educated and the illiterate? Or is
it going to give those who already have a centuries-old head start
a friendly helping hand?
Is globalization about "eradication of world poverty," or is it a
mutant variety of colonialism, remote-controlled and digitally
operated? These are huge, contentious questions. The answers vary
depending on whether they come from the villages and fields of
rural India, from the slums and shantytowns of urban India, from
the living rooms of the burgeoning middle class or from the
boardrooms of the big business houses. Today India produces more
milk, more sugar and more food grain than ever before. And yet, in
March 2000, just before President Clinton's visit to India, the
Indian government lifted import restrictions on 1,400 commodities,
including milk, grain, sugar, cotton, tea, coffee and palm oil.
This despite the fact that there was a glut of these products on
the market.
As of April 1 -- April Fool's Day -- 2001, according to the terms
of its agreement with the World Trade Organization, the Indian
government had to drop its quantitative import restrictions. The
Indian market is already flooded with cheap imports. Though India
is technically free to export its agricultural produce, in
practice most of it cannot be exported because it doesn't meet the
First World's "environmental standards." (You don't eat bruised
mangoes or bananas with mosquito bites or rice with a few weevils
in it, whereas we don't mind the odd mosquito and the occasional
weevil.)
Developed countries like the United States, whose hugely
subsidized farm industry engages only 2 to 3 percent of its total
population, are using the WTO to pressure countries like India to
drop agricultural subsidies in order to make the market
"competitive." Huge, mechanized corporate enterprises working
thousands of acres of farmland want to compete with impoverished
subsistence farmers who own a couple of acres.
In effect, India's rural economy, which supports 700 million
people, is being garroted. Farmers who produce too much are in
distress, farmers who produce too little are in distress and
landless agricultural laborers are out of work as big estates and
farms lay off their workers. They're all flocking to the cities in
search of employment.
"Trade Not Aid" is the rallying cry of the head men of the new
Global Village, headquartered in the shining offices of the WTO.
Our British colonizers stepped onto our shores a few centuries ago
disguised as traders. We all remember the East India Company. This
time around, the colonizer doesn't even need a token white
presence in the colonies. The CEOs and their men don't need to go
to the trouble of tramping through the tropics, risking malaria,
diarrhea, sunstroke and an early death. They don't have to
maintain an army or a police force, or worry about insurrections
and mutinies. They can have their colonies and an easy conscience.
"Creating a good investment climate" is the new euphemism for
Third World repression. Besides, the responsibility for
implementation rests with the local administration.
Enron in India
The fishbowl of the drive to privatize power, its truly star turn,
is the story of Enron, the Houston-based natural gas company. The
Enron project was the first private power project in India. The
Power Purchase Agreement between Enron and the Congress
Party-ruled state government of Maharashtra for a 740-megawatt
power plant was signed in 1993. The opposition parties, the Hindu
nationalist Bharatiya Janata Party (BJP) and the Shiv Sena, set up
a howl of swadeshi (nationalist) protest and filed legal
proceedings against Enron and the state government. They alleged
malfeasance and corruption at the highest level. A year later,
when state elections were announced, it was the only campaign
issue of the BJP-Shiv Sena alliance.
In February 1995 this combine won the elections. True to their
word, they "scrapped" the project. In a savage, fiery statement,
the opposition leader L.K. Advani attacked the phenomenon he
called "loot through liberalization." He more or less directly
accused the Congress Party government of having taken a $13
million bribe from Enron. Enron had made no secret of the fact
that in order to secure the deal, it paid out millions of dollars
to "educate" the politicians and bureaucrats involved in the deal.
Following annulment of the contract, the US government began to
pressure the Maharashtra government. US Ambassador Frank Wisner
made several statements deploring the cancellation. (Soon after he
completed his term as ambassador, he joined Enron as a director.)
In November 1995 the BJP-Shiv Sena government in Maharashtra
announced a "renegotiation" committee. In May 1996 a minority
federal government headed by the BJP was sworn in at New Delhi. It
lasted for exactly thirteen days and then resigned before facing a
no-confidence vote in Parliament. On its last day in office, even
as the motion of no confidence was in progress, the Cabinet met
for a hurried "lunch" and reratified the national government's
counterguarantee (which had become void because of the earlier
"canceled" contract with Enron). In August 1996 the government of
Maharashtra signed a fresh contract with Enron on terms that would
astound the most hard-boiled cynic.
The impugned contract had involved annual payments to Enron of
$430 million for Phase I of the project (740 megawatts), with
Phase II (1,624 megawatts) being optional. The "renegotiated"
power purchase agreement makes Phase II of the project mandatory
and legally binds the Maharashtra State Electricity Board (MSEB)
to pay Enron the sum of $30 billion! It constitutes the largest
contract ever signed in the history of India.
Indian experts who have studied the project have called it the
most massive fraud in the country's history. The project's gross
profits work out to between $12 billion and $14 billion. The
official return on equity is more than 30 percent. That's almost
double what Indian law and statutes permit in power projects. In
effect, for an 18 percent increase in installed capacity, the MSEB
has to set aside 70 percent of its revenue to pay Enron. There is,
of course, no record of what mathematical formula was used to
"re-educate" the new government. Nor any trace of how much
trickled up or down or sideways or to whom.
But there's more: In one of the most extraordinary decisions in
its not entirely pristine history, in May 1997 the Supreme Court
of India refused to entertain an appeal against Enron.
Today, everything that critics of the project predicted has come
true with an eerie vengeance. The power that the Enron plant
produces is twice as expensive as its nearest competitor and seven
times as expensive as the cheapest electricity available in
Maharashtra. In May 2000 the Maharashtra Electricity Regulatory
Committee (MERC) ruled that temporarily, until as long as was
absolutely necessary, no power should be bought from Enron. This
was based on a calculation that it would be cheaper to just pay
Enron the mandatory fixed charges for the maintenance and
administration of the plant that it is contractually obliged to
pay than to actually buy any of its exorbitant power. The fixed
charges alone work out to around $220 million a year for Phase I
of the project. Phase II will be nearly twice the amount.
Two hundred and twenty million dollars a year for the next twenty
years. Meanwhile, industrialists in Maharashtra have begun to
generate their own power at a much cheaper rate, with private
generators. The demand for power from the industrial sector has
begun to decline rapidly. The MSEB, strapped for cash, with Enron
hanging like an albatross around its neck, will now have no choice
but to make private generators illegal. That's the only way that
industrialists can be coerced into buying Enron's exorbitantly
priced electricity.
In January 2001 the Maharashtra government (the Congress Party is
back in power with a new chief minister) announced that it did not
have the money to pay Enron's bills. On January 31, only five days
after an earthquake in the neighboring state of Gujarat, at a time
when the country was still reeling from the disaster, the
newspapers announced that Enron had decided to invoke the
counterguarantee and that if the government did not come up with
the cash, it would have to auction the government properties named
as collateral security in the contract.
But Enron had friends in high places. It was one of the biggest
corporate contributors to President George W. Bush's election
campaign. US government officials warned India about vitiating the
"investment climate" and running the risk of frightening away
future investors. In other words: Allow us to rob you blind, or
else we'll go away.
Last June the MSEB announced that it was ending its agreement with
the Dabhol Power Corporation, a joint venture of Enron -- which
has the largest stake -- General Electric and Bechtel. DPC ceased
operations soon afterward, and is pressuring the government to
cover its debts. Royal Dutch/Shell, the Anglo-Dutch petroleum
group, TotalFinaElf and Gaz de France are currently bidding to
take over Enron, Bechtel and GE's collective stake in the plant in
a "distress sale."
Globalizing Dissent
Recently, globalization has come in for some criticism. The
protests in Seattle and Prague will go down in history. Each time
the WTO or the World Economic Forum wants to have a meeting,
ministers have to barricade themselves with thousands of heavily
armed police. Still, all its admirers, from Bill Clinton, Kofi
Annan and A.B. Vajpayee (the Indian Prime Minister) to the
cheering brokers in the stalls, continue to say the same lofty
things: If we have the right institutions of governance in place
-- effective courts, good laws, honest politicians, participatory
democracy, a transparent administration that respects human rights
and gives people a say in decisions that affect their lives --
then the globalization project will work for the poor as well.
They call this "globalization with a human face."
The point is, if all this were in place, almost anything would
succeed: socialism, capitalism, you name it. Everything works in
Paradise, a Communist State as well as a Military Dictatorship.
But in an imperfect world, is it globalization that's going to
bring us all this bounty? Is that what's happening in India now
that it's on the fast track to the free market? Does any one thing
on that lofty list apply to life in India today? Are state
institutions transparent? Have people had a say -- have they even
been informed, let alone consulted -- about decisions that vitally
affect their lives? And are Clinton (or now Bush) and Prime
Minister Vajpayee doing everything in their power to see that the
"right institutions of governance" are in place? Or are they
involved in exactly the opposite enterprise? Do they mean
something else altogether when they talk of the "right
institutions of governance"?
The fact is that what's happening in India today is not a
"problem," and the issues that some of us are raising are not
"causes." They are huge political and social upheavals that are
convulsing the nation. One is not involved by virtue of being a
writer or activist. One is involved because one is a human being.
If you're one of the lucky people with a berth booked on the small
convoy, then Leaving It to the Experts is, or can be, a mutually
beneficial proposition for both the expert and yourself. It's a
convenient way of shrugging off your own role in the circuitry.
And it creates a huge professional market for all kinds of
"expertise." There's a whole ugly universe waiting to be explored
there. This is not at all to suggest that all consultants are
racketeers or that expertise is unnecessary, but you've heard the
saying: There's a lot of money in poverty. There are plenty of
ethical questions to be asked of those who make a professional
living off their expertise in poverty and despair.
For instance, at what point does a scholar stop being a scholar
and become a parasite who feeds off despair and dispossession?
Does the source of your funding compromise your scholarship? We
know, after all, that World Bank studies are among the most quoted
studies in the world. Is the World Bank a dispassionate observer
of the global situation? Are the studies it funds entirely devoid
of self-interest?
Take, for example, the international dam industry. It's worth
$32-$46 billion a year. It's bursting with experts and
consultants. Given the number of studies, reports, books, PhDs,
grants, loans, consultancies, environmental impact assessments --
it's odd, wouldn't you say, that there is no really reliable
estimate of how many people have been displaced by big dams in
India? That there is no estimate for exactly what the contribution
of big dams has been to overall food production in India? That
there hasn't been an official audit, a comprehensive, honest,
thoughtful, post-project evaluation, of a single big dam to see
whether or not it has achieved what it set out to achieve? Whether
or not the costs were justified, or even what the costs actually
were?
Cynics say that real life is a choice between the failed
revolution and the shabby deal. I don't know . . . maybe they're
right. But even they should know that there's no limit to just how
shabby that shabby deal can be. What we need to search for and
find, what we need to hone and perfect into a magnificent, shining
thing, is a new kind of politics. Not the politics of governance,
but the politics of resistance. The politics of opposition. The
politics of forcing accountability. The politics of slowing things
down. The politics of joining hands across the world and
preventing certain destruction. In the present circumstances, I'd
say that the only thing worth globalizing is dissent. It's India's
best export.
Arundhati Roy, a novelist who lives in New Delhi, is the author of
Power Politics (from which this article in the February 18, 2002
issue was adapted). A second and expanded edition will be
available (February 2002) from South End Press.
© 2002 The Nation Company, L.P.
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