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Dhabhol Power Plant - India
"Many energy companies have invested in closed or repressive countries -- arguing that their investment would help develop the local economy and thereby improve the human rights situation. But in this case, Enron has invested in a democratic country -- and human rights abuses there have increased. Enron hasn't made things better for human rights; it has made things worse." Responsibility: Financing Institutions and the Government of the United States
Table of Contents

Key Individuals Named in this Report

I. Summary and Recommendations

II. Background: New Delhi and Bombay

III. Background to the Protests: Ratnagiri District

IV. Legal Restrictions Used to Suppress Opposition to the Dabhol Power Project

V. Ratnagiri: Violations of Human Rights 1997

VI. The Applicable Laws

VII. Complicity: The Dabhol Power Corporation

VIII. Responsibility: Financing Institutions and the Government of the United States

IX. Conclusion

Appendix A: Correspondence Between Human Rights Watch and the Export-Import Bank of the United States

Appendix B: Report of the Cabinet Sub-Committee to Review the Dabhol Power Project

Appendix C: Selected Recommendations and Conclusions from the Parliamentary Standing Committee on Energy, May 29, 1995

Appendix D: Correspondence Between the Government of India and the World Bank

The U.S. Government

On June 16, 1998, the secretary of state for the United States government, Madeleine Albright, outlined the goals of United States foreign policy, in a speech to the Senate Appropriations Committee: “We all agree that the United States is, and should remain, vigilant in protecting its interests, careful and reliable in its commitments and a forceful advocate for freedom, human rights, open markets and the rule of law.”272

In the case of the Dabhol Power project, it seems that the government of the United States acted as a forceful advocate for open markets at the expense of human rights and the rule of law. Throughout the development and implementation of the Dabhol project, U.S. government officials and various governmental agencies including the Department of Energy, Department of State, Department of Commerce, and Central Intelligence Agency consistently lobbiedthe Indian government heavily on behalf of the companies.273 According to a 1995 article in the New York Times:

[T]he negotiators for the Enron Corporation, the lead bidder in an American consortium, have been shadowed and assisted by a startling array of Government agencies. In a carefully-planned assault, the State and Energy Departments pressed the firms’ [Enron, General Electric, and Bechtel] case. The American ambassador to India, Frank G. Wisner, constantly cajoled Indian officials. The Secretary of Energy, Hazel O’Leary, brought in delegations of other make the point that more American investment is in the wings if the conditions are right.

To sweeten the pot, the Export-Import Bank of the United States and the Overseas Private Investment Corporation put together $400 million in financing. And working just behind the scenes, as it often does thesedays, was the Central Intelligence Agency, assessing the risks of the project and scoping out the competitive strategies of Britain and other countries that want a big chunk of Indian market.274

The lobbying effort extended to the point of cautioning the Indian government to allow the project or face the consequences. For example, when the agreement was suspended by the newly elected Shiv Sena-BJP government in 1995, the U.S. Department of Energy issued a very strong statement threatening that the project’s cancellation would seriously jeopardize U.S.-India relations and India’s ability to attract foreign investment:

We strongly support the reform process in India and believe that bringing private power is central to Indian economic development. The counter-guarantees that the Indian government has committed to provide for the first “fast-track” projects are essential to move those projects forward and establish a strong track record with international investors. While we recognize the need to limit the number of such guarantees, it will take time to bring alternative financing packages to market.

The first of these power projects, Enron's Dabhol Project, has already reached financial closure and is under construction, sending a positive signal to international investors about the future of the Indian market. Failure to honor the agreements between the project partners and the various Indian governments will jeopardize not only the Dabhol Project but also the other private power projects being proposed for international financing.275

The statement was so strong that other U.S. officials, namely Amb. Frank Wisner, had to reassure officials of the Indian government that the U.S. Energy Department did not have the authority to cancel or block foreign investment in India. Instead, Wisner argued that the intent of the statement was to advise India that cancellation of the project would make it more difficult to attract foreigninvestment.276 Wisner’s support for the company and the project was steadfast. According to the Far Eastern Economic Review:

Enron found a powerful ally in the U.S. government. Ambassador Frank Wisner took up Enron’s cause and hammered home to Indian officials that the two countries’ newly established business ties would suffer if the Dabhol project were canceled altogether. The backing of Wisner...“speaks volumes for Enron’s ability to rope powerful people in to help their cause,” says a top official in the Power Ministry who was with the Power Ministry when the Dabhol deal was initially cleared. “The Indian government was clearly intimidated by Enron’s clout.”277

Commenting on his role, Wisner told Human Rights Watch, “I did say that cancellation of the deal could jeopardize foreign investment in the country. There were many statements about the project at the time, I was the ambassador and authorized all of them and stand behind every one of them.”278

Given the stated goals of U.S. foreign policy, the fact that this is a project of U.S. companies, and the Overseas Private Investment Corporation (OPIC) and the Ex-Im Bank have labor rights and human rights conditionalities placed on their financing, respectively, it would be reasonable to assume that equal concern would be accorded to human rights. This was not the case, however.

The Overseas Private Investment Corporation is required to address labor rights in the course of its lending. OPIC contractually binds recipients of its financing to respect labor rights in the course of their operations. These activities are monitored by OPIC and reported on internally.279 Of greater relevance in thecase of the Dabhol Power Corporation, the Ex-Im Bank is required to consider human rights broadly in its financing packages. Provisions in the Ex-Im Bank policies address general human rights issues, such as arbitrary detention, torture, freedom of expression, and freedom of association. But the policy is weak and grudging: Ex-Im Bank’s policy manual avers, for example, that “there is no internationally accepted definition of what constitutes human rights,” thus ignoring the extensive legal and monitoring framework achieved by the United Nations. The Ex-Im Bank can “deny its financing for human rights reasons only if the President [of the U.S.] through authority delegated to the Secretary of State, determines that such a denial would be in the national interest.”280 Otherwise, according to the bank’s policy, “Ex-Im Bank should not deny applications for nonfinancial or noncommercial reasons.” 281

However, on every Ex-Im Bank transaction exceeding $10 million, the State Department is required to conduct a human rights impact assessment “to determine if it may give rise to significant human rights concerns.” This review examines “both the general status of human rights and the effect of the export on humanrights in the importing country” and has been required since 1978.282 Since Enron received between $290 and $300 million in U.S. government loan guarantees for the Dabhol Power project, the State Department was required to conduct a human rights impact assessment. The assessment was conducted by the U.S. Embassy in India, which provides the State Department with information on the human rights situation within the country.

As the ambassador and head of the U.S. Embassy in India, Mr. Wisner—in stark contrast to his role as advocate for Enron’s commercial interests—was silent on the issue of human rights. When we asked former Ambassador Wisner about the human rights violations that took place in Maharashtra related to the Dabhol Power project in 1997, he responded:

Look into the facts carefully about “protests.” They were not protests—local villagers didn’t like the amount of money they got from Enron in compensation and wanted to get more from the company. I do not know about the record of the Maharashtra police and don’t know whether there were any human rights violations. I am not aware of what went down in the village, but they were probably exaggerated. I have never seen any information on human rights violations related to Dabhol and can’t say anything about them. If you think there are human rights violations, you should go down to India and get the facts. If you want to know about human rights, talk to the Maharashtra Police. I don’t know anything about the protests and suggest that you go to India and find out. Why do you want to talk to me?283

When we informed Mr. Wisner that we had investigated human rights violations in the area, he replied, “Well then, you have all the information you need. Why do you need to talk to me? I told you what I think of the project and my opinions.”284

It is a matter of serious concern to Human Rights Watch that the former ambassador appears to have given no consideration to human rights violations in this context. It suggests a willingness on the part of the United States government to discount human rights when commercial interests are at stake. We believe thatthe ambassador had ample opportunity to look into the issue; and could with difficulty have missed references to it in the Indian press. For example, barely two days after the attack by Enron contractors in Kathalwadi village, and after several months of protests and police reprisals, Wisner visited the Dabhol Power project on April 3, 1997, accompanied by India’s minister of power, S. Venugopalachari.285 Many of the demonstrations were detailed in national newspapers, and a cursory consultation with NGOs would have exposed Wisner to the problem.

Frank Wisner was named to the board of directors of Enron Oil & Gas, a subsidiary of the Enron Corporation, on October 28, 1997, a few months after leaving his posting in India.286

Following admissions by representatives at the Ex-Im Bank that they were unaware of the human rights policies that applied to Ex-Im Bank lending, Human Rights Watch filed a Freedom of Information Act request to obtain all documents referring to the human rights review of the Dabhol Power Project. We received a confirmation of our request by the Ex-Im Bank, dated July 23, 1998.287 Later, we received the impact assessment and a letter from the Ex-Im Bank. In a letter dated October 1, 1998, informing us that there were no other documents concerning human rights in relation to the loan guarantee. The State Department’s impact assessment itself is minimal. It states, in its entirety, “The State Department has no objection to this case on political grounds or on the basis of human rights issues.”288 The correspondence and impact assessment are reprinted in Appendix A.

A human rights impact assessment conducted in 1994-1995 could not have predicted violations in 1996-1998. But in 1993-1994, demonstrations and reprisals had already begun. Moreover, the complete lack of interest, as in the case of Mr. Wisner, the highest-ranking State Department official in India; the complete lack of knowledge, as in the case of the general counsel’s office of the Ex-Im Bank; and the complete lack of information, as the impact assessment obtained from the Ex-Im Bank illustrates, demonstrate that human rights was not a consideration for theU.S. government. This apathy continues to have relevance now, as financing is arranged for Phase II of the project.

272 United States Secretary of State Madeleine K. Albright, Opening Remarks Before the Senate Appropriations Committee, Subcommittee on Foreign Operations, Washington, D.C., June 16, 1998.

273 This is not the only instance of concerted U.S. government lobbying for Enron. In 1995, according to the Houston Chronicle, U.S. officials lobbied the government of Mozambique to award Enron a $500-million contract to develop the Pande natural gas field. The company’s primary competitor was Sasol, a South African firm. John Kachamila, then Mozambique’s minister of mineral resources, told the Houston Chronicle: “There were outright threats to withhold development funds if we didn’t sign, and sign soon. Their diplomats, especially Mike McKinley [deputy chief of the U.S. Embassy], pressured me to sign a deal that was not good for Mozambique. He was not a neutral diplomat. It was as if he was working for Enron. We got calls from American senators threatening us with this and that if we didn’t sign. Anthony Lake [U.S. national security adviser] even called to tell us to sign... They put together a smear campaign against us... Enron was forever playing games with us and the embassy forever threatening to withdraw aid. Everyone was saying that we would not sign the deal because I wanted a percentage, when all I wanted was a better deal for the state... So Enron caved in to our demands, especially after the World Bank commissioned a study that found many of our concerns were warranted. Now let me ask you: Who is corrupt here? To me it is Enron for trying to shove this rotten deal down our throats.” In the same article, the Chronicle quoted an unnamed State Department official saying, “This project represents tax revenue, hard currency earnings in a big way for the Mozambican state... If the Mozambicans think they can kill this deal and we will keep dumping money into this place, they should think again.” At the time, $1.1 billion of the government of Mozambique’s $1.5-billion budget was financed through foreign aid, at least $40 million from the United States Agency for International Development alone. See: John Fleming, “U.S. Foreign Aid was Lever that Moved Enron Deal,” Houston Chronicle, November 1, 1995.

274 David E. Sanger, “How Washington Inc. Makes a Sale,” New York Times, February 19, 1995.

275 “Statement on the Cancellation of the Dabhol Power Project,” United States Department of Energy, June 5, 1995.

276 “Enron Power-Moves Afoot to Take Heat Out of Dabhol Row,” Reuters, June 26, 1995.

277 “Alive and Well...”

278 Human Rights Watch telephone interview with former United States Ambassador to India Frank Wisner; New York, July 16, 1998. Other governments would follow suit. The former chancellor of the exchequer for the government of the United Kingdom, Kenneth Clarke, would issue similar statements while leading a trade delegation to India. See: Clarence Fernandez, “U.S., Britain Warn India Over Enron Deal,” Reuters, June 5, 1995.

279 According to the OPIC Policy Handbook: Other Requirements: OPIC is prohibited by statute from supporting projects that contribute to violations of internationally recognized worker rights. OPIC insurance and finance agreements require the investor to agree to respect these rights, including the rights of association, collective bargaining and acceptable working conditions with respect to wages, hours of work, occupational health

and safety and minimum age requirements. Monitoring & Compliance: OPICsystematically monitors investor compliance with U.S. economic, environmental, worker rights and corrupt practices representations through questionnaires, investor reporting and site visits. Noncompliance may constitute a default under OPIC insurance contracts and loan agreements.

280 From Section 24 of the Policy Manual of the Export Import Bank of the United States. The relevant sections of the human rights policy are as follows—Definition: Human rights are basic protections to which a human being in a given country has a just claim. The United Nations Universal Declaration of Human Rights outlines very broad human rights principles, such as freedom of expression, religion, and assembly, and proscriptions against torture, discrimination and arbitrary arrest. However, there is no internationally accepted definition of what constitutes human rights. Policy: Ex-Im Bank can deny its financing for human rights reasons only if the President, through authority delegated to the Secretary of State, determines that such a denial would be in the national interest. A specific human rights review is conducted by the State Department for every transaction over $10 million to determine if it may give rise to significant human rights concerns. This review examines both the general status of human rights and the effect of the export on human rights in the importing country. Rationale: Section 2(b)(1)(B) of the Export-Import Bank Act of 1945, as amended, was amended in 1978 by P.L. 95-630, 92 Stat. 3724 (the Chafee Amendment). This amendment states that Ex-Im Bank should not deny applications for nonfinancial or noncommercial reasons (i.e., for policy reasons) unless the President of the United States determines that the denial is in the national interest. Interest areas on which a particular transaction may receive a denial include international terrorism, nuclear proliferation, environmental protection and human rights....

281 Ibid.

282 See footnote 280, on the human rights policies in the Policy Manual of the Export-Import Bank of the United States.

283 Human Rights Watch telephone interview with former United States Ambassador to India Frank Wisner; New York, July 16, 1998.

284 Ibid.

285 Dabhol Samvad..., Vol. 1, No. 3, p. 4.

286 “Enron Oil & Gas Company Elects Frank Wisner, Three New Enron Corporation Representatives to Board,” Enron Corporation press release, October 28, 1998.

287 Letter from the Export-Import Bank of the United States to Human Rights Watch, July 23, 1998.

288 Letter from the Export-Import Bank of the United States, October 1, 1998. The attached impact assessment is undated and is not sourced, other than a handwritten note to Human Rights Watch stating, “From Export-Import Bank Board of Directors Memorandum.” The written correspondence between Human Rights Watch and the Export-Import Bank is reprinted in Appendix A below.