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Neoliberalism, Corporations, and Power: Enronin India

Waquar Ahmed

Department of Geology and Geography, Mount Holyoke College

This article examines the role of Enron, an American corporation, in its promotion of the electric power sectorin the Dabhol Power Project in India. Under the new economic regime in India, policy changes were followedby nine fast-track private electric power projects in different parts of the country with foreign companies asprimary promoters or major collaborators. The new, privately promoted power projects brought into focus thepower of foreign capital and neoliberal discourse. Neoliberalism is not about free markets, nor about freedom,nor development of the global South or postsocialist economies but rather a form of power that creates congenialspaces for the extraction of revenue by corporations in countries that were, until recently, relatively less accessibleto capitalist exploitation. The research is based on interviews with key informants and archival data. Key Words:Enron, foreign direct investment, India, neoliberalism, power.

Este artıculo examina el papel de Enron, una corporacion norteamericana, en la promocion del sector de energıaelectrica del Proyecto Dabhol de Energıa, enla India.Bajo el nuevo regimen economico deese paıs, sobrevinieroncambios de polıtica en nueve proyectos energeticos privados, en diferentes partes del paıs, en los que companıasextranjeras figuran como promotores primarios o colaboradores principales. Los nuevos proyectos energ eticospromovidos desde el sector privado coloco en primer plano el poder del capital foraneo y el discurso neoliberal.El neoliberalismo no se refiere a mercados libres, ni es acerca de la libertad, ni del desarrollo del Sur global o

de las economıas possocialistas; en vez de eso es una forma de poder que crea espacios congeniales para quelas companıas obtengan ingresos en paıses que hasta hace poco tiempo eran relativamente poco accesibles ala explotacion capitalista. La investigacion se baso en entrevistas con informantes claves y datos de archivos.Palabras clave: Enron, inversi´ on extranjera directa, India, neoliberalismo, poder.

The New Economic Policy (NEP) was initiatedin India in 1991, following economic crisis,1 thecollapse of the Soviet Union, and subsequent

dependence on conditional loans from the WorldBank and the International Monetary Fund (IMF) thatprompted wide-scale policy changes. I examine the un-

folding of the new policy regime in the electric-powersector as an example of the government of India’s at-tempt to reconfigure national economic space and makeit more congenial to private investment. These policychanges were followed by nine fast-track private powerprojects2 in different parts of the country with foreigncompanies as primary promoters or major collaborators.

Until 1991, the Indian power industry had beenalmost completely nationalized. Under the new

neoliberal regime, private power production projectssuch as the Dabhol Power Project (DPC), promoted byEnron, an American corporation, exemplifies the cor-porate power of foreign capital investment, neoliberaldiscourse, and their relationship with and impact on In-dia’s spatial reconfiguration. This article is divided into

five sections in which I examine previous research onthe theme; develop a conceptual framework for under-standing neoliberalism and the power of foreign capital;examine the spatial transformation of India to make itforeign-capital-friendly and the subsequent initiationof foreign investment in power; address the Enron-ledpower project in India and its role in pauperizingthe Maharashtra State Electricity Board; and finally,contextualize the DPC, concluding by examining

Annals of the Association of American Geographers, 100(3) 2010, pp. 621–639 C 2010 by Association of American GeographersInitial submission, February 2008; revised submissions, October and December 2008; final acceptance, January 2009

Published by Taylor & Francis, LLC.

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the nature of corporate power exercised vis-a-visEnron’s investment in India. The research is based oninterviews with key informants, including high-rankingexecutives of global corporations, members of Parlia-ment, and bureaucratic executives in the government of India. Archives, including documents prepared by fact-finding committees set up by the government of India,testimonyin the U.S. House of Representative, news re-ports, and court cases also constitute vital data sources.

Postcrisis Liberalization

India acquired conditional loans from the IMF toovercome its economic crisis (Government of India1992), followed by investments by Enron in India’senergy sector. In this section, I examine the litera-ture that highlights the role of global governance in-

stitutions in economic liberalization of postsocialistand Third World economies and foreign direct in-vestment (FDI) that follow such economic liberaliza-tion. Intervention by the World Bank and the IMF inthe crisis of postsocialist, newly industrialized (NICs)and Third World countries are well covered by main-stream economists3 (Sachs et al. 1994; Ferreira, Pren-nushi, and Ravallion 1999; Summers 2000; Dollar andKraay 2002; Boockmann and Dreher 2003). So is thetheme of foreign investment and the structural adjust-ment and macroeconomic stabilization programs thatprecede such investments (Ozawa 1992; Borensztein,

De Gregorio, and Lee 1998; Markusen and Venables1999; Liu, Burridge, and Sinclair 2002; Ram and Zhang2002; Saggi 2002). According to Summers (2000), pre-viously Chief Economist of the World Bank and Sec-retary of the U.S. Treasury, crisis response puts intoplace national policies that restore investor confidencein coordination with international efforts to financea credible path out of crisis. Summers says that theinternational community can never want sound poli-cies and economic stability more than the governmentand the people of the country itself; however, he thinksthat there is need for international surveillance of the

“quality”4 of national policies, a responsibility that theIMF has increasingly assumed. Self-interest, accord-ing to Summers, ensures that countries willingly ac-cept the IMF’s intervention in the surveillance of theirnational economies. Summers epitomizes the views of most mainstream economists that IMF intervention inpostsocialist and Third World countries is necessaryand is in their best interest and that these countriesneed to carry out neoliberal reforms. In my view, such

discourses are symbolic formations arranged aroundpersuasive political ideas of neoliberalism and Amer-ican exceptionalism (cf. Peet 2007). Their discursivepower rests on the universalization of a particular in-terpreted, theorized, and valorized regional experience,essentially that of Anglo-America (Peet 2002). Suchdiscourses are manifestations of imperial hubris in aunipolar global order, where intervention of the UnitedStates, the World Bank, and the IMF to pressurize andproduce policy changes and exercise surveillance over“sovereign” nations is found notonly acceptable butalsodesirable.

Sachs et al.(1994) suggestedshocktherapy to initiatea policy regime that can ameliorate economic difficul-ties in postsocialist countries. They argued that shocktherapy, in the form of sudden and complete removalof state subsidies, leads to movement of labor from low-yielding public enterprises to sectors with higher pro-

ductivity. In criticizing the USSR, Sachs et al. pointedout that it was the state’s failure to curtail or abol-ish subsidies that cut off the potential supply of labor,restricted movement of means of production, and inturn, throttled many emerging firms. Based on Sachs etal.’s advice, postsocialist Poland undertook shock ther-apy, with devastating repercussions for the economy(Gowan 1996). In Russia, shock therapy created thegroundwork for the plunder of public assets by Russianoligarchs (Stiglitz 2000a, 2000b; Hoffman 2002).

Yet the discourse of shock therapy as a remedy isstrongly entrenched in the mindsof proponents of struc-

tural adjustment in postcrisis economies. Initially, thisidea showed up, although not to the degree suggestedby Sachs et al. (2004), in India’s NEP as well. Demo-cratic pulls and pressures in the long run, however,ensured gradual rather than sudden changes, much tothe dismay of the main architects of local articulationof neoliberalism in India (see, for example, Ahluwalia2002).

Dollar and Kraay (2001), World Bank economists,argued that developing countries that have adoptedneoliberal reforms have experienced increased growthrates. They pointed out that “since there is little sys-

tematic evidence of a relationship between changes intrade volumes (or any other globalization measure weconsider) and changes in income share of the poorest,the increase in growth rates that accompanies expandedtrade leads to proportionate increases in incomes of the poor” and concluded that neoliberal globalizationleads to a reduction in poverty in poor countries (alsosee Bhagwati 1998; Virmani 2006, in the Indian con-text). Milanovic (2002, 2003), using household-level

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data, concluded, however, that between 1988 and 1993,global inequality increased sharply from a Gini coeffi-cient level of 0.63 to 0.66. In view of Ravallion, Datt,and Van de Walle’s (1991) simulation model showingthat a 4 percent increase in the world’s Gini index,spread over fifteen years, is sufficient to wipe out thegains to the poor from a sustained 1 percent per annumrate of growth in consumption per capita (Ravallion,Datt, and Van de Walle 1991), the increased Gini co-efficient of 4.8 percent, as in Milanovic’s findings, hastremendous socioeconomic ramifications.

Most supporters of neoliberalism associate economicgrowth with this policy regime and phrase it in therhetoric of freedom (e.g., Friedman 2000).Thus, Boock-mann and Dreher (2003) argued that IMF and WorldBank programs, even if classified as failures with respectto specific goals, are nevertheless important in “increas-ing freedom.” They created a statistical model to mea-

sure the impact of IMF and World Bank interventionsin postcrisis Third World economies and argued thatsuch interventions increase economic freedom throughconditionalities imposed by these international finan-cial institutions and because of the number of contractsbetween them and national politicians, which en-hances the transfer of knowledge. On account of theseconditions, national politicians are forced to changetheir attitudes toward economic freedom, as they wantmore investments. Such interventions, they argue, alsoimprove exports, increase technical cooperation, in-crease enrollment in secondary education, and increase

the ratio of radios (as a surrogate variable for economicemancipation) to the total population, thereby in-creasing freedom. I find a direct relationship betweenthe IMF and World Bank’s neoliberal intervention andincreased enrollment in secondary education spurious.Enrollment growth in Third World countries oftenreflects government intervention and subsidies topromote human resource development (Dreze and Sen2002). The argument that improved exports increasetechnical cooperation and that an increase in ratio of radios to total population is a reflection of freedom,economic or political, is also farfetched. Further, the

authors’ ideas about freedom seem in complete opposi-tion to freedom in the form of national sovereignty andindependence of the “un-free” Third World nations tomake choices. After all, conditionalities imposed by in-ternational financial institutions are forms of constraintand compulsion, rather than freedom. Rodrik (1996),citing the case of Chile, pointed out that economic lib-eralization has often led to suspension of normal politicsand a heavy dose of authoritarianism. Stiglitz (2000a)

vented his frustration on the constant association ofneoliberalism with freedom by asking, “Do thosemaking decisions that affect the lives and livelihoodsof millions of people throughout the world reflect theinterests and concerns, not just of financial markets,but of businesses, small and large, and of workers,and the economy more broadly?” (1085). Essentially,those who celebrate “freedom” in the context ofneoliberalism do so from the point of view of financialmarkets and global corporations.

FDI refers to long-term investment by foreign compa-nies in an enterprise resident in another national econ-omy (Peet 2007). FDI is not unique to neoliberalism;between 1960 and 1979, U.S. companies made directinvestments worth $164.9 billion in different parts oftheworld(Bureau of Economic Analysis2008). In 1981,prior to initiation of neoliberal policies in India, Suzukiof Japan made investments in manufacturing Maruti

cars (in India). What is unique to neoliberalism is thatglobal governance institutions prescribe the pursuit ofFDI as the main engine of economic growth in devel-oping economies (see Organization for Economic Co-operation and Development 2002, 5). Thus the WorldBank and the IMF, upon providing conditional loans,and through their surveillance techniques, ensure thatcountries adopt laws and regulations to make nationaleconomic spaces more investor-friendly by liberaliz-ing legal frameworks, lowering corporate income taxes,giving exemptions from import duties, providing spe-cial investment and depreciation allowances, and so on

(Taylor 1997, 1998).FDI in developing countries, as a manifestation of

neoliberal intervention, has attracted the attentionof a number of scholars, and opinions vary on FDI’srelationship to the advancement and betterment ofThird World economies. On the basis of a statisti-cal model, Borensztein, De Gregorio, and Lee (1998)suggested that FDI is an important vehicle for thetransfer of technology, contributing more to economicgrowththandoesdomesticinvestment.Ontheoneside,technological and research and development-relatedspillover effects of multinational enterprises on host

countries (Hejazi and Safarian 1999); positive relation-ship among economic growth, FDI, and trade (Liu, Bur-ridge, and Sinclair 2002; Ram and Zhang 2002; Saggi2002); and FDI as a catalyst for local industrial devel-opment (Ozawa 1992; Markusen and Venables 1999)are cited as major benefits for FDI. By contrast, Loun-gani and Razin (2001) cautioned that leverage can limitFDI’s benefits. The domestic investment undertaken byFDI establishments, more often than not, is heavily

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leveraged owing to borrowing in the domestic creditmarket. Thus, the fraction of domestic investment ac-tually financed by foreign savings through FDI flowsmight not be as large as it seems, as foreign investors canrepatriate funds borrowed in the domestic market. Fur-ther, domestic borrowing by foreign-owned firms mightreduce the size of the gains from FDI. Carkovic andLevine (2005) also pointed out that although “soundeconomic policies” might spur both economic growthand FDI, the relationship between FDI and economicgrowth is insignificant. FDI exerts positive impact oneconomic growth under conditions of high levels of hu-man resource development and well-developed finan-cial systems to improve capital allocation in host coun-tries. Empirical evidence on the scope of knowledgespillovers on account of FDI is also ambiguous (Saggi2002).

Sumner (2005), in an empirically sound paper, pre-

sented a more comprehensive understanding of FDI.He argues that the main dilemma vis-a-vis FDI is notwhether it is good or bad for social and economic devel-opment but that its impact is determined by the termson which FDI is accepted. Benefits of FDI are linkedto the FDI policy regime in the host county, and thecurrent orthodoxy of maintaining a highly liberal FDIpolicy regime leads to a situation whereby developingcountries have a precarious trade-off to make betweenattracting FDI by adopting a “race to the bottom” strat-egy (see also Wheeler 2001; Nayyar 2002a; Singh andZammit 2004) and maintaining policy instruments to

extract the benefits from any inflows. Arguing alongsimilar lines, Milberg (1990) pointed out that FDI hasusually lagged behind economic development, and tocapture the potential positive technological spilloversfrom FDI requires attaining a certain level of absorp-tive capacity reflected in infrastructure and humancapital.

Are developing countries given the freedom todevelop their institutional capacity in a mannerthat enhances their absorptive capacity? To assumethat neoliberalism provides equal opportunity to allnation-states for growth, development, and accumu-

lation of capital, that all nation-states are on perfectlyequal footing to influence manifestations of neoliberalcapitalism, that bilateral economic transactions arefree of relations of domination is erroneous. FDI inthe global South tends to come only to those countriesthat have high levels of domestic savings, becauseforeign corporations essentially rely on the generationof domestic finance for accomplishment of “foreign”projects (Patnaik 1996). So there is a disconnect

between the reality of FDI flows and what the globalgovernance institutions champion; that is, that mereliberalization would shift capital to low-wage countries.In addition, the U.S. dollar is the only currency thatis believed to constitute a safe medium for holdingwealth. Thus, so much of the world’s wealth is alreadyheld in U.S. dollars that all countries have a vestedinterest in protecting its value. Financial fluidity doesnot mean that the level and nature of activity in thecapitalist world is determined by something called the“market force”; it is determined through processes,which are linked to U.S. policy and its class interests(Harvey 2005). In view of the hegemonic nature of financial flows in the neoliberal world, there is a needto define and examine neoliberalism as a form of power.

The geographical literature, although sparse, has sev-eral case studies and empirical examples of how ne-

oliberalism has unfolded in postcrisis economies inthe NICs, postsocialist, and developing economies.Studies suggest that the unfolding of neoliberalismin Russia produced a spatial concentration of capi-tal along with widening regional disparities (Bradshawand Vartapetov 2003). In Zimbabwe, the textile, cloth-ing, and footwear industries virtually collapsed follow-ing the adoption of the World Bank’s recommenda-tions vis-a-vis economic liberalization and structuraladjustment (Carmody 1998), and the urban poor havebeen badly affected by the retreat of the state fromwelfare subsidies, resulting in sharp increases in food

prices (Drakakis-Smith 1994). Similarly, neoliberalismhas had negative impacts, ranging from environmentaldegradation to growth of political authoritarianism inCambodia (Springer 2009), southern Mexico (Klepeisand Vance 2003), island countries in the Pacific(Murray 2000), Nigeria (Lado 2000), South Africa(Lado 2000; Peet 2002), Ghana (Logan and Mengis-teab 1993), and Somalia (Samatar 1993). Geographers,however, have severely neglected the unfolding andimpact of neoliberalism in India. Some exceptions are Jeffrey, Jeffery, and Jeffery (2004), who examined howyoung men in north India are struggling to attain edu-

cation and respect in the context of the NEP; Corbridgeand Harriss (2000), who examined the changing politi-cal economy, role of state, and rise of Hindu fundamen-talism in India; Kumar (2004), who examined the roleof state in reworking the ideas of neoliberalism thougha dialectical process, while engaging with the society;Raju (2006), who examined the exploitation of the fe-male workforce under globalization; Fromhold-Eisebith(2006), who examined the territorialization of capital

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in the information-technology sector; Banerjee-Guha(2006), who examined the politicsof grudgingtolerancebetween contending ethnic and class groups in Mum-bai; Ahmed (2008), who examined the impact of ne-oliberalism on indigenous communities; and Townsend,Porter, and Mawdsley (2004), who examined how cer-tain nongovernmental organizations in India conceptu-alize and work toward resisting neoliberalism in empow-ering marginalized groups. The euphoria over India’srapid economic growth and the representation of thisgrowth in the form of numbers and data has overshad-owed problems and contradictions that the NEP hasgiven rise to. For example, Sachs (2005) presented In-dia as a poster child of neoliberal success (also see Sachset al. 1995) but at the same time overlooked the factthat India’s rapid economic growth started well beforeit adopted neoliberal policies in 1991.5 My project, al-though acknowledging the virtues of foreign investment

for capitalist forms of economic growth, highlights thatforeign investment, in its present form, is enmeshed inunequal and exploitative power relationships. Whereascapital flows are accompanied by the rhetoric of free-dom and free markets, empirical evidence, to the con-trary, shows a relationship of exploitation and extrac-tion (Patnaik 1995). I highlight the nature of powerexercised between FDI and national and local spacesthrough my case study of the liberalization of India’selectric and power sector and the case of Enron’s powerproject in India. Prior to doing so, I develop the con-ceptual framework to understand neoliberalism and the

nature of power in which it is enmeshed.

Toward a Framework for Neoliberalismas Power

To examine the unfolding of neoliberalism in In-dia’s electricity and power sector, I draw from Marx(1894, 1906), Schumpeter (1950), and Harvey (2006),who provide valuable insight on the nature of corporateinvestments, corporate power, and, in turn, neoliberaltransformation. The corporation, as a manifestation of

monopoly and oligopolies, “reproduces a new aristoc-racy of finance, a new sort of parasite in the shape of promoters, speculators, and merely nominal directors; awhole system of swindlingand cheating by means of cor-poration juggling, stock jobbing, and stock speculation.It is private production without the control of privateproperty” (Marx 1894, 519). Some of the most profoundconsequences of big business and corporate capitalismare sociopolitical, and monopolies and oligopolies are

perceived to play a strategic role in capitalism’s ten-dency to endanger the institutions on which it depends(Marx 1906, 836–37). Similarly, Schumpeter (1950,xiii) postulated the “inevitable decomposition of cap-italism society,” as he thought that capital lacked theability to survive: “Its very success undermines the socialinstitutions whichprotect it, and inevitably creates con-ditions in which it will not be able to live” (Schumpeter1950, 61). For Schumpeter, capital, through its creativesuccess, leads to its own destruction, as it underminesthe very institutions on which it depends. The prob-lem with large corporations is not only that monopolypower reduces competition. Even if corporations weremanaged with angelic perfection, the elimination ofsmall-scale producers and consequently their “depen-dents, henchmen, and connections” profoundly affectsthe political structure and reduces political support forcapitalism (Schumpeter 1950, 140; Elliott 1980). In the

sections to follow, I elaborate on the role of Enron, amultibillion-dollar global corporation, in manipulatingIndia’s economic space (including its political and legalsystem) and exploiting it to the extent of endangeringits own survival. I also examine how Enron exploitedthe social institutions (including the Congress partythat facilitated its entry into India; and the new laws,regulations, and institutions put in place to facilitateforeign investments in energy) to the extent that theybecame unpopular, unviable, or both.

Harvey (2006) described neoliberalism as a pro-cess encompassing replacement of older social relations

(read mixed economy in India and different forms ofKeynesianism, socialism, feudalism, etc., all over theworld) with corporatization, commodification, and pri-vatization of public assets. Peet (2007) argued thatneoliberalism is a policy regime furthering the in-terests of a new economic formation, global financecapital. Neoliberal policies create a global space inwhich finance capital can range freely in search ofever-increasing profit. In a supposedly democratic age,financial interests must adopt the stance that invest-ment is vital to a development that benefits everyone—eventually. For Peet, however, this is merely the latest

ideological disguise for a capitalist system that has al-ways hidden utterly selfish intent behind a veil of phil-anthropic concern. The role of the national or localstate, in the context of neoliberalism, is to create andpreserve an institutional framework appropriate to suchpractices. It must also set up those military, defense, po-lice, and juridical functions required to secure privateproperty rights and support freely functioning markets(Harvey 2006). The privatization and corporatization of

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hitherto public assets has been a main feature of the ne-oliberal project and its primary aim has been to open upnew fields for capital accumulation in sectors that hadbeen regarded as off limits to the matrix of profitability(Peck 2001; Peck and Tickell 2002; Harvey 2006). Thepolicy prescriptions of the IMF and the World Bank,and the subsequent adoption of these policies in Indiaand, for that matter, anywhere else, are not endpointsin local and national manifestations of neoliberalism.Rather, neoliberalization is a process that plays itself out in multiple ways. This transition constitutes a com-plex reworking of old social relations in an attempt toconstruct a form of capitalism based on public assets ina state that previously idealized socialist goals (Smithand Pickles 1998). In the context of energy policy andEnron’s investment in India, I use Harvey’s concept of replacement of older social relations to examine the re-placement or destruction of older institutions set up to

produce balanced growth, equity, and socialism,6

withthe reconfiguration and re-creation of space to facili-tate capitalist extraction from a sector that had beenpublicly owned.

Another concept important for examining WorldBank and IMF-supported structural adjustments poli-cies, and the subsequent FDI in electricity generationin India, is power. We are used to thinking of power asa force pressing on the subject from the outside, sub-ordinating and relegating it to a lower order. Our cus-tomary understanding is that power imposes itself on usand, weakened by its force, we come to internalize or

accept its terms. Although this is a fair description of part of what power does, power is also instrumental informing the subject and providing the very condition of its existence (Foucault 1980, 1982; Butler 1997; Gibson2001). Thus, power is not only what we oppose but alsowhat we depend on, preserve, and harbor. This inter-dependence, or discursive production, of the social sub-ject constitutes subjection. Foucault (1979) also arguedthat juridical power—power acting on, subordinatingpregiven subjects—precedes productive power, the ca-pacity of power to form subjects. In what follows, I useFoucault’s concept of power to examine neoliberalism

and FDI not only as juridical power and as impositionbut also as discursive production. The discursive pro-duction of power and subjection, vis-a-vis FDI in theelectric power sector, took place on account of problemsand contradictions existing within India’s energy sectorand the government of India’s willingness to facilitateneoliberalism and create spaces conducive for FDI—subjection, however, does not preclude subjugation ordominance.

New Policies and Fast-Track Projects:The Changing Power Industry in India

I interviewed theregional manager (SouthandSouthEast Asia) of a global corporation,7 operating in sev-enty countries, with annual sales of US$16.75 billion,

which primarily invests in the natural gas business andrelated equipment. In addition to providing fuel to sev-eral power plants all over the world, the corporation setsup power generating units, often to provide electricityto its own industrial units. My interviewee had earlierbeen an energy developer in the United States, so hespoke with tremendous experience and authority on thesubject of FDI in power generation. His main complaintabout India as a site for investment in energy, despitewide-ranging pro-free-market policy changes, was that:

If I as an industrial buyer, want to buy power from the state,I haveto pay the state utility board a cross subsidy8—this is

problematic, I believe in competition and no governmentintervention. The Government of India tries to subsidizepower from profit making industries, to the poor—in thelong run, this creates inefficiency, creates imperfections inthe market and hampers business.

As a follow-up, I reminded him about the tax holi-days and cheap land that global corporations demandto invest in the global South and asked him if this wasnot a form of subsidy that was creating inefficiency andimperfections in the market. He defended such subsi-dies by asking, “Do you want the investment or not—

you need the investment? Why would investors wantto come here if you do not provide incentives?” Viewssuch as these set the tone for the spatial transformationsovertaking India during this time.

The genealogy of my interviewee’s arguments can betraced back to the now-normalized neoliberal discourse.Ever since the IMF and the World Bank bailed Indiaout of the balance of payment crisis in 1991, there hasbeen tremendous pressure, in the form of World Bankand IMF recommendations, on the government of Indiato adhere to “free market” ideology vis-a-vis the energysector (also see Nayyar 2002b). These recommenda-

tions resonate with Harvey’s (2006) argument aboutneoliberalization involving the destruction or transfor-mation of old institutions that were earlier put in placeand the creation of new ones. The main features of theearlier energy policies9 were, first, government owner-ship and supply of capital from federal or central andstate budgets; second, development of centralized elec-tricity supply system and of regional and national elec-tricity grid; and third, self-reliance in technology and

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fuels. Under this policy, autonomous but government-owned companies like Bharat Heavy ElectricalLimited (BHEL) were created to develop the necessaryadvanced technological capabilities in the electricitysector. Emphasis was also laid on utilization of the avail-able energy sources such as coal and hydro sources in thecountry. Finally, the policy of cross-subsidy, or subsidyfrom within the sector, was widely adopted. The ob-jective underlying this policy was to provide electricityat affordable rates to deprived sections of society, espe-cially farmers from backward, rural, and tribal regions.Following the suggestions of the World Bank and theIMF, these needed replacement by new institutions andspatial configurations that facilitate private property,profit, and free trade (as opposed to the earlier policy of self-reliance). Even cross-subsidies, what the regionalmanager of the global corporation complained about,are to be removed in the near future. Thus, neoliber-

alism progresses through replacement of older institu-tions with new ones to reconfigure and re-create FDIfacilitating space, according to the demands of globalgovernance institutions and corporations. As a caveat,however, I want to add that the nature and rate atwhich spatial reconfiguration has taken place across In-dian states differ because the energy sector falls withinthe concurrent list10 of the Indian constitution (seealso Jenkins 1999). State governments run by politicalparties that fall within the center-to-right ideologicalspectrum have been more proactive in neoliberalizingspace, including that in the state of Maharashtra where

DPC, my case study, is located.What privatization and the subsequent creation of

facilitative space for FDI in the global South entailis brought out clearly by an occasional paper pub-lished by the International Financial Corporation of the World Bank. Sader (2000), author of the occa-sional paper, suggested the following: First, he high-lights the virtues of government support arrangementsfor privatization and FDI. These support arrangementsmight take the form of grants, subordinated loans for eq-uity participation, debt or equity guarantees, exchangerate guarantees, cash-flow guarantees,11 government

counterguarantees,12 revenue enhancements,13 conces-sion term extension,14 and change of law guarantees.15

Second, Sader highlighted the importance of overallsectoral liberalization, which he suggested would re-quire privatization of the state-owned entities com-bined with a pricing mechanism that primarily relieson market forces rather than political concerns. Third,Sader suggested that governments in developing coun-tries need to review the existing institutional structure

responsible for projects involving FDI in infrastructure,review the country’s legal framework to see whether itaddressesinvestor requirements appropriately, and eval-uate the effectiveness of the existing regulatory envi-ronment. To transform similar idealized renderings intoconcrete policies in India, the World Bank, which hadalready lent around US$10 billion to the power sectorover several years prior to the economic crisis, startedlaying down conditions that all further loans to thesector would be contingent on the government of In-dia’s ability to attract private investments in power inthe postcrisis scenario (Purkayastha and Prasad 2002).Here, “ability” implies the government’s proactive ad-herence to World Bank’sideasandsuggestionsfor policychanges and transformation or re-creation of spaces tofacilitate privatized profiteering in India, which, accord-ing to Harvey (2006) constitute replacement of oldersocial relations and according to Schumpeter (1950)

constitute creative destruction.To understand India’s neoliberal transformation assimply a top-down process, with only the World Bankand the IMF exercising power, is simplistic. Subjection,which Foucault (1980, 1982) and Butler (1997) alludedto, involves interdependence, or discursive productionof social space and policies. To trace the genealogyof the power exercised by the World Bank, the IMF,and the United States in subjecting India to neolib-eral transformation, the problems that plagued the In-dian electricity sector prior to the adoption of the NEPin 1991 also need to be examined. First, India’s pre-

NEP pro-business policy package in the 1980s includedtax concessions to private investors. Subsequently, thepressure on the national budget, on account of tax con-cessions to private investors and high-income earners,forced the government to restrict public sector invest-ments in the 1980s (Kohli 2006), partly affecting In-dia’s electricity sector. Very few or no investments weremade in improving efficiency in the generation, trans-mission, and distribution of electricity in the 1980s.Second, project delays and cost overruns affected thepower industry adversely during this period. Third, thegovernment of India failed to devise appropriate tariff

policies, especially in the context of rising electricitysubsidies in the 1980s. Electricity subsidy became vir-tually a political ploy to garner electoral votes (Ahmed2006). In fact, richer agricultural states in India suchas Haryana, Punjab, Gujarat, and Maharashtra were atthe forefront of providing electricity subsidies for farm-ers (Corbridge and Harriss 2000). Subsidies were giveneven to individual users who had relatively high in-comes and had the ability to pay. As a result, many of

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those who really needed the subsidy did not get it orgot very little. I should add, however, that this problemcould have been fixed through appropriate policy inter-vention; for example, a need- and income-based subsidypolicy. Fourth, despite the presence of legal provisionsto allow autonomy to state electricity boards (SEBs),many of the SEBs were turned into departments of stateenergy ministries, bringing them under direct control of political executives and, in turn, political interference.As a result, vested interests that exercised influenceover state governments could control the functioningof the SEBs to secure economic and political benefitsfor themselves (Dubash and Rajan 2001; Rao 2002).Another reason for the acceleration of economic crisiswas the increasing and unsustainable state debts thatwere exacerbated by populist measures like the waiverof soft loans to individuals. Despite these problems, In-dia’s installed capacity of electricity increased phenom-

enally, nearly fifty-one times, from 1,362 MW in 1947,at the time when India gained independence, to 69,065MW toward the beginning of India’s Eighth Five YearPlan16 in 1992, when the sector started adopting the NEP.

A reportprepared by thePrayasEnergy Group(2001)pointed out that, at the time when the NEP was tak-ing root in the early 1990s, state-level politicians whocontrolled SEBs found themselves in a situation thatdemanded difficult decisions. Controlling SEBs was inthe interest of these politicians, but they also had to facepublic wrath caused by rising electricity tariffs and de-

teriorating standards of consumer service. At the sametime, the benefits and advantages that politicians usedto draw, through their control over the SEBs, starteddwindling on account of the SEBs’ deteriorating con-ditions, making the electricity boards a liability thatpoliticians became willing to pass on. It was the will-ingness of state politicians to loosen their control overthe poorly performing SEBs that strengthened the po-sition of the World Bank and allowed it to acquire astrategically key position in the electricity sector andto start dictating terms in many states. Thus, the powerof the World Bank and the IMF, in collaboration with

what Foucault(1980) calledthe “willed effect” of Indianpoliticians, manifested in subjection of India’s powerpolicy regime to neoliberal changes. Internalizing theIMF prescription of reducing or doing away with fiscaldeficits as a prime indicator of good macroeconomicmanagement, the Indian government focused on saleof equity of public-sector firms to window-dress its bud-gets, along with scant disregard for the real problems of the electricity sector such as managerial reforms, lack of

autonomy, politicization of subsidies, and so on (Chan-drasekhar and Ghosh 2002).

Postcrisis neoliberal transformation is a continuingand discursively produced process (Smith and Pickles1998), what Schumpeter (1950) and Harvey (2006) ref-ered to as creative destruction. Elements of this processfirst manifested in the form of changes in the ElectricitySupply Act of 1948 in the early 1990s to allow entryof private capital in the power sector. The governmentof India’s main efforts were toward inviting private andforeign capital on attractive terms to invest in powergeneration. These efforts were in the form of conces-sions to investors. Policy changes included removal of the profit ceiling, which had been set at 11 percent ayear for the few private power companies that oper-ated in India prior to the adoption of the NEP. Despitethis ceiling, the limited number of private companiesthat had been allowed to operate, such as Tata Electric,

Ahmedabad Electric Corporation, and Calcutta Elec-tric SupplyCorporation, had been performing well. Thenew policy, however, allowed the effectiverate of returnon capital to be as high as 31 percent—16 percent di-rectly and another 15 percent as a bonus on extra plantload factor. Other incentives included a tax holidayfor five years, guaranteed offtake, and sovereign guaran-tees for payment in foreign exchange. The new policieswere not geared at just facilitating private investment;instead, these were geared at creating facilitative spacefor (private) foreign investment.

Profit maximization is the primary rationality for the

existence and functioning of multi- and transnationalcorporations. So despite the far-reaching changes inIndia’s power policy, there was demand for even moreincentives that could further secure and increase profits.The government of India set up several committees tolaydown norms forprivate participation in power gener-ation prior to thearrival of fast-track projects, beginningwith that of Enron in 1992. Significantly, onesuch com-mittee was headed by Dr. Reinhardt, a German citizen,and Chief Executive of Siemens (India), subsidiary of Siemens (Germany), one of the six major global playersin the world electricity market. Thus, a multinational

corporation was laying down rules for its own func-tioning and ensuring that it had state protection whilemaking profit. Followingthe Reinhardt Committee pre-scription and a few others with free market leanings, thegovernment of India incorporated the following pol-icy changes: 16 percent guaranteed return on capital;complete tax holiday; depreciation of 8.24 percent ascompared to 3.5 percent allowed originally; completeprotection against foreign exchange fluctuations and

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sovereign guarantees by the union government with re-gard to their dues; a two-part tariff system, allowing acapital-servicing charge plus an operating cost; optionto import fuel; and a guaranteed offtake higher thanthe average load demand in the country (Mehta 2000;Purkayastha and Prasad 2002). The 16 percent rate of return on equity was fixed at 68.5 percent plant loadfactor (PLF), with additional incentives up to 0.7 per-cent on return from each percentage point of additionalPLF. According to the Electricity Power Research Insti-tute of California, a reasonably well-maintained plantwould operate at 80 percent PLF in the first ten yearsand at 75 percent PLF at the end of the twentieth year(Ministry of Power 1995). Most recent private powerprojects, all over the world, have been guaranteed off-take of power well above 80 percent PLF (Ministry of Power 1995). The return on equity, with the adoptionof the new policy, at a normally achievable PLF shot

up to 24.5 percent (and could be stretched to as highas 31 percent) with a corresponding rise in the inter-nal rate of return. Returns as high as those provided tothe fast-track projects were unprecedented. In addition,this was the first time since the days of the colonial EastIndia Company that the state was guaranteeing a returnon capital. Thus, the new policy was a form of juridi-cal power (Foucault 1980, 1982) to regulate, control,and even protect a certain political-economic structureof exploitation (also see Butler 1990). Repeated ma-nipulation of policy to suit the needs of corporationsalludes to Marx’s (1894) warning about their monopo-

listic and oligopolistic powers, which constantly tries tomanipulate the system to its advantage. It also alludes toSchumpeter’s (1950) concern that by manipulating thesystem, capitalism profoundly affects the political struc-ture and lays the groundwork for reduced support foritself, in addition to endangering the very institutions

on which it had been relying. Besides, the new policiesdid not address the problems that actually plagued theSEB; instead, it shifted the focus to issues of FDI. Asdiscussed earlier, it was not the problem of investmentand growth that was plaguing the Indian electricity sec-tor but rather that of autonomy, political interference,political will to provide subsidies only to the needy, andso on.

With the unleashing of new terms for FDI inpower, nine fast-track power projects,17 involving sig-nificant foreign investments, received immediate clear-ance from the state and the central governments. Asopposed to neoliberal rhetoric, which takes pride inthe concept of the free market, these clearances weregained in the absence of open and competitive bidding.The Indian public-sector unit, BHEL, was technologi-cally capable of developing power-generating units withinstalled capacities similar to those offered by the fast-

track projects, but they were denied the opportunityeven to bid for these projects. One of my interviewees,a senior manager at BHEL, the Indian public-sectorunit, said, “Had there been open bidding, we wouldhave bid for much lower costs. In fact, the costs perMW quoted by the foreign companies (and accepted bythe state and central governments) were 75 to 175 per-cent higher than what we were quoting at that time.”Several other fast-track project approvals followed; thelocation, corporations involved, installed capacity, andtype of fuel used are listed in Table 1.

Detailed examination of each of these projects is not

among the objectives of my research, but there are afew aspects that need to be highlighted. First, these in-vestments came from corporations based in the UnitedStates and European countries that exercise major con-trol over the World Bank and the IMF. The UnitedStates exercises control over the IMF and World Bank

Table 1. Fast-track power projects: 1992 through 1995

Location and date of “in principle” clearance Installedby India’s Central Electricity Authority Corporation(s) involved capacity (MW) F uel used

Jegurupadu, Andhra Pradesh (November 1992) GVK Inc., USA 216 Gas/naphthaGodavari (Kakinada), Andhra Pradesh (April 1993) Spectrum Tech 208 N/AVisakhapatnam, Andhra Pradesh (May 1995) Ashok Leyland and National Power, UK 1,000 CoalDabhol, Maharashtra (September 1993) Enron, Bechtel, and GE, USA 695 Distilled oilBhadravati , Maharashtra (June 1994) Nippon Denro Ispat Ltd., GEC, and EDF, France 1,072 CoalPaguthan, Gujarat (March 1993) Torrent Group & GPCL 654.7 Gas/naphthaMangalore, Karnataka (July 1995) Cogentrix & GEC 1,000 CoalIB Valley units 3 and 4, Orissa (July 1993) AES Tranpower, USA 420 Coal Neyveli, Tamil Nadu (December 1993) ST Power System & CMS Generation, USA 250 Lignite

Source: Government of India (1995).

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through its voting share (Peet et al. 2003), and corpora-tions gain access to theU.S. administration and exercisepower on account of the political parties’ dependenceon donations. In fact, the Enron and AES corpora-tions, which featured among the corporations that hada stake in India’s fast-track power projects, were ma-jor contributors of electoral funds to the Democraticas well as the Republican parties18 through the 1990s.The transformation of India’s electricity power policyregime, after all, was carried out to provide attractivespaces to such corporations to make investments andto increase returns on investments made primarily byAmerican shareholders. Another point to note is thatthe fuel required for some of these projects includeddistilled oil, naphtha, and natural gas that needed tobe imported. Volatility of the international oil andgas market is a necessary input in all such decision-making exercises, but in the case of fast-track projects,

it was overlooked. Further, one of the main causes of India’s balance of payment crisis in 1990 and 1991 wasthe Gulf War and the subsequent rise in petroleumand gas prices. Thus, India’s willingness to risk invest-ments in projects that required plunging further intothe volatile oil and gas market defies economic logic,but it very much alludes to Foucault’s (1980, 1982)notion of the willed effect of the subject in its ownsubjection.

My interviewee, A Srinavas Rao, the head of AESCorporation in India, informed me, “We were frustratedwith the progress of our fast track project, so we have

given up on it . . . in fact, almost all foreign playersinvolved in the fast-track projects have packed theirbags and left the country.” The failure of these fast-track projects, despite all the incentives they were pro-vided, is a stark reminder of Marx’s (1894, 1906) andSchumpeter’s (1950) warnings about capital’s ability toundermine the very institutions that they depend onand put such pressure on the sociopolitical structureon which it thrives so as to cause self-destruction. Inthe following section, I examine the case of Enron’ssubsidiary, the DPC, in detail, to highlight subjectionand the corporation’s tendency to undermine the insti-

tutions they depend on, on account of their efforts tomake unsustainable profits. DPC was the biggest FDIproject in Indian history. According to SushilkumarShinde, Cabinet Minister in the government of Indiain charge of the Ministry of Power, the failure of theDPC hit India’s exuberance about FDI in power thehardest and the entire fiasco has created a situation inwhich FDI in power in India has “dried up” or beenjeopardized.

Enron in India

On 15 June 1992, a few months after India had re-ceived structural adjustment loans from theWorld Bankand the IMF, a team of officials from Enron Corpora-tion and the General Electric Company (GE) arrivedin New Delhi. Immediately, they held discussions withthe chairperson of the Oil and Natural Gas Commis-sion and the Petroleum Secretary in the governmentof India. On 18 and 19 June 1992, this team visited ahalf-dozen potential sites in Maharashtra and followedthis by handing over “a term sheet” to the Maharash-tra State Electricity Board (MSEB; Mehta 2000). Thesame day (20 June 1992), the MSEB signed a memo-randum of understanding (MoU) with Enron and GEspecifying that MSEB would buy electricity from En-ron, which would build, own, and operate a plant of about 2,000 to 2,400 MW capacity that would run on

liquefied natural gas (LNG). The power station was tobe located in Dabhol in Ratnagiri district, about 300km south of Mumbai. The “electricity power purchasecontract” would be for a twenty-year term between thepower venture and the MSEB. According to the MoU,the “contract (was) to be structured to achieve an allin all price of US$0.073/kWh” (Rs. 2.34 per unit atthen-prevailing exchange rates). This was the singlelargest purchase contract in the history of the country.It should have involved public debate and open bid-ding. In this case, however, even these basic norms of open bidding were not followed.

In 1993, a contract was signed between the MSEBand the Indian subsidiary of the (U.S.-based) EnronCorporation, the DPC, for setting up an electricity-generating unit with installed capacity of 695 MW.“Techno-economic” clearance for the project was is-sued by the sole authority under the Indian law, thestate-controlled Central Electricity Authority (CEA;Mehta 2000), despite the fact that the CEA had pre-viously pointed out that the price of power agreed onwas a “departure from the existing norms and parame-ters set by the Government of India” (27). The CEAfound that the price agreed on (i.e., US$0.073/kWh)

was high and went on to state that “the entire Memo-randum of Understanding was one sided”; that is, bene-fiting Enron (Allison 2001). While theproject wasgain-ing official clearance, considerable local opposition wasattracted, on various ideological, economic, political,and environmental grounds, from a diversity of politicalparties, including a loose-knit coalition of former chair-persons of the CEA and various SEBs, environmen-talists, consumer organizations, and academics (Mehta

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2000). Even as the World Bank championed the causeof multi- and transnational corporations in India andhighlighted privatization and FDI as a cure for all of India’s power-sector problems, it, too, was skeptical of the DPC project’s financial feasibility. After review, theWorld Bank (Mehta 2000, 28) pointed out: “This largeproject which is nearly 20 percent of its (MSEB’s) in-stalled capacity, is likely to have an adverse financialimpact (on MSEB)” and refused to fund the project.What tipped the scale for the government of Indiaand the MSEB in Enron’s favor was the corporation’sclose relationship with the U.S. government. I high-light this aspect later in the article. According to VivekMontario,19 the secretary of the Maharashtra state com-mittee, Centre of Indian Trade Unions, “In the newunipolar geopolitical context, the Indian governmentwas desperate to dance to the American tune,” a viewheld by several of my interviewees. Most Indian news-

papers also highlighted possible corruption as the rea-son for the government of Maharashtra and MSEB’senthusiasm in going ahead with formalizing the dealwith Enron. Later in the article, I examine this aspectas well.

In the state-level elections of 1995, a coalition of op-position parties came to power almost solely on the issueof possible malfeasance in the contract between Enronand the Congress-party-led state government of Ma-harashtra (Mehta 2000; Chitkara, Shekhar, and Kalra2001). The new government, headed by the Shiva Sena(a major political party of the state of Maharashtra), un-

dertook to reexamine the terms and conditions of thecontract. It concluded that the contract was not in thepublic interest and decided to cancel the contract inAugust 1995. Within three months of that decision,for reasons that are not clear, the government back-tracked, and “renegotiated” the contract without sig-nificant amendment (Mehta 2000). Opposition to thisproject was overlooked or crushed as “activists (oppos-ing the project) were subjected to harassment, arbitraryarrest, preventive detention under the ordinary crim-inal law, and ill-treatment” (Amnesty International1997). Following “renegotiations,” the MSEB and DPC

signed an agreement in August 1996 for the supply of about 2,000 MW of electricity to the MSEB. Enron, GE,Bechtel, and the MSEB held 65 percent, 10 percent, 10percent, and 15 percent of the shares, respectively, inthe DPC project. The payment due from MSEB to En-ron on the renegotiated agreement constituted one of the largest contracts in world history (US$30 billion)and was the single largest contract in India’s history.Details of the project are provided in Table 2.

Table 2. Main features of the Dabhol Power Project

Features Phase I Phase II

Total instal led capacity (in MW) 695 1,320Fuel Distillate

no. 2Liquefied

naturalgas with

distillateYear of operation startup 1996 1998Capital cost, including import duties

and sales tax (in millions $)• Power plant 747 1,385• Harbor 35 32• Fuel storage and regassification 45 428• Financing fee and working capital 39 120Total 864 1,965Tariff (all in one price at zero duty)• Cents/kWh 7.15 6.72• Rupees/kWh 2.29 2.15Tariff (all in one price with 20

percent customs duty on

equipment, 15 percent on fueland sales tax)

• Cents/kWh 7.94 7.82• Rupees/kWh 2.54 2.50

Sources: Mehta (2000), Godbole et al. (2001).

The DPC, however, never had a smooth run inIndia. Continuing pressure from civil society kept forc-ing the government of Maharashtra and the MSEB torequest renegotiation of the project. The global corpo-rations, however, having struck an extremely profitable

deal, were unwilling to budge. Matters came to such animpasse that MSEB was going bankrupt while payingEnron, GE, and Bechtel, so it unilaterally canceled thecontract and stopped all payments (Srivastava 2001b).Alluding to Marx (1906) and Schumpeter (1950), DPCendangered the very institution (MSEB) that had sup-ported it andon which it hadearlier relied. Governmentcounterguarantee, a legal binding on national govern-ments vis-a-vis FDI in infrastructure that the WorldBank promotes (see Sader 2000), and an incentive thatthe government of India had provided those investingin the fast-track projects, in complete violation of free

market norms, came to Enron’s rescue at this juncture.Enron started cashing in on the government of India’scounterguarantee to recover unpaid bills (Srivastava2001a). It was only after its collapse at the global levelin the latter part of 2001 that Enron quit India. DPC’sassets were first taken over by Enron’s liquidators. Later,GE and Bechtel, which had earlier been Enron’s ven-ture partners in India, purchased DPC’s assets, allowingthem to gain effective control over 85 percent of equity

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holdings (Ramachandran 2005). In what follows, I ex-amine what was wrong with the entire DPC deal. Ihighlight how the DPC deal was entangled in corpo-rate greed to make unsustainable profits, corruption,subjection, and American hegemony.

Enron’s senior vice president, Linda F. Powers, whiletestifying on behalf of Enron Corporation before theU.S. House of Representatives, pointed out that cor-porations in developing countries are able to achievethings that U.S. foreign assistance efforts have longbeen trying: “The projects are serving as action-forcingevents that are getting the host countries to finally im-plement the legal and policy changes long urged uponthem” (U.S. House of Representatives 1995). She alsosaid “Our company spent an enormous amount of itsown money—approximately US$20 million—on thiseducation and project development process alone, notincluding any project costs” in the context of the DPC.

Rebecca Mark, the Enron representative who visitedIndia, pointed out that the corporation had spent ap-proximately US$10.6 million (based on conversion of rupees to U.S. dollars at 1992 rates) just in “educat-ing” people on the project (Nayar 2001). Remarkably,US$10.6 million was spent in five days20 (i.e., 15 June1992–20 June 1992), from the day when Enron’s rep-resentatives first reached India, to the day when theMoU between MSEB, Enron, and GE was signed. Inthe United States and in India, Enron’s mode of oper-ation, based on influence peddling, was essentially thesame. One of the reasons for Enron’s rise in the United

States was its ability to influence public policy; Enroninfluenced public policy in the United States throughthe lobbying of state and federal governments. It tradedin energy futures—essentially depending on knowingwhich way the market was going—and if the marketdid not obey the predictions, nudging it in the right di-rection (Purkayastha and Prasad 2002). The numerouspolicy changes that India introduced should be seen inthe light of Powers’s claim that projects like DPC were“action-forcing events that are getting the host coun-tries to finally implement the legal and policy changes.”Contrary to general claims of freedom and choice that

privatization and neoliberalism are supposed to bring,new power policies in India skewed the market infavor of multi- and transnational corporations at thecost of national interests. The US$20 million that Pow-ers mentioned as “expenditure on education and projectdevelopment process alone, not including any projectcosts” remains unaccounted for. Dipankar Mukherjee,an interviewee who had been a member of the IndianParliament and a member of the Parliament’s standing

committee on energy that investigated and reported onthe fast-track power projects, pointed out that “Enron’srepresentatives, while testifying before the committee(of which he was a member) have not provided thebreakup of how that US$20 million was spent, whatwere the educational expenditures, who was educated,what project development was taken up.” He furtherpointed out, “even our report acknowledges the pres-ence of scam.” In essence, he insinuated that it wasthrough “influence peddling” that Enron made inroadsinto the Indian power sector. Mukherjee also informedme that the Dabhol project represented the exploitativenexus among Enron, GE, and Bechtel. Not only wereEnron, GE, and Bechtel promoters of the project, butGE was also the supplier of equipment and Bechtel wasa consultant to the same project. Essentially, the ex-penses that the corporations were incurring as promot-ers of the project were being channeled back to them as

income. The choice of GE as the supplier of equipmentand Bechtel as a consultant again occurred in the ab-sence of open bidding. Enron’s ability to dominate andextract profits was so overbearingly apparent that afterthe Dabhol project was renegotiated, even the MumbaiHigh Court, vis-a-vis writ petition No. 2416 of 1996 inCITU and Abhay Mehta vs. DPC and others observed:“Enron revisited, Enron saw and Enron conquered—much more than it did earlier” (Godbole 1999, 663).Codependence among the political and bureaucraticelites and the power corporations was instrumental increating the conditions for their success and existence

at that particular time and space (Foucault 1980, 1982).Thus, the parties involved had an interest in preserv-ing and harboring the existing power relations, whichin turn constituted subjection (Foucault 1980, 1982;Butler 1997; Gibson 2001). In the discussion that fol-lows, I highlight the initial complacent nature of theIndian state, the MSEB, and the Maharashtra state gov-ernment that constituted subjection, which in the longrun produced tremendous financial losses for the stateinstitutions.

Among the bizarre features of the Dabhol projectwas the cost of power being pegged at the dollar rate

(Godbole et al. 2001). This meant that the price of power was designed to increase as the rupee depreci-ated. This was not the norm; if Coca Cola or Pepsi cantransact in India in rupees, so can Enron (Purkayasthaand Prasad 2002). Further, India had just gone througha balance of payment crisis and this was accompaniedby severe depreciation of the rupee. With no guaran-tee that the rupee would not depreciate further, bypegging something as basic as the cost of power, the

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government of India, the government of Maharashtra,and the MSEB jeopardized the interest of the Indianconsumers.

The project was not just about electric power butalso a complex intermeshing of neoliberal power incor-porating LNG supplies, shipping, and port projects puttogether (see Table 2), resonating with Marx’s (1906)and Schumpeter’s (1950) arguments that corporate cap-italism has the tendency to produce oligopolies andmonopoly. This complex intermeshing was designed tolay the foundation for Enron to become a major playerin, and controller of, the Indian electricity power andgas sectors. The project included a separate twenty-year shipping time charter with Mitsui O.S.K. Lines, Japan, for LNG transportation, which involves char-tering the use of LNG tankers costing approximatelyUS$98,000 per day according to project estimates. Inreviewing the project, the Energy Review Committee

of the government of Maharashtra pointed out thatthis cost was excessive. Even in the year 2001, bids forthe charter of a similar ship by Petronet LNG stoodat US$70,000 per day. The project also included long-term fuel supply agreements with Oman LNG and AbuDhabi Gas Liquefaction Co. Ltd., for 1.6 million tonsand 0.5 million tons (a total of 2.1 million tons), withtake or pay commitments of 90 percent and 75 per-cent, respectively. These contractual obligations weresubsequently passed through to MSEB, transferring theresponsibility for paying for approximately 1.8 milliontons of LNG even if it was not consumed (Godbole et al.

2001).The type of fuel to be used was another contro-

versial element in the DPC venture. In 1990–1991,just before the initiation of fast-track projects, the costof supplied power averaged rupees 1.09 per unit. Theaverage cost of non-DPC electricity when DPC wasfunctioning—coming essentially fromcoal—was rupees1.90 per unit, much lower than what DPC was charging(DPC’s cost of electricity ranged between 120 and 350percent higher, depending on the exchange rate andinternational price). The government of Maharashtraand the MSEB’s acceptance of the hydrocarbon route—

naphtha and LNG as the fuels—for Dabhol show poorforesight and decision-making ability. Linking the en-ergy prices to naphtha and LNG made the consumersof the region vulnerable to the volatile internationalprices of these fuels. Acceptance of the hydrocarbonroute is even more disturbing in the context of the stateof Maharashtra being rich in coal reserves. Environ-mental concerns alone cannot justify the hydrocarbonroute. Installation of state-of-the art, internationally ac-

cepted pollution-reduction devices in coal-based powerplants would have cost consumers an additional rupees0.05 per unit (Mehta 2000) and would still have beenmuch cheaper than what MSEB agreed on.

Compounding the previously mentioned problemswas the inclusion of something called “capacity charge”in the power purchase agreement (PPA). The PPA hadmore than six pages of complex interlinked formulae tocalculate capacity charges and it included factors likedollar-to-rupee ratios, the rate of Indian inflation, therate of inflation in the United States, the U.S. laborinflation index, and the U.S. materials inflation index(Mehta 2000). These were used to arrive at a fixedcapacity charge that would be charged in India for elec-tricity that would be produced and consumed in India.In essence, it meant that even if MSEB did not drawpower equal to 83 percent of the agreed output, theywould still pay the foreign promoters a sum equal to

approximately US$21 million per month (Purkayasthaand Prasad 2002). It also meant that MSEB was boundto buy power from DPC, even if power was available ata cheaper rate from alternative sources. Such an agree-ment was in complete violation of even free marketnorms, as it deprives the consumer of choosing the low-est cost option.

When MSEB had entered into the contract withEnron, power supplied by DPC was supposed to cost ap-proximately rupees 2.5 per unit (Table 2). When PhaseI of the Dabhol power unit became functional, DPCwas charging the MSEB a much higher price. From

May 1999 through December 2000, DPC was chargingMSEB an average of rupees 4.67 per unit of electricity.In some months, DPC tariff cost as much as rupees 8.04per unit—nearly 222 percent higher than what was in-tended (Godbole et al. 2001). Industrial power tariffs inIndia, currently at rupees 4.00 to rupees 5.00, are alreadyamong the highest in the world and threaten the com-petitiveness of the industry, so DPC’s charges (in theproduction end itself) were unsustainable (Purkayasthaand Prasad 2002). The high per unit charges of DPCwere due to the high fixed charges or capacity chargesdiscussed earlier; they were payable regardless of the en-

ergy purchased. In fact, it was cheaper for MSEB to payEnron the capacity charges and not draw power thanto pay the high fuel charges that was being demanded(Purkayastha and Prasad 2002). Another reason for thehigh charges was the sharp rise in the internationalprice of naphtha. If MSEB had the option of purchas-ing power produced from domestic or less volatile fuelsources in the international market, its financial healthwould have been secure. In addition, the value of the

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Indian rupee had depreciated from approximately ru-pees 31.50 per dollar when the contract was signed, toapproximately rupees 45 per dollar when DPC becameoperational. This raised the cost of DPC’s power evenfurther.

MSEB was so entangled by the guarantees that thestate and the national governments had provided toEnron, that to meet its obligations, it reduced the pur-chase of lower cost power from public-sector units toprevent further decline in its financial health. Thiswas even prior to Phase II of DPC becoming opera-tional. According to the Energy Review Committee of the government of Maharashtra, the expenditure onpower purchase from DPC (i.e., 3,871 MU for approxi-mately US$367 million) would havecost approximatelyUS$167 million had the power been purchased fromnon-DPC sources.

On account of the nature of the contract with En-

ron, MSEB was tied to the conditionality of compul-sory purchases of power from DPC. Subsequent to thecommissioning of DPC Phase I, the financial deterio-ration of MSEB was rapid. Although MSEB turned aprofit in the financial year 1998–1999, it plummetedto huge losses (excluding subsidy) once it was com-pelledto buy power from DPC. In 1999–2000 and 2001–2002, MSEB’s losses (excluding subsidy) were estimatedat US$367 million and US$853 million, respectively.These losses affected MSEB so severely that paymentto all its creditors and suppliers was disrupted. A cashcrunch hit the MSEB so hard that it was unable to pay

DPC as well. It was under these conditions that MSEBstopped paying DPC and wanted to cancel the contract.As mentioned earlier, DPC responded by cashing in onthe government of India counterguarantee.

Therelationshipbetween Enron and theU.S. admin-istration had been strong. Enron had been the secondbiggest contributor to George W. Bush’s first presiden-tial election campaign. Frank Wisner, the U.S. ambas-sador to India from July 1994 through July 1997, joinedEnron as a director within twenty-four hours of com-pleting his tenure in New Delhi (Nayar 2001). Underconditions of crisis, when MSEB wanted to free itself

of the DPC contract, the relationship between U.S.corporations and the U.S. administration manifested inthe form of the U.S. government stepping to Enron’srescue. The first salvo against theMSEB and thegovern-ment of India came from Kenneth Lay, the chairman of Enron Corporation. The Financial Times reported thatthe Enron CEO wanted U.S. sanctions against India if the MSEB did not resume payment (BBC News 2001a,2001b). On 6 September 2001, the BBC reported “US

warns India on Enron.” Speaking on behalf of Enron andother potential investors, the new U.S. ambassador toIndia, Robert Blackwill, warned that the long-runningdispute between Enron and Maharashtra was deterringinvestment in India. Finally, even the White House in-tervened on behalfof Enron (BBC News 2002).RichardCheney, Vice President of the United States, discussedEnron with Sonia Gandhi, President of the CongressParty, which was in power in Maharashtra in June 2002.This was after Enron, the global corporation, had col-lapsed. According to the White House spokesperson,this was in the “national interest” of the United States.The government of India and the government of Ma-harashtra, in no position to withstand the might of thesuperpower, met all arrears21 even as DPC’s assets weretaken over by Enron’s liquidators and then purchasedby the venture partners (i.e., GE and Bechtel). The fi-nancial impact of the resulting arrangement is another

story of corporate exploitation but beyond the scope of this article.

Contextualizing the Dabhol Power Project

The DPC exemplifies the power of neoliberalism andglobal corporations in Third World countries. WorldBank, IMF, and U.S.-sponsored neoliberalism are notabout free markets, or about freedom, or developmentof the global South or postsocialist economies. Theyare about creating congenial spaces for the extraction

of revenue by corporations in countries that were often,until recently, relatively less accessible to capitalist ex-ploitation. FDI, in the absence of power relations, mighthave emancipatory potentials. The statistical modelsexamined and reviewed earlier suggest several positiveimpacts of FDI precisely because of FDI’s ability to addto gross national wealth. The main problem with suchstatistical models, however, is the high level of abstrac-tion involved and, in turn, the fallacy of misplacedconcreteness (Allen 1983; Sayer 1992). Models can beformulated and benefits, or other effects, of FDI can beshown by examining a set of indicators, but postcrisis

FDI is embedded in the political economy of neoliber-alism. It manifests and impacts society in multiple, andeven nonquantifiable ways. Thus, it is not sufficientsimply to see the relationship of FDI with, for example,national income or knowledge spillover. FDI needs tobe examined in the context of power relations and itsoverall impact on local and national spaces as well. Assuch, FDI in the context of neoliberalism and Ameri-can hegemony manifests as an instrument of capitalist

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extraction, rather than one that comprehensively ben-efits developing or postsocialist economies.

Neoliberalism in the Third World, as a system basedon free markets, has produced a race to the bottom, es-sentially to the benefit of corporations. The race to thebottom is manifested in transformation of economicpolicies and, in turn, economic space, to the extentthat local interests are being compromised. New insti-tutions, as a manifestation of neoliberalism in India, aregeared at attracting and supporting mobile global cap-ital. Development of these new institutions has takenplace at the cost of those that could enhance the absorp-tive capacity from FDI. Then, however, strengtheningof institutions that could enhance absorptive capacityfrom FDI could also make India a less attractive site forinvestment and lead to capital flight.

The monopolistic and oligopolistic tendency of multi- and transnational corporations further compro-

mises the claimed benefits of FDI. In the case of DPC,the power of big corporations was manifested in theirefforts to extract unsustainable profits. The DPC pushedthe profit-making MSEB, a public-sector unit, into fi-nancial crisis. The means adopted by Enron to achievethe position of domination through influence peddling,and, in turn, efforts to earn unsustainable profits, jeopar-dized the very institution that it was dependent on (i.e.,MSEB). The case of DPC, however, is not unique. Allinitial foreign-held fast-track projects in India, on ac-count of the unsustainable nature of their relationshipwith local spaces, produced their own demise.

Power, however, that subjected India to neolib-eral transformation in the case of the fast-track powerprojects in general, and the Dabhol electricity projectin particular, was not exercised solely by the UnitedStates, the World Bank, the IMF, and the global cor-porations involved. Power was also exercised in theform of willingness of local politicians and bureaucratsto accept kickbacks. Unwillingness of local politiciansto streamline subsidies and provide autonomy to SEBscompromised and weakened the position of SEBs. Thesubsequent willingness of politicians to privatize elec-tricity also constituted power that was instrumental

in the neoliberal transformation. In fact, the powerof economic and policy transformation unleashed byneoliberalism found willing subjects in India becauseit preserved and protected the subjects’ own precari-ous positions. The willing subjects were able to “sell”neoliberalism as a policy that would eventually benefitall, in the face of the balance of payment crisis that In-dia had just undergone. In fact, when opposition to theDPC grew louder in 1995, N. K. P. Salve, the minister

for power in the government of India, questioned thepatriotism of the protestors (“Review the deal” 1995). Itwas the willed effect of such subjects to dependence onthe power of neoliberal exploitation that produced ne-oliberal transformation in India(alsosee Bhaduri 2002).

As discussed earlier, the DPC project was opposedon several grounds. As fallout of the opposition to thehighhandedness of the federal and state governmentand absence of transparency in the DPC deal, therewere demands for new legislation and regulation per-taining to the electricity sector. Ahluwalia (2002, 86),formerly an employee of the IMF, who became one ofthe main architects of India’s economic liberalizationpolicy, pointed out that “the complexity of problems inthis area was under-estimated; especially in the powersector . . . this has now been recognized.” Thus, in 2003a new Electricity Act was passed with a goal of mak-ing capital more accountable. Even as policy guidelines

have been geared to make capital more accountable,however, several provisions of the new Electricity Actof 2003 are geared to facilitate privatization of the elec-tricity sector in the form of delicensing, reduction andremoval of entry barriers for private companies, and soon. Currently, states that are more proactive in imple-menting the provisions of the new act, which conformto most of the suggestions made by the World Bank andthe IMF (discussed earlier), are ranked as investment-friendly states. The government of India has employedICRA and CRISIL (2006), both credit rating private(American) companies, to rank the Indian state. Thus,

even as the Electricity Act of 2003 reflects institutionallearning, it also reinforces neoliberal transformationthat adheres to the demands of global capital withoutreally addressing the core problems that ail India’s elec-tricity sector that were discussed earlier in the article.

I must also add, however, that experiences such asthose of Enron and DPC have made Indian societyvigilant and proactive. In several cases, Indian societyhas utilized India’s democratic space to oppose and stallstate-led efforts at neoliberalizing space, especially whenlittle impact assessment was done before initiation ofsuch policies and projects. The Indian state and civil

society’s learning curve is particularly reflected in thefact that neoliberalization of India’s financial and insur-ance sector was debated inside and outside the IndianParliament, and slowed down, if not stalled. Althoughthe crisis of the global finance markets, accentuated bythe collapse of the housing market in the United States,and failure of several banking and insurance corpora-tions has hit the global economy hard, India’s economydisplays signs of resilience.22 India has been somewhat

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636 Ahmed

insulated from the financial crisis because India’s finan-cial institutions have not been fully exposed to the risksof the global financial market, particularly because of civil opposition. Thus, democratic norms, tensions, andpressures have the potential of ensuring that neoliberalspatial transformation proceeds, if at all, with caution.

Acknowledgments

I am grateful to Richard Peet (my doctoral advi-sor), Jody Emel, Nancy Ettlinger, and Ipsita Chatterjeefor going though my earlier drafts of the article andfor several stimulating discussions on the theme. I amalso grateful to Audrey Kobayashi and the anonymousreviewers for their suggestions. The usual disclaimersapply.

Notes

1. India’s economic crisis of 1990–1991 primarily refers tothe balance of payment crisis when India’s foreign ex-change reserves declined from US$3.11 billion at theend of August 1990 to US$896 million on 16 January1991. At this juncture, India was in serious danger of defaulting on its foreign debt payments. In addition, theeconomic crisis included spiraling inflation; increasedfiscal, primary, and revenue deficit; negative import andexport growth rates; decline in foreign investments; in-creasing international oil and gas prices; and devaluationof the Indian currency (Government of India 1992).

2. “At the initial stage of the private power program, someprojects which have progressed faster were identified asfast track projects. They were also amongst the first to becleared from foreign investment angle” (Government of India 1995).

3. Several of these economists are former or current em-ployees of global governance institutions like the IMFand the World Bank.

4. Here, quality implies its similarity or otherwise vis-a-vis U.S. economic policy. The more standardized (thestandard being the United States) the economic policiesare, the better.

5. India’s gross domestic product (GDP) between 1980 and1990 grew at an average of 5.8 percent per annum. Be-tween 1990 and 2005, GDP grew at 5.9 percent per

annum.6. According to the Preamble to the constitution of India,

“The Peopleof India, havingsolemnly resolved to consti-tute India into a Sovereign Socialist Secular DemocraticRepublic.”

7. The name of interviewee and the corporation are with-held on the interviewee’s request.

8. Cross-subsidy in electricity refers to provision of elec-tricity at low or subsidized tariff to farmers and poorersections of the population and making up for the deficitby keeping the industrial tariff high.

9. See the Government of India’s Electricity (Supply) Actof 1948; The Industrial Policy Resolution of 1956, andamendments in 1976.

10. Forty-seven subjects, including power, fall within theconcurrent list on which both Parliament and the statelegislature can make laws. In case of conflict between thelaw made by Parliament and thestate legislature, thelawmade by Parliament prevails.

11. Guarantees for government support in case minimumrevenue or consumption targets are not being reached.

12. The host government promises to assume liabilities incase a public-sector contractual party fails to meet itsfinancial obligation toward the project company.

13. Revenue entrenchment might involve direct govern-ment expenditure such as construction of complemen-tary and adjacent facilities or give investors the right todevelop ancillary facilities.

14. By extending the concession term to lengthen the in-vestment recovery period in case unforeseen events af-fect a project’s revenue stream.

15. Involves general guarantees by host government againstany changes in legislation, regulation, and administra-tive practices that might result in changes to the oper-ating environment.

16. Data obtained from various Government of India FiveYear Plans.

17. “At the initial stage of the private power program, someprojects which have progressed faster were identified asfast track projects. They were also amongst the first to becleared from foreign investment angle” (Government of India 1995).

18. For figures, see PoliticalMoneyLine (www.tray.com).19. Vivek Montario was one of the main leaders of the anti-

Enron movement in India and the Center of IndianTrade Union is among the biggest labor union groups inthe country.

20. This was reported by Dipankar Mukherjee, a former

member of the Indian Parliament and a member of theParliament’s standing committee on energy that inves-tigated and reported on the fast-track power projects, aswell as Vivek Montario.

21. Information about the arrears having been met was pro-vided by the Minister for Energy, Dilip Walse-Patil, inthe government of Maharashtra in a personal (recorded)interview.

22. On 16 November 2008, even in the face of a globaleconomic crisis, India’s Finance Minister assured thatthe Indian economy would continue to grow at 7percent per annum (even by conservative estimates).This prediction has been widely reported in the Indianpress.

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