The plant was to be constructed in two phases. In March 1995, the ruling
Congress Party in
Maharashtra lost to a nationalist coalition (of Shiv Sena and Bharatiya Janata Party - BJP) that had campaigned on an anti-foreign investment platform. In May, hundreds of protesting villagers swarmed over the site to protest the displacement of people that would take place, and a riot broke out.
Human Rights Watch and
Amnesty International eventually charged the security forces guarding Dabhol for Enron with human-rights abuses; Human Rights Watch blamed
Enron for being
complicit. On August 3, the Maharashtra state government ordered the project to be halted because of "lack of transparency, alleged padded costs, and environmental hazards." Construction ground to a halt. By then, Enron had invested about $300 million into the project.
Phase One Phase one was set to burn
naphtha, a fuel similar to
kerosene and
gasoline. Phase one would produce 740 megawatts and help stabilize the local transmission grid. The power plant's phase one project was started in 1992 and finally completed two years behind schedule.
Phase Two Phase two would burn
liquefied natural gas (LNG). The LNG infrastructure associated with the LNG Terminal at Dabhol was going to cost around $1 billion. In 1996 when India's
Congress Party was no longer in power, the Indian government assessed the project as being excessively expensive and refused to pay for the plant and stopped construction. The
Maharashtra State Electricity Board (MSEB), the local state-run utility, was required by contract to continue to pay Enron plant maintenance charges, even if no power was purchased from the plant. The MSEB determined that it could not afford to purchase the power (at Rs. 8 per unit kWh) charged by Enron. From 1996 until Enron's bankruptcy in 2001 the company tried to revive the project and spark interest in India's need for the power plant without success. The project was widely criticized for excess costs and deemed a
white elephant. Socialist groups cited the project as an example of corporate profiteering over public good. Over the next year Enron reviewed its options. On February 23, 1996, the then government of Maharashtra and Enron announced a new agreement. Enron cut the price of the power by over 20 percent, cut total capital costs from $2.8 billion to $2.5 billion, and increased Dabhol's output from 2,015 megawatts to 2,184 megawatts. Both parties committed formally to develop the second phase. The first phase went online May 1999, almost two years behind schedule, and construction was started on phase two. Costs would now ultimately climb to $3 billion. Then everything came to halt. The MSEB refused to pay for all the power, and it became clear that getting the government to honor the guarantees would not be an easy task. Although Maharashtra still suffers from blackouts, it says it does not need and cannot afford Dabhol's power. India's energy sector still loses roughly $5 billion a year. This plant was taken over by Ratnagiri Gas and Power Private limited in July 2005. == Dabhol Today ==