case 494521

Asia Sase Researah **ntre THI UI!IVTR$|TY CF }{ONG KONG HKU7O7 tsffiffiN Pst:n H*rY! l{ai Ss{l6s PAUL LEJOT FREDERIK PRETORIUS POLITICS. INSTITUTIONS AND PROJECT FINANCE: THE DABHOL POWER PROJECT ‘In l992,Indian authorities entered into an agfeement with Houston-based Enron Corporation to build a gas-fired p”*.. pi””i i,t lutt ot in”Maharashtra state, India’ This was intended to be the world,s largest independent power project and the largest single foreign investment in India. The plant was .o’n*,*”t”i under’pathbreaking tetms because of the liberalization of “f.”irl”i,V supply in India. But when the first stage of the new plant commenced production’ the price”of eli”t i.lty was perceived to be unaffordable for consumers’ Moreover, there were accusations of corruption in the state government’s association with the project, and the pr”:””, became a pawn in the volatile Iniian political environment. Completion of the project ‘*u* utro suspended for years, at great costs tt all, and the principal project promoter, Enron, collapsed in the interim.’could it f,ave been done differently? In all, the. Dabhol Power Project ofl-ers great insights into the negotiation of complex financial transactions with governments in unstable institutional environments’ lndia After gaining independence from the United Kingdom in 1947, India’s economy was managed with socialist-oriented