The Cogentrix Power project if allowed to go through would place a Rs.40,000 crore extra burden on the people of the country. This huge sum of well over Rs.40,000 crores even in the land of scams and corruption, should be large enough to result in a national debate. It is a largesse that the poor people of the country can ill afford. The cabinet has a duty to have the exact figures worked out and then take a stand on the proposed counter guarantee, without which the project cannot go through. This is stated in a statement issued by Arun Agarwal, petitioner in the cognetrix case.

The following are the major loopholes, which will allow Cogentrix to make profits amounting to tens of thousands of crores as the cost of the poor consumer:

The latest Power Purchase Agreement(PPA) of November 1997 guarantees a profit of 28% of this, 16% is to be paid in US dollars. This 16% is guaranteed against the fluctuation of the value of the rupee against the value of the dollar. With the continuing depreciation in the value of the rupee against the US Dollar, the profit in rupee terms will be substantially higher than the 16% and will increase proportionately with the strengthening of the dollar. If the depreciation in the value of rupee from year 1981-82(Rs.11 to a dollar) to 1999 (Rs.43 to a dollar) is projected for the next thirty years (the period of the contract), then the loss on currency fluctuation alone to the consumer/tax payer/government is over Rs.15,000 crores.

Due to deliberate inflation in the cost capital equipment, fuel cost, fuel rate, interest charges, O&M charges etc the cost of power is very high. The fact that even now Cogentrix is saying that the cost of power is only Rs.2.40 only shows that it acknowledges no limits to the disinformation campaign that it is indulging in. The reality is that this cost has been calculated at a dollar rate of Rs.31.50 which makes the cost of power much over 7 cents per unit as against the 4 to 5 cents per unit as stated by the present Power Minister himself. Even if a conservative cost padding of 2 cents is presumed the annual excess annual payment will be in the region of Rs.600 crores and the total excess payment over the thirty year period of the contract is around Rs.18,000 crores. Cogentrix power is far more expensive than the Enron power. As is now known the reality of paying for Enron power is proving fatal for Maharastra.

The arbitrary doubling of the project from 250 MW to 500 MW each at Bangalore and Mangalore and thereafter shifting the entire 1000 MW project to Mangalore to suit the profiteering needs of Cogentrix will result in extra transmission cost and transmission and distribution losses of at least rupees three hundred crores per annum. The excess payment which will have to be borne by the consumers on this account over the thirty year period of the contract is at least nine thousand crores.

The power plant is a base load plant which means that the expensive power will have to be compulsorily purchased even at night time when there is slack demand and the less expensive power from other sources is available. The extra cost cannot be quantified out will certainly run into thousands of crores.

The selection of foreign company has been attempted to be justified on grounds of foreign exchange inflows. However the terms of the contract show that the total amount that the Cogentrix would bring in the country is only 75 million dollars, whereas the total foreign investment is around 700 million dollars. However the total out flow of foreign exchange on account of payment for the power over the thirty years is a mind boggling 18,000 million dollars.

There are various other largesse negotiated by the project developer like the doubling of the plant capacity, counter guarantee, non recourse project, purchase of foreign coal, right to trade in the project etc which will result in a profit of over 1500 crores etc. The balance sheet of Cogentrix shows development expenses of over Rs.175 crores in three years and Mr.Ron Sommers has admitted to spending Rs.110 crores. As regards this expenditure not a single brick so far has been laid, when not a single brick has been laid. Hence the legitimate question where has all the money gone?

It is because of these reasons a complaint with the U S Justice Department and the SEC authorities is being filed for investigation under the Foreign Corrupt Practices Act of the USA. The Indian experience has shown that in an era of liberalisation, the system is not responsive enough to the systematic loot to which the people are subjected. It may be recalled that it was the American lawyers who had rushed to India and wanted the Union Carbide to pay compensation to the victims of the Bhopal gas tragedy under the American law. Our system delivered little to the victims. It was the Swiss radio, which got the Bofors investigation going. It was the World Bank, which said that the Enron power project was economically unviable. The same World Bank institution withdrew from Cogentrix project. The lesson is clear in an era of economic liberalisation, justice too has to has to be globalised.