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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



Phase II Financing

With an estimated cost of $1.5 billion and a capacity of 1,440 megawatts, Phase II of the project is slated to be almost twice the size of the $920-million, 740-megawatt Phase I.289 Initially, the same actors, primarily the U.S. government’s Export-Import Bank and OPIC as well as private investors, were expected to finance Phase II. Ex-Im Bank, for example, could have extended up to $500 million for the second phase of the project.290 OPIC and Ex-Im Bank involvement, however, was suspended in May 1998 because of the underground nuclear tests that India and Pakistan had recently conducted: President Clinton imposed sanctions against India and Pakistan prohibiting the extension of all non-humanitarian aid and trade programs, including OPIC and Ex-Im Bank financing. Enron’s response was that, “as a company doing business in India, we were not and we are not in favor of sanctions....”291 The company predicted that sanctions would be lifted by the end of 1998.

The absence of OPIC and Ex-Im Bank financing created serious problems for Phase II planning. Publicly, Enron would not comment on the extent of the damage done by the loss of OPIC and Ex-Im Bank funding, stating only: “We are monitoring the situation and it is premature for us to predict any potential impact on our projects.”292 Later, the company would again reassure investors that sanctions would not affect the construction of Phase II of the Dabhol Power project.293

The business press and government officials were much more skeptical. Platt’s Commodity News, a leading industry publication, reported that Enron’s funding was in jeopardy because of the inability to access OPIC and Ex-Im Bank financing.294 Equally telling was a State Department official’s assessment in June 1998:

Currently, Enron is in a lot of trouble. With the nuclear tests, OPIC and Ex-Im funding has been suspended. Enron is not as big as other oil companies and cannot finance projects of this size off their balance sheet, so they have to rely on financing like OPIC and Ex-Im. India is a big project and the lack of financing will hurt them.295

Enron scrambled to handle the setback, announcing on September 1, 1998 that it had secured $1 billion in financing from international commercial banks. The company obtained a $200 million loan guarantee from the Export-Import Bank of Belgium and $50 million from the Export-Import Bank of Japan (J-Exim) as part of the $1 billion financing package.296 The company also announced that $300 million would be obtained from Indian banks, led by the Indian government’s Industrial Development Bank of India. The State Bank of India announced an “in principle” agreement to loan $150 million for Phase II of the project.297 On November 9, 1998, the Indian government’s Industrial Finance Corporation provided an $83 million loan for Phase II.298 The State Bank of India and state-owned Industrial Development Finance Corporation announced their intent to loan $100 million for Phase II.299 The Indian government, however, did not extend a counter-guarantee for Phase II.300 Following the announcement that it had secured financing, the company said that it would begin construction of Phase II in the fourth quarter (October to December) of 2001.301

None of the institutions that have agreed to finance Phase II have human rights conditionalities in general, or anything comparable to OPIC and Ex-Im policies, to regulate their transactions. Nevertheless, Human Rights Watch considers that because of the abuses which occurred during the construction of Phase I and the existing prohibition on freedom of expression and peaceful assembly in Ratnagiri district, no financial institution can avoid responsibility for human rights violations if it finances Phase II without appropriate safeguards to protect human rights. Moreover, the consortium of public and private investorsthat financed Phase I—the Bank of America, ABN Amro, the consortium led by the Industrial Bank of India, OPIC, and Ex-Im Bank—bear special responsibility for the human rights violations because of a lack of due diligence which led to a failure to address and condemn the human rights violations while they extended financial support for this project.

On November 7, 1998, the U.S. government “eased” sanctions against India and reauthorized OPIC and Ex-Im Bank funding for projects in India, but at this writing it is unclear whether the company will try to secure U.S. government funding.302


289 “Enron Seeking Power Plant Funding from Indian Financiers,” Platt’s Commodity News, June 28, 1998.

290 “Japan’s Sumitomo Asked to Lead India Power Plant Funding,” Platt’s Commodity News, July 20, 1998.

291 “Sanctions Against India May be Lifted by Year-end—Enron,” Press Trust of India, September 1, 1998.

292 “Enron Assessing Impact of Sanctions on India,” Reuters, May 14, 1998.

293 “Enron Says Sanctions Won’t Slow India Plant,” Reuters, May 19, 1998.

294 “Enron India Power Plant Funding Threatened by Sanctions,” Platt’s Commodity News, May 13, 1998.

295 Human Rights Watch interview with David Kirsch.

296 “Enron Unit Secures Funds for India Power Plant,” Reuters, September 1, 1998.

297 “State Bank of India Approves Loan to Enron,” Reuters, November 4, 1998.

298 “India’s IFC Extends $154 Mln in Loans to 2 Power Projects,” Reuters, November 9, 1998.

299 Sangita Mehta, “SBI, IDFC to Enter Takeout Deal for Dabhol,” Business Standard, Bombay, November 12, 1998.

300 “Enron Ties Up $US1 Billion for Phase 2 of Indian Project,” Press Trust of India, September 1, 1998.

301 “Enron Unit Secures Funds for India Power Plant,” Reuters, September 1, 1998.

302 “U.S. Lifting of Sanctions, Boost to Infrastructure Projects Likely,” Business Line, November 7, 1998.

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