An agreement between the Maharashtra State Electricity Board (MSEB) and Enron Corp, a US-based multinational power company, to set up a 2,015 megawatt power plant in Dabhol in Ratnagiri district has come in for criticism. The plant is to be set up by General Electric and Bechtel Corp of the US. In the first phase of the project, which will be operational by 1997, 695 mw of power will be generated using imported diesel oil, and in the second phase, the plant will be converted to run on liquified natural gas.

The World Bank has refused to finance the Rs 9,050 crore project on the ground that the expected growth in demand for power does not justify the project. Kirit Parikh, director of the Indira Gandhi Institute of Development Research in Bombay, attacked the project, saying though it provided a guaranteed 16 per cent return on capital, the state did not have any control over the investment cost of the plant. He added that the cost of electricity from the plant would be high and that 90 per cent of the power demand in the state would have to be met from the plant. This could be done only at additional cost to MSEB, which would have to reduce supply from lower-cost plants during off-peak hours.

Other critics pointed out that though gas-based electricity should be 20 per cent cheaper than coal-based thermal power, Enron's capital cost works out to be four times higher -- Rs 45,000 per kw compared to less than Rs 10,000 per kw for coal-based BHEL projects.

Parikh points out that mounting criticism ensured that the terms and conditions of the agreement were considerably modified. MSEB now has the option to reject the second phase of the project.