Column: This Bothers Me
By Krishnan Chittur
NEW YORK, October 23, 2021 – The Government of India has launched a National Master Plan, a massive infrastructure initiative, “Gati Shakti,” budgeted at an astounding $1.35 trillion. The Plan is to build inter-modal connectivity to coordinate at least 16 major ministries through a central platform, and to dramatically speed up various infrastructure projects ranging from electric mobility, solar energy and “green hydrogen” to new waterways, seaplanes, and modernization of railways.
Modeled along FDR’s New Deal, Gati Shakti would affect a significant socio-economic transformation of India over the next couple of decades. Each infrastructure project would result in significant public benefits: large-scale employment, reduced logistics costs, improved supply chains and increased global competitiveness.
However, whether the public will actually benefit, or be suckered into another disaster will depend how much we have absorbed the lessons of previous grandiose projects. As we know, many such grandiose projects became unmitigated calamities: ill-thought, ill-planned, and driven by corruption, they led to economic catastrophe, destruction of environment, disruption of local life, and callous violation of human rights. The taxpayer was saddled with the resulting mess and the staggering outstanding dues. For “Gati Shakti”- or any portion of it – to be successful, a heightened vigilance against Economic Hit Men (EHM) is a must.
Who Are EHM?
EHM are the primary tools of big business in eye-popping projects involving staggering sums of money. They are teams of highly qualified “professionals” – economists, engineers, management consultants, and financial analysts – who produce impressive reports that may appear legitimate, but the real purpose is to deceive and plunder.
As NYT Bestselling author John Perkins summarizes in his book, “Hoodwinked,” EHM “seduce, bribe, and extort leaders into exploiting their own people” – authorizing loans on outrageous terms, “privatize national assets, legalize the destruction of fragile environments,” and walk away after pocketing unconscionable bribes leaving us to bear the consequences.
EHM provide bogus projections with exaggerated benefits, unrealistic costs, and fast-track procedures – bending or amending legal requirements – to railroad projects in record time. Their tactic is “stake driving,” and its purpose is to present the locals with a fait accomplii: Once construction has started, i.e., the “first stake” is driven into the ground, no politician or judge dared to call off the entire project by refusing more funds or legal authority. These EHM tactics were the same, whether in Suharto’s Indonesia of the 1960s, or India’s Dabhol Power Project of the 90’s (“DPP”). Let’s analyze the latter, the EHM hitjob that we know about.
The Dabhol Power Project: A Classic EHM Hit Job
In the early 1990s, when India commenced “liberalization” of its economy, GOI invited Enron to set up DPP, a $3 billion power project in Dabhol, Maharashtra. That was the highest Foreign Direct Investment in India at that time.
In short order, Enron entered into a deal with the Maharashtra State Electricity Board (MSEB) (1993). Despite the unprecedent size, and the economic, political, and ecological long- term significance of DPP, the entire project was finalized in barely 5 days in utter secrecy with jaw-dropping efficiency.
Under India’s Electricity law, the Central Electricity Authority (CEA) was required to review the cost, location, and salient implications of such projects. But Enron insisted on proceeding without clearance of the techno-economic aspect from CEA.
Understandably so: several aspects of Enron’s proposal would never have survived scrutiny. So Enron demanded amendments to the Electricity Supply Act, 1948, because Enron did not want to lower the costs to comply with existing requirements. Enron also demanded amendment of the Indian Companies Act, 1956, because it did not want to make the requisite public filings: We could not scrutinize the data underlying the project, or critically assess Enron’s projections underlying DPP.
GOI initially appears to have balked, and incredibly, the MSEB sided with Enron. MSEB defiantly declared that government interference in the project was unacceptable. In other words, the State Government authority MSEB publicly riled against GOI!
GOI caved in, and amended the relevant statutes and regulations to Enron’s specs – without waiting for the CEA review. And MSEB signed off on the deal promptly.
World Bank Rejects Loan Request: DPP “one-sided,” “not viable for India”
Enron and India then requested funding from the World Bank. The World Bank refused to finance DPP: the transaction was nauseatingly one-sided in favor of Enron, and was not economically viable for India. For example, Enron would be paid whether it supplied electricity or not. Further Enron’s payment was to be in US dollars so that consumer electricity prices were bound to skyrocket as the dollar rose vis-a-vis the rupee.
Enron and our political leaders were not deterred by the World Bank’s stinging rebuke. With undimmed enthusiasm, they proceeded with the project with financing from various commercial lenders.
The CEA also noted several problems with DPP. But India’s political leaders had already let the horse out of the barn by then.
India leaders’ Sell-Out
Commentators, civic leaders, and locals shouted themselves hoarse about the secrecy, unseemly haste, and gross violation of routine procedures – apart from the obvious effects on the environment and the locals. Serious corruption at highest levels was written all over the project.
Enron officials later testified in the U.S. House Appropriations Committee that Enron had spent $20 million (about 150 crores of rupees) “educating Indians on how capitalist business should work.” No record exists of MSEB starting a training or educational institution. Who got this super-expensive “education”? What did it comprise of? Where did it take place? The answers are obvious.
Further, these “educational expenses” were what was formally reported by Enron. What was unreported remains, well, unknown.
The Havoc Wreaked on Locals, Environment
It is not necessary to enter into the specifics of Enron’s bogus projections: no one can seriously dispute that these projections were just doctored to meet Enron’s profit objectives. For example, it came to light in 2000 – to no one’s surprise – that Enron was charging more than double that of other power generation plants.
Enron’s hijacking of the entire process underlying the DPP approval and implementation was equally shocking. For example, Enron’s plan for DPP projected displacement of thousands of people: 2,000 directly, and 92,000 indirectly from 8 different villages. These people depended on local natural resources. Enron’s own consultants had reported that acquiring land would affect the natural resources and the lives of the people residing in the area.
After a meeting between the State Government and Enron, Enron invited comments and complaints regarding the setting up of DPP, and published a newspaper article. While it received many complaints from locals and NGOs, Enron bluntly lied publicly, and reported that no complaints had been received.
In fact, local opposition was strong, based on very serious concerns such as the potential of a mass Bhopal-type disaster. Locals objected to environmental degradation, concerned that their native places would become toxic chemical zones. Harmful chemicals from the project would affect local’s lives as well as the local horticulture.
Never mind, Enron and MSEB assuaged, boldly declaring that the project would not damage the environment at all. Enron/MSEB would create a green zone around the Power Plant to minimize pollution. Further, natural gas would create the least pollution and wouldn’t be harmful to the area.
Enron submitted a report about the impact on the environment and submitted it to the Government of India. But Enron concealed that the first phase of the plant would use oil and not natural gas. And even natural gas, for that matter, would create thermal and chemical pollution, which would disrupt the thermal release in the estuary.
Most importantly, Enron’s Environmental Impact Assessment (EIA) was kept a secret. Locals knew nothing about these facts. GOI and Maharashtra Government leaders and bureaucrats were obviously bought off.
Human Rights Violations
DPP violated human rights under the guise of maintaining law and order. It had police always employed on the construction site and violently disrupted every peaceful protest. The ever-compliant police conducted raids in villages illegally and harassed them. The water supply was also diverted from the village where the protests originated.
Indeed, the human rights violations were severe enough to draw condemnation from Amnesty International. Amnesty publicly objected, and sought assurances from the GOI and the State Government on protection of free speech rights, and for investigation and accountability for the violators.
In 2002, the Pacific News Service reported: “Today in Dabhol, the power plant is considered polluting and undependable. Spring water has become undrinkable, the mango crop is blighted and the fish catch is dwindling. Often at nightfall, the electricity fails.”
The Legal/Financial Fallout
The State Government changed after the 1995 election. An investigation resulted, and MSEB canceled the deal. DPP had already cost $300 million, and Enron allegedly was losing $250,000 a day due to delay. Much legal wrangling ensued: Enron commenced arbitration seeking $5 billion in damages. Terrified at the prospect of that arbitration – which would take place outside India – GOI statutorily nullified the agreement and commenced court proceedings to enjoin Enron from proceeding with the arbitration. U.S. Vice President Cheney, a huge beneficiary of Enron’s largesse, sought to pressure GOI to pay Enron’s dues.
After endless negotiations, and several false starts, the plant started operating again on November 26, 2015. But only 300 out of the total capacity of 1967 MW would be generated at the moment, to be supplied to Indian Railways.
In sum, three billion dollars and three decades later, the project produced a fifth of the power it was approved for; in the process, it destroyed tens of thousands of lives, and wrecked the environment and the area forever.
Conclusion
The DPP saga illustrates the danger posed by EHM, especially on massive infrastructure projects. “Spend now, regret forever” may help the construction industry, the lenders, and the so-called “consultants”. But the locals bear the permanent consequences.
“Gati Shakti” is an epoch-making development in many ways. Most important, it reflects the replacement of short-term thinking with long-term planning amongst our political leaders. It could catapult India into a massive economic power, raise the common man’s standard of living significantly, and, indeed, transform India in almost every aspect.
However, whether that will, in fact, happen depends on how well we control the EHM. Dabhol can be a tremendous educational experience – for those who choose to study and learn from it. If taxpayers are lackadaisical, mind-numbing amounts of money would go into politicians and bureaucrats’ pockets, leaving the country plundered and ravaged – and the gargantuan effect cannot be gainsaid. As George Santayana wrote, “Those who cannot remember the past are condemned to repeat it.” What we need is super-heightened vigilance, of the level of our brave jawans in Kargil.
(Krishnan Chittur is a New York-based attorney and community activist, working for international peace and justice)
