Counter guarantees to Dabhol a mistake: Sengupta

Renowned economist and front-runner for the top slot at the Planning Commission, Arjun Sengupta on Thursday said it was a mistake to have extended counter guarantees to the controversial Dabhol power project.

Sengupta, who was member secretary of the Plan panel then, said at a round table conference in New Delhi, "It was a mistake to give counter guarantees because the numbers were wrong."

He said he had strongly favoured government assuming political risk associated with Dabhol, billed as the single largest foreign direct investment (FDI) project.

"Some of us maintained categorically that if a company said it was facing risks due to government policy then those risks must be shared," he said, adding the government must be willing to compensate for these risks.

Sengupta said the erstwhile promoters of the project had cited risks arising out of the inability to sell power directly to customers owing to legislative hurdles.

The $3-billion project initially promoted by the now bankrupt Enron group has been lying defunct since mid-2001, following financial difficulties with the Maharashtra State Electricity Board.

The 740-mw naphtha fired plant was 65 per cent owned by Enron, with the state electricity board and GE and Bechtel owning the rest. However, following a recent order by a US court, the other two foreign promoters have acquired Enron's 49 per cent stake and are in the process of acquiring the residual stake while domestic and foreign lenders continue to wrangle over sorting out the debt issues.

The Indian government has constituted a high-powered committee under former Cabinet Secretary Naresh Chandra to sort out the matter.