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Power Game in India: Environmental

Clearance and the Enron Project
Sanjay Jos6 Mullick*
I. INTRODUCTION .................................
II. THE OPENING OF INDIA ...............................
257
260
A. Economic Liberalization .........................

B. Power Problem ...................................
1. State Electricity Boards .......................
2. New Power Policy ............................
III. ENTER ENRON ........................................
260
262
262
264
A. Project Profile ....................................
266
266
B. Environmental Concerns .........................
267
1. Fuel Type ....................................

2. Fuel Storage ..................................
3. General Ecosystem ...........................

4. Fisheries ......................................
5. Population Dislocation .......................
IV. INDIA'S ENVIRONmENTAL LAws ........................
V. Environmental Impact Assessment ...................
A. The Environmental Clearance Notification .......
B. The Enron Dilemma .............................
C.
Retroactive Review ...............................
D. Comparative Analysis .............................

1. The Application's Content ...................
2. Enron Example Demonstrates Importance of
Site Selection Criteria ........................
3. Objective Evaluation .........................
4. Defects in the IAA Evaluation of Enron ......
267
268
269
270
271
272
275
275
275
276
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279
279
280
* U.S. Department of Commerce, Office of the Chief Counsel for Import Administration. B.S.F.S., Georgetown University School of Foreign Service, 1991;J.D., Georgetown
-University Law Center, 1996. I would like to thank Professor Lisa Heinzerling for her
guidance and support. I would also like to thank Mr. Krishan Nehra, of the Library of
Congress; Mr. Debi Goenka, of SOCLEEN; Ms. Cathy Glenn, of Enron; and Mrs. Monisha
Mashruwala, my cousin, for their research assistance. I would like to dedicate this Article
to my mother and father, Drs. Florabel and Umesh Mullick, who have given me everything
in life.
1997]
POIAER GAME IN INDIA
5.
6.
VI.
Availability of Information ...................

Information Breakdown with Enron ..........
CONCLUSION ..........................................
No Conditional Clearance ........................

An Impossible Overlay ............................
But Still A Good First Step .......................
Other Considerations ............................
1. Swadeshi ......................................
2. Power as Paramount Priority .................
VII. LESSONS FOR THE FUTURE .............................
A. Enron was an Exception .........................
B. Recommendations ................................
1. Citizens Must Have Immediate Independent
Access to Courts ..............................
2. India Should Provide its Private Sector with
Economic Incentives for Pollution
Prevention ...................................
3. India Should Empower NGOs ................
C. A New Environmental Consciousness .............
A.
B.
C.
D.
I.
280
281
281
282
283
284
284
284
286
286
286
287
287
289
291
292
INTRODUCTION
In September 1994 the Bombay High Court in India heard a

writ petition filed by a local non-governmental organization, the
Society for Clean Environment (SOCLEEN).' SOCLEEN claimed
that important environmental effects of a $2.5 billion foreignowned power project-the Enron Project-had not been adequately addressed before the government approved it.2 The petition specifically charged that the Enron' power project at Dabhol
had not been examined under the new comprehensive environ1. SOCLEEN is self-described as a non-political, non-profit organization, having as its
members social workers, professionals and concerned citizens, who are working to protect
the environment and enhance the quality of life. See SOCLEEN Writ Petition No. 2921,
before The High Court of Judicature of Bombay, July, 1994, para. 1 [hereinafter
SOCLEEN].
2. SOCLEEN, supra note 1, Synopsis para. 3-13.

3. Enron Corp. describes itself as a global leader in natural gas electricity development. It believes this fuel to be optimal when balancing environment and development
concerns and currently has $19 billion worth of energy infrastructure projects at various
stages of development or bid around the world. Enron's vision includes being the
"[w]orld's leading energy company-creating energy solutions worldwide for a better environment." ENRON CORP., 1995 Annual Report to Shareholders and Customers 1-2, 27 (1995)
[hereinafter ENRON CORP.]; DABHOL POWER CoMPAN', DABHOL POWER PLArr: ENVIRONMENT-SENSrrnE DEVELOPMENT, at 2 (1996) [hereinafter DABHOL POWER CO.].
258
STANFORD ENVFRONMENTAL LAW JOURNAL
[Vol. 16:256
mental clearance criteria issued by the Ministry of Environment

and Forests earlier that year. 4 The Court, applying the new law for
the first time, ordered the Ministry of Environment and Forests to
conduct a rapid retroactive review of the Enron project under the
environmental clearance criteria-throwing the weight of court enforcement behind the new law and beginning the difficult process
of evaluating the profound potential effects of foreign investment
on the Indian environment.5
This article will critically examine India's procedures for environmental impact assessment using the Enron retroactive environmental clearance as an illustration. On January 27, 1994, the
Ministry of Environment and Forests issued a Notification requiring that all proposals for power projects first receive an Environmental Clearance. Since the approval process for the Enron
project was already well underway, its proposal for clearance had
been almost completely evaluated before the implementation of
these rules. The court's action on the SOCLEEN petition presents
an opportunity to review the new environmental clearance rules in
the context of one of India's largest and most important development projects. This article will evaluate whether the Ministry's review of Enron as ordered by the Bombay (Mumbai) 6 High Court
was adequate vis-4-vis the Environmental Clearance Notification,
conduct a critical analysis of the rules embodied in the Notification
itself, and make recommendations for improving the Clearance
process.
Protracted political battles have surrounded the power project
since Enron's initial proposal to the Maharashtra State government
in 1992. In a crowded news conference on January 8, 1996,
Maharashtra State Chief Minister Manohar Joshi announced that
4. The Notification reads in pertinent part:
[T]he Central Government hereby directs that on and from the date of publica-
tion of this notification in the Official Gazette.... any ... new project listed in
Schedule I of this notification shall not be undertaken in any part of India unless
it has been accorded environmental clearance by the Central Government in accordance with the procedure hereinafter specified in this notification.
MINISTRY OF ENVIRONMENT AND FORESTS NOTIFICATION, Jan. 27, 1994, The Gazette of India:
Extraordinary, Part II- 3(ii), at 5 [hereinafter NOTIFICATION]. The publication date of

January 27, 1994 makes the Notification law as of that date. Thermal power plants are
listed as item 19 on Schedule 1.
5. See Environment Ministry Asked to Review Okay for DabholProject,THE TIMES OF INDIA,
Oct. 4, 1994, at 3.
6. The Maharashtra state government has since returned Bombay to its pre-colonial
name: "Mumbai."
1997]
POTWER GAME IN INDIA
the government had approved the Enron power project at

Dabhol.7 The news came after a six-hour cabinet meeting' and finally put to an end five months of tension and uncertainty over the
project's ultimate fate. On August 3, 1995, MinisterJoshi had announced to the state legislature that his government was scrapping
the power project." Now, after months of renegotiation and on the
threshold of mutual legal action, the project was back on-line. 10
As of this writing, the Enron power project is not much more
than a deflated tarpaulin cover over an empty hole in the middle
of a barren construction site. But this empty hole is full of potential; and it has positive as well as negative ramifications for India.
Enron is the largest foreign investment in India and will be the
biggest private power plant in the world." For India watchers, it
represents the initial test case for whether the couniry's political
environment is stable enough for foreign investors to participate in
its economic liberalization. 2 For India itself, the power project
represents the first and most crucial step towards meeting the
country's future power demands.
After four years, the Enron power project is still barely under
construction due to the controversy that has surrounded it since its
inception." The project is a microcosm of the multitude of political, legal, economic and social struggles with which India grapples
as it moves towards the 21st century. Enron confirms the political
implications of the onset of foreign involvement in a country that
has fiercely prided itself on self sufficiency and a break from its
colonial past. The project measures whether India's legal mechanisms for environmental assessment, project approval, and dispute
7. See Enron Project Is Ok'd, INDIA ABROAD, Jan. 12, 1996, at 12.
8. See MaharashtraGovernment Clears EnronProjec EXPRESS INDIA, Jan. 12, 1996, at 1.
9. On August 7, the Maharashtra State Electricity Board issued a notice to Enron to
stop work at the site since Enron officials had continued to work even after the August 3
announcement. See India State Makes Formal OrderforDabholto Stop, PLATr's OILGRAM NEWs,
Aug. 9, 1996, at 4, available in LEXIS, Energy Library, PONEWS file.

10. Enron had initiated arbitration proceedings in London and the Maharashtra government had filed suit in the Bombay High Court challenging Enron's power purchase
agreement sighed with the State's previous government. See Shekhar Hattangadi, Way Is
Clearedfor EnronProject to Resume, INDIA ABROAD, Dec. 1, 1995, at 26.
11. See Dabhol"Suicidal First Step, ECON. & POL. WEEKLY, Jan. 1-8, 1994, at 23.
12. SeeJohn Bussey, Enron Sees Compromise On India Plant, WALL ST.J., Aug. 23, 1995,
at A8.
13. According to government officials opposed to the project, Enron began searching for a project site in June of 1992. It then signed a memorandum of understanding with
the Maharastra state government. R. Padmanabhan, Exit Enron, FRONTLINE, Aug. 25, 1995,
at 18.
260
STANFORD ENVIRONMENTAL LAW JOURNAL
[Vol. 16:256
resolution can protect the country's natural resources from being

overrun by industrial development. In addition, the project confirms that four-and-a-half years of economic reform have solidified
an open economic policy for India in the future. And within the
social context, the Enron power plant will stand as a monument to
the fact that India's historic agrarian heritage will now share space
with the new industrial culture that technology inevitably brings. 4
Part II of this article will discuss India's economic reforms, the
state of its energy supplies, and its domestic energy delivery system
to provide the background for understanding India's perceived
need to build foreign-owned power plants. Part III will describe
the Enron power plant specifically, and the substantive environmental issues which concern its critics. Part IV will give a primer
on India's environmental laws as the backdrop for the Environmental Clearance requirements discussed in detail in Part V. Part
V also provides a critical analysis of how the Enron project's improvised clearance process compares to that actually required by the
new law. Part VI will draw conclusions regarding India's environmental impact assessment process and will also highlight key political factors which contributed to criticisms of the Enron project.
Finally, Part VII will propose policy recommendations that India
can institute to better protect its environment as it ushers in a wave
of foreign development projects in the future.
II.
A.
THE OPENING OF INDIA
Economic Liberalization
Not long ago, India would have turned away a massive foreign
power project like Enron as unnecessary and unwanted. Historically, the nation pursued an autarkic closed economic policy with
high barriers to imports and foreign investment.' 5 However, the
severe economic crisis that faced India in the wake of Rajiv Gandhi's tragic death in 1991 awoke the country from its dynastic slum14. See Marcus W. Brauchli, A Gandhi Legacy: Clash Over Power Plant Reflects Fight in
India for Its Economic Sou, WALL ST. J., Apr. 27, 1995, at Al.
15. See GOVERNMENT OF INDIA PLANNING COMMISSION, EIGHTH FnE YEAR PLAN: 199297, 4.2.1, Policies on Trade, Technology and Capital Flows (1992) [hereinafter PLAN].
Before the reforms, all investment proposals required prior approval from the Government and India allowed foreign investment only if the foreign investor agreed to transfer
technology to the Indian company or if the foreign investor undertook a major export
commitment. NABHI KUMARJAIN, NABHI's MANUAL FOR FOREIGN COLLABORATION AND INVESTMENT IN INDIA 69 (5th ed. 1995).
1997]
POWIER GAME iN INDIA
16
ber and forced it to make drastic changes to its economic policy.
In July of 1991, the newly-elected government of Prime Minister
P.V. Narasimha Rao launched an economic revolution, announcing a rapid succession of sweeping reforms aimed at liberalizing
India's economy. 17 The Government devalued the rupee, reduced
taxes, and lifted import barriers.' 8 The Government's New Industrial Policy opened several economic sectors to both private and
foreign investment and sharply curtailed the regulatory approval
process.' 9 In addition, the Government virtually abolished industrial licenses.2" The new Foreign Investment Policy allowed approval for direct foreign investment up to 51% of foreign equity in
most industries and up to 100% in key industries requiring large
investments and advanced technology, including power.2 Additionally, India set up a Foreign Investment Promotion Board
with interested firms and expedite the negotia(FIPB) to negotiate
22
tion process.
India was now open for business, and the world community began to notice this new economic opportunity. In the year and a
half after the 1991 reforms, U.S. foreign investment in India exceeded the cumulative total of the previous forty-five years.2 3 Such
rapid industrialization was destined to place extra pressure on the
country's environmental resources and push India to implement a
16. See Hamish McDonald, Key to the Door, FAR E. ECON. REx., Aug. 8, 1991, at 49.
17. For example, in June, 1991, India's balance of payments situation had grown so
dire that its foreign exchange reserves could only cover two week of imports. See Singh's
New Song, ECONOMIST, Jul. 27, 1991, at 36; PLAN, supra note 15, 4.2.2, at 85. The chief
architect of India's economic reforms has been Finance Minister Manmohan Singh.
18. The Government reduced the maximum tariff rate from 300% in 1990-91 to 65%
in 1994-95. JMN, supra note 15, at 6.
19. In the Government's own words: "Government ha[s] decided to take a series of
measures to unshackle the Indian industrial economy from the cobwebs of unnecessary
bureaucratic control." Id. at 149 (quoting text of the New Industrial Policy).
20. Licensing requirements only remained for industries related to "security and strategic concerns, social reasons, hazardous chemicals and overriding environmental reasons,
and items of elitist consumption." New Industrial Policy Industrial Licensing Policy A(i),
in id. at 149 (quoting the New Industrial Policy Industrial Licensing Policy A(i)). Examples of the above industries are defense equipment, industrial explosives, electronic aerospace, coal, petroleum, alcohol, hazardous chemicals, pharmaceutical and drugs, and
certain consumer goods such as sugar, edible oils, refrigerators, motor cars and consumer
electronics. See PLAN, supra note 15, 4.3.2, at 87.
21. OFFICE OF ENERGY, ENVIRONMENT, AND TECHNOLOGY, U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT, INDIA: ELECTRIC POWER AND ENERGY OVERVIEW BRIEFING BOOK 29
(1994).
22. SeeJAIN, supra note 15, at 71-72.
23. See John Ward Anderson, The Lure of India's Big Market, WASH. PosT, Dec. 31,
1993, at Al.
262
[Vol. 16:256
regulatory system to protect its environment from the impending

onslaught of industrial development.
B.
PowerProblem
India's successful strides towards vigorous economic liberalization have only exacerbated the potential for a power crisis. In
1994, experts projected that India would be up to 30% short of its
power generation requirement by 1997, which could have a catastrophic effect on the momentum of economic reforms.24
Although per capita electricity consumption in India is among the
lowest in the world,25 its pace of economic growth will still increase
India's electricity demand rate by 9% per year. India's current
power capacity is 78,900 megawatts (MW) and one study forecasts
that even if it increases to 115,000 MW by 2007, it will still be
107,000 MW short of the total projected requirement of 222,000
26
MW.
1.
State electricity boards.
India's power system underproduces because of underutilization, not inadequacy, of power capacity. 27 Such factors as high
transmission and distribution losses, coal shortages, and machinery
breakdowns contribute to India's underutilization. However, the
dominant factor in India's power problem is the inefficient operation of India's State Electricity Boards (SEBs).28 In 1993, for example, India's more efficient Central Power Sector achieved a Plant
Load Factor (PLF) of 67.6% while the combined PLF of the State
Electricity Boards was only 54.1%. Since every one percent improvement in PLF makes available an additional 390 megawatts of
power, this SEB inefficiency results in a loss of over 5,000 MW per
SEB. If the SEBs' PLF was on par with that of the Central Sector,
29
India would have no power shortage.
at 16.24. See Ramesh Gune, Power CapacityRunning 30 % Short, INDIA ABROAD,JUly 15, 1994,
25. As of 1994, India's per capita electricity consumption was around 270 kilowatt
units; this is in comparison with Pakistan (358), China (546) and the United States
(12,170). I. Gopalakrishnan, PowerSector Opening Upheld; INDIA ABROAD, Feb. 11, 1994, at
28.
26. ECONOMIsr INTELLIGENCE UNIT, COuNTRY REPORT: INDIA 34 (3rd Qtr. 1995).
27. See Sunil Jain, A Long Winding Road, INDIA TODAY, Nov. 30, 1994, at 52-53.
28. See id,
29. MINISTRY OF FINANCE, GOVERNMENT OF INDIA, ECONOMIC SURV'EY 1993-94, at 133-34
(1994) [hereinafter ECONOMIC SuRvEY]. The PLF measures the difference between capacity and actual production, thus providing a powerful indicator of operational efficiency. Id.
POWER GAME IN INDIA
1997]
In the Indian federal system, the administration of electricity is

controlled largely by individual states. The SEBs, controlled at
the state level, generate capacity, distribute power, set tariffs, and
collect revenues. 31 In the Indian democratic system, state governments have been notorious for allegedly using the SEBs as a political tool, doling out electricity to cultivate constituencies and win
elections.3 2 In 1993, for example, over 77% of the subsidy arising
from inefficiently priced power arose from SEB sales to farmers.
This uncovered subsidy has more than doubled in the last few
years.
34
The Indian Government did not have the resources to rectify

the situation due to the magnitude of this energy shortfall.
Although the Eighth Five Year Plan allocated approximately $33.3
billion for power development, it was estimated at the time that
approximately $23.8 billion still would be needed, leaving India
unable to finance its necessary electricity expansion through
1997. 3 - Furthermore, all of India's financial institutions put together would only be able to support financing for one-fifth of the
annual projected power requirements. 3 6 India will ultimately
achieve its power goals only by undertaking a thorough overhaul of
the operation of the SEBs. But with the failure or inability to instigate such a complete reform, perhaps due to the highly political
nature of the SEBs, and with the general state of India's domestic
at 134. It must be noted that the Maharashtra SEB, which is the Board that will purchase
power from the Enron plant, is one of the more efficient SEB's.
30. This is the case although, technically, power is to be a shared responsibility between the states and the central government. The Constitution of India allocates central,
state, and central/state responsibilities on three Lists: the Union List, the State List, and
the Concurrent List. Power is assigned to the Concurrent List. WORLD BANK, ECONOMIC
DEVELOPMENTS IN INDIA 40, 81 (1995) [hereinafter ECONOMIC DEVELOPMENTS].
31. ECONOMIC SURVEY supra note 29, at 134.
32. For example, state governments seldom grant SEB requests to adjust tariffs because the governments prefer that the tariffs be maintained at a level well below the cost of
supply. WORLD BANK, INDIA: RECENT EcONOMic DEVELOPMENTS AND PROSPECrS 16 (1995)
[hereinafter ECONOMIC PROSPECrs].
33. SeeJain, supra note 27, at 53.

34. The subsidy increased from $915 million in 1991 to $2.1 billion in 1995 (there
are approximately Rs 35 to $1US). Uncovered subsidies are defined as the difference between the tariff rate that would enable the SEB to cover its variable costs and the actual
tariff rate charged. Sanjay Suri, PowerProjectsDominate Talks at IDF, INDIA ABROAD, July 21,
1995, at 24.
35. SeeVivian Fernandes, A Bridge Too Far,INDIA TODAY, Apr. 30, 1993, at 76. Revised
estimates place the shortfall at almost $225 billion through 2007. See Sunil Kataria, Indiato
Speed Up PrivateInvestment in Power,THE REuTER ASIA-PAC. Bus. REP., Aug. 20, 1996, available
in LEXIS, News Library, REVAPB file.
36. SeeJain, supra note 27, at 52.
264
[Vol. 16:256
electricity sector, India needed to take immediate alternative

action.
2.
New power policy.
The Government amended the Electricity Act of 1948 and instituted the New Power Policy inJuly, 1991, which relied on attracting
significant private and foreign investment to fill the remaining
power gap.3 7 The New Power Policy allowed foreign private inves-
tors to own up to 100% of the power projects they developed.35

The government granted investors a 25% reduction on the customs and excise duties on imported equipment, 9 allowed investors
to own captive coal mines, and granted them five years without
taxes on profits from any power generation projects they undertook in any part of India.' Finally, the State Electricity Boards
guaranteed payment to the investors at a 16% rate of return on
their investment, ensuring that investors would make a profit.4"
The key to the policy lay in the central government's agreement
to counter-guaranty the SEBs' rate of return payment to the investors. If both the SEBs and the states defaulted, the central government would be obligated to cover the payment to the investors.42
This element of the policy generated much national and international criticism as opponents accused the central government of
creating a power dependency, which exposed it to exploitation by
37. Private domestic and foreign investment had heretofore been constitutionally
prohibited. See ECONOMIC DEVELOPMENTS, supra note 30, at xxx. PLAN, supra note 15,
8.65.9, at 190.
38. JAIN, supra note 15, at 109.
39. Gune, supra note 24, at 16.
40. JAIN, supra note 15, at I10.
41. 1d. This rate was 5% above the Reserve Bank of India rate. The 16% rate of
return is calculated at a Plant Load Factor of 68.5%. Power producers will also earn an
additional 0.7% in the rate of return for every 1% increase in their PLF, an operational
efficiency incentive. Some expect that the foreign investors should be able to run their
plants at a PLF in the 80% range, which would produce a 24% rate of return (Enron has
guaranteed a 90% PLF to the Maharastra SEB). Enron Project Cancellation, Part II: In Search
of Solutions in India, EIU Bus. INDIA, Sept. 1, 1995, available in LEXIS, Market Library,
PROMPT file; S.N. Vasuki, Living on a Razor's Edge in Electricity Supply, Bus. TIMES, OCL 6,
1994, at 17, available in LEXIS, News Library, BUSDTL file; JAIN, supra note 15, at 111.
42. The central government did take some steps to protect itself. It required that an
SEB be no more than two months behind in receivables, that it be achieving at least a 3%
rate of return in order to qualify for the counter-guaranty, and that the amount of the
counter-guaranty (if invoked) be deducted from the central government's next budget
appropriation for the respective state. Bodhisatva Ganguli, Signed, Sealed and Guaranteed,
Bus. INDIA, Aug. 29-Sept. 11, 1994, at 119.
1997]
POWER GAME IN INDIA
foreigners.43 Although the government has since discontinued the

counter-guaranty for future power projects,' initially, it staunchly
defended the counter-guaranty as the only way to secure quickly
the requisite international commitments to the Indian power sector. The central government attributed the counter-guaranty requirement to foreign companies' insistence that they would not get
involved in an imbroglio with India's notorious SEBs.4 5
Against this backdrop, the Foreign Investment Promotion
Board used its authority46 to approve eight power projects under
43. The World Bank criticized the counter-guaranty as an open invitation for power
producers to inflate costs because they were assured a rate of return on their investment. I.
Gopalakrishnan, New Delhi Issues New PowerProject Guidelines,INDIA ABROAD, Nov. 25, 1994,
at 26.
44. ECONOMic DEVELOPMENTS, supranote 30, at xxx.
45. Power Minister N.K.P. Salve explained in Parliament that once foreign confidence had increased, and the function of state power utilities improved, the Indian power
sector would no longer need to provide counter-guarantees. I. Gopalakrishnan, Power
Counter-GuaranteesCome UnderFire,INDIA ABROAD, Sept. 2, 1994, at 24; Rahul Sharma, Guarantees For Power Projects, INDIA ABROAD, Jan. 14, 1994, at 22.
46. The enabling legislation of the New Industrial Policy creating the Foreign Investment Promotion Board reads in pertinent part:
Government have [sic] tabled on July 24, 1991, a Statement on Industrial Policy
in both Houses of Parliament. Para 39B(v) of the Statement provides for the
establishment of a Special Empowered Board to negotiate with large international firms and to approve foreign direct investment in selected areas. In pursuance of this provision, Government have [sic] decided to constitute a Foreign
Investment Promotion Board. The objective, functions, composition and procedure of the Board are detailed below:
I. Objective
... 2. The objective of this Board will be to invite and facilitate investment
in India by international companies in projects which are considered to be of
benefit to the Indian economy and do not fall within the parameters of the
existing policy for clearance of foreign investment proposals.
II. Functions
3. The functions of this Board shall comprise mainly of... (ii) Establishment of contact with and inviting selected international
companies to invest in India in appropriate ventures...
4. Initially, the Board will prepare a short list of international firms who have
already evinced interest in undertaking investments in this country. The
Board will pursue the preparation of detailed investment plans in respect of
these firms.
GOVERNMENT OF INDIA, MINISTRY OF INDUSTRY, DEPARTMENT OF INDUSTRIAL DEVELOPMENT,
FOREIGN INVESTMENT PROMOTION BOARD, in JAIN, supra note 15, at app. 3.XV (emphasis
added).
This essentially unilateral action of picking and choosing specific companies rather
than holding open competitive bidding was roundly criticized and aroused suspicion, in
some circles, of favoritism and corruption. The central government defended itself against
these charges by stating that the power shortage necessitated expeditious action to get the
initial phase of power projects underway. See Gopalakrishnan, supra note 45, at 24.
266
[Vol. 16:256
"fast-track" status. 47 Of the eight, none was larger, more significant, more celebrated, nor more controversial than the Enron
power project.
III. ENTER ENRON

A.
Project Profile
The $2.5 billion Enron power project is being developed by an

American consortium called the Dabhol Power Company."' The
Enron project will consist of a 2,450-megawatt plant at Dabhol, a
town in the Ratnagiri district of the western State of Maharashtra
located about 174 miles south of Bombay.4 9 The plant will be built
in two phases: during the first, indigenous naphtha will fuel the
plant, and during the second, Enron will use imported or domestic
liquefied natural gas. 50 The power plant will sell its electricity to
the local power authority, the Maharashtra SEB, and the SEB will
47. The eight fast-track projects include the Enron project at Dabhol; a $2.3 billion
1,000 MW coal-based thermal power station at Mangalore, by Cogentrix Inc. of Charlotte; a
$1.9 billion 1,000 MW coal-based joint venture project at Visakhapatnam between Ashok
Leyland of Madras and National Power Corp. of the U.K; a $664 million 420 MW project
at Ib Valley in Orissa, by A.E.S. Trans Power Corp.; a $275 million 235 MW project at
Jegrupadu in Andhra Pradesh, by C.M.S. Energy Corp.; a $250 million 208 MW project at
Kakinada in Andhra Pradesh, by Spectrum Technologies of Schenectady, New York; a $442
million 250 MW project at Neyveli Zero, by S.T. Power Systems; and a $745 million 500 MW
power project in West Bengal, by Rolls Royce. Suman Dubey, India To GuaranteeInvestors
Payments By Public Utilities,AsiAN WALL ST. J., Jan. 10, 1994, at 6; I. Gopalakrishnan, Iaried
Prospectsfor Seven Fast-TrackPower Projects, INDIA ABROAD, Aug. 25, 1995, at 22.
48. The Dabhol Power Company is a joint venture between three U.S. companies:
Enron Development Corporation, a subsidiary of Enron Corporation (80% ownership);
Bechtel Enterprises, Inc., San Francisco (10% ownership); and General Electric Capital
Corporation of Stamford, Connecticut (10% ownership). Enron's Dabhol will run the facility, Bechtel Power Company will construct the plant, and the General Electric affiliate
will supply the gas and steam turbines. Judy Schriener, IndiaInks New PowerDeal, ENGINEER.
ING NEws-RECORD, Mar. 13, 1995, at 17, availablein LEXIS, News Library, ENR file. Under
the revised agreement, the Maharashtra State Electricity Board will have a 30% stake in the
project. See Enron Project Is Ok'd, supranote 7, at 24.
49. Critics have sought to add justification to their stance against the project by pointing to the World Bank refusal to finance the Enron power project. The World Bank
thought the project, at 2045 MW, was "economically unviable." L'affaire Enron, FRONTLINE,
Aug. 25, 1995, at 16. But such criticism overlooks the World Bank's historic aversion to
loaning India money for any power project without a firm commitment from India to first
reform the vast irregularities in the operations of the domestic SEBs. The presence of
these irregularities and the absence of development assistance have created the dire financial situation in India's energy sector which has prompted India to have to call on foreign
power investors to help it meet its energy needs. ENRON CORP., supra note 3, at 26-27. See
Marcus W. Brauchli, Enron Deal in India Teeters on Politics,WALL ST. J., Jul. 3, 1995, at A14.
50. Hattangadi, supra note 10, at 26.
POWER GAME IN INDIA
19971
sell to consumers.5 '

Much of the controversy surrounding Enron lies in the criticism that no one outside the key negotiators of the deal knew how,
or why, Enron was selected, and no one knew the terms of the
agreement. Moreover, the government did not open competitive
bidding for the power project, and the Power Purchase Agreement
signed with Enron was not disclosed until several months after Enron's approval.5 2 Although the Enron project is also criticized on
technical and symbolic grounds, this article will focus on the environmental issues in dispute.
B.
Environmental Concerns
The Enron project has generated five substantive areas of environmental concern: fuel type, fuel storage, general ecosystem,
water and fisheries, and population dislocation. Of these, after the
court's order and the subsequent issuance of a final clearance to
Enron by the Ministry of Environment and Forests, the Ministry is
only requiring additional information on the issue of water and
fisheries.5 3
1. Fuel type.
The Enron plant is to be built in two stages: first, a 826 megawatt (MWA) plant will be built and second, a 1,624 MW plant will be
built.5 4 Upon completion, the bulk of the plant will be powered by
liquefied natural gas (LNG)," an "environmentally-friendly" fuel
and one in which Enron specializes.5 6 Experts project that when
51. Enron signed a Power Purchase Agreement (PPA) with the State of Maharashtra
on December 8, 1993. The exact rates at which the State will purchase power have been
renegotiated, but the PPA still governs the basic terms upon which power will be
purchased. See V. Sridhar, The Scandalous Enron Deak What the Secret Documents Reveal,
FRONTLINE, Apr. 7, 1995, at 24.
52. Id.
53. See infra text accompanying notes 147-148.

54.
ENRON
CORP., supra note 3, at 26.
55. Enron has signed a letter of intent to build a $4 billion plant in Qatar to produce
LNG. The plant should be completed in time for the second phase of the India project
and would produce about five million tons of LNG per year. Some have criticized this
arrangement, since it permits Enron to choose imported fuel over domestic fuel and, by
acting as its own customer, to profit twice. Cf Shekhar Hattangadi, Enron UnderHeavy Fire
On India W1or, PLATT'S OILGRANI NEws, May 31, 1995, at 1, available in LEXIS, Energy Library, PONEWS File (outlining criticisms of the Enron project).
56. Enron set up the largest LNG-powered project in the world, at Teesside, in the
U.K. Kalpana Sharma, Dabhol PowerPlant:Not Yet Out Of The Woods, in THE HINDU SURVEY
OF THE EN"T, 1995, at 177.
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STANFORD ENV[RONMENTAL LAW JOURNAL
[Vol. 16:256
the plant is operating at full capacity the LNG will emit no sulfur
dioxide (SO 2) and only 794 kg/hr nitrogen oxides (NOx). In con-
trast, distillate oil would emit 4169 kg/hr S02, and an Indian coalfired plant would emit 2565 kg/hr NOx. 5 7 Similarly, LNG does not
lead to disposal problems by generating by-products such as fly ash
and slurry.5" Enron claims that the levels of emissions at Dabhol
will be lower than the emissions that the residents of Bombay and
Delhi are exposed to every day.59
The fuel for the first stage, however, remains a source of controversy. Because the LNG supply will not be ready in time to fuel
the first phase of the plant, 60 Enron initially planned to use distillate oil as its power source. Distillate oil releases more S02 than
Indian coal, although Enron claims that its studies demonstrate
that the emissions of both SO 2 and NOx will remain well below the
Indian Government standard for both pollutants, which is 80 micrograms per cubic meter.6 However, the new Maharashtra state
government required Enron to switch the first phase fuel to indigenous naphtha, a less costly but more polluting fuel.62
2.
Fuel storage.
Fuel storage is probably the most contentious environmental

issue since Enron plans to store large amounts of fuel under high
pressure and controlled temperatures in tanks on site. 63 While critics concede that the plant needs to have a standing fuel supply,
they oppose the proximity of the tanks to population centers because of the danger of radiation burns in case of conflagration.64
In response, Enron plans to create a 750-meter safety exclusion
57. SOCLEEN, supra note 1, para. 14(ii).
58. Sharma, supra note 56.
59. DABHOL POWER CO., supra note 3, at 2.
60. See Sharma, suira note 56.
61. Sharma, supra note 56.
62. See Nirmal Mitra, PawarFearsDamage From Enron Pricing,INDIA ABROAD, Dec. 1,
1995, at 26 (statement by former Maharashtra Chief Minister Sharad Pawar).
63. The SOCLEEN writ petition describes the amounts as "colossal" and perhaps the
largest and most dangerous fuel storage facility in the world. See SOCLEEN, supranote 1,
para. 8(ii).
64. The SOCLEEN writ petition states that the storage tanks will hold approximately
15-25 days fuel supply, others have contended the plan calls for storage of as much as 30
days supply of LNG in the on-site tanks. One reason for this is because heavy rains during
the summer monsoon can make the waters so turbulent that ships cannot access the jetty
in order to make fuel deliveries. Id. para. 8. See Hattangadi, supra note 55. Rajita Bansal,
The Managing of Greenlaw, Bus. TODAY, Dec. 7-21, 1994, at 144.
1997]
POIRER GAME IN INDIA
zone around the storage facility. 5 A study by India's National Environmental Engineering Institute (NEERI), however, recommends
that Enron expand the zone to 887 meters.6 6 NEERI criticizes Enron's plan for considering only leakages and valve ruptures but not
other potential hazards such as fuel spills and sabotage of the
tanks.6 7 Enron counters that its studies show that the 750-meter
safety exclusion zone is more than double the international standard.6 8 Nevertheless, critics insist that under Maximum Credible
Accident Analysis (MCA), a blast from a storage facility fire would
affect communities as far as eighteen miles (approximately thirty
kilometers) from the site.69
3.
General ecosystem.
The Enron site is located on the Konkan coastal belt region of

the western Indian state of Maharashtra. It sits on a plateau near
the estuary where the Vashisti River empties into the Arabian Sea.7"
Dabhol, a small town with a population of about 7,000, is less than
two miles away.71 Although the actual parcel of land on which the
project will be constructed is located in a village (Katwaldi) whose
Marathi name translated into English means "infertile,"7 2 the surrounding Konkan area is known for its fishes, lobsters, prawns, cashews, coconuts, kokams, bananas, guavas and, especially, its
renowned Alphonso mangoes.73 Although Konkan was chosen by
Enron partially because of its remoteness, Konkan recently has begun to draw a buzz of industrial activity. The Lote-Parsuram area,
for example, was recently designated a chemical zone and has
since attracted 215 new chemical facilities." A contemporary news
reporter noted intense pollution in Lote-Parsuram, describing the
area as shrouded in haze with a burnt plastic smell adrift in the
65. Sharma, supra note 56, at 178.
66. See One Big Hurdle Left for Giant Dabhol LNG Scheme, POWER ASIA, THE FIN. TIMES,
Nov. 14, 1994, available in LEXIS, Energy News Library.
67. Id.
68. Enron hired Oklahoma-based Quest Consultants, Inc. to provide environmental
consultation. Quest concluded that the customary exclusion zone to ensure adequate
safety to surrounding residential areas is 300-325 meters. Id.
69. See SOCLEEN, supra note 1, para. 8(v).
70. Id. par. 4.
71. Id.
72. DABHOL POWER CO., supra note 3,at 2 (1996).
73. SOCLEEN, supra note 1, para. 4, 17. See also Milind Palnitkar, Environment Rift
Slows Down Industry, INDIA AiROAD, May 20, 1994, at 30 (noting environmental effects of
development in the region).
74. Id.
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[Vol. 16:256
air.75 Locals from surrounding villages have complained of reduced mango yields, while fishermen have reported substantially
reduced catches that they attribute to the effluents discharged by
these factories. 76 The Lote-Parsuram experience has magnified the
Konkan people's reservations about further industrial development in their region, including the building of Enron at Dabhol.
4. Fisheries.
Enron's need for large quantities of water for cooling purposes
raises concerns about the project's threat to the local water supply
and local fishing trade. In an effort to prevent further depletion of
the area's already scarce supply of fresh water, Enron will employ
measures to curtail the power plant's fresh water requirements.
The project will use a cooling tower to cool some of the plant
through evaporation, a process which will use substantially less
water than if the project were cooled exclusively by water via a direct cooling system.77 The fresh water that Enron uses to cool its
boilers will be sourced via pipeline from a dam approximately forty
miles away in order to avoid disturbing the supply and flow of fresh
water in the villages immediately proximate to the site.7 8
After cooling, the power plant will discharge heated water into
the adjacent sea. Warmer water temperatures increase the biological growth rate, reducing the available oxygen in the water. 79 The
Enron plant will discharge 92,000 cubic meters of water into the
sea per day, or about one cubic meter per second. At this rate,
Enron calculates that the temperature of the discharged water will
be less than three degrees Celsius above sea temperature at the
point of discharge and will return to normal sea temperature
within fifteen meters of the discharge point. The discharge outlet
will be equipped with pH and temperature controls in order to
prevent the release of overly acidic or overly hot water.8 According to Enron, there will be no negative impact on fisheries because
the relevant area of concern will be a circular zone thirty meters in
diameter, where there are no fishing grounds.8 '
75. Id.
76. Id.
77. Bansal, supra note 64, at 144.
78. Id.
80. Bansal, supranote 64, at 143.
81. DABHOL POWER Co., supra note 3, at 3 (1996).
1997]
5.
PO4ER GAME IN 1NDIA
Population dislocation.
The Enron power project occupies a 1,480-acre space at

Dabhol. 2 This land, although in a relatively remote area, was ac83
quired by the government from the local village populations.
The land acquisition process, which has taken up to three years for
other projects, was completed in just six months for Enron, significantly raising the rancor of local residents.8 4 To show opposition
to the accelerated nature of this land acquisition, some key population pockets have resisted relocation,85 and most have refused compensation. 6 Even more dramatically, in May of 1995, villagers and
activists stormed the project site, attacking workers and destroying
property and equipment.8 7
When completed, the power project will employ about 300
skilled workers, but Enron acknowledges that the local villagers are
unlikely to be qualified for the jobs.88 For 200 villagers, Enron has
promised to provide lifetime employment.8 9 Remaining villagers,
wrested from their subsistence-farming heritage and uprooted
from their native land, may have little choice but to drift into the
cities as migrants.
Aware of the profound impact this relocation will have on the
villagers and wary of the potential public relations problem of being perceived as callous industrialists, Enron began a comprehensive community revitalization program. Enron is currently
building a hospital and a workers' township 90 with schools. 91 En82. Narayan Madha-an, Tiny Indian Village Guns ForAmerican Power Giants, THE REUTER ASIA-PAc. Bus. REP., May 19, 1995, available in LEXIS, Energy News Library.
83. Most of the land is needed in order to provide the 750-meter safety exclusion
zone between the villages and the LNG storage tanks. Sandeep Unnithan, Villagers Refuse
Compensation From Enron, NEws INDIA-TIMEs, June 30, 1995, at 22.
84. The government acquired the land in July, 1994, transferred it to the government-run Maharashtra Industrial Development Corporation (MIDC) in September, and
transferred it to the Dabhol Power Company in November. Id.
86. MIDC administered the land transfer process. MIDC fixed compensation rates
according to its evaluation of the quality of the crop and land, ranging from 20,000-30,000
rupees per hectare. As of the end ofJune, 1995, only 20% of the affected population had
accepted the compensation paynents. Those who accepted reside in the adjoining villages, not in Dabhol specifically. Unnithan, supra note 83.
87. See Madhavan, supranote 82. Milind Palnitkar, Enron's Power Project Site Attacked,
INDIA ABROAD, May 26, 1995, at 24 (highlighting local groups' and political parties' violent
opposition to the Enron project).
88. Sharma, supranote 56, at 178.
89. Shekhar Hattangadi, PrivateIndia Work On Hold, ENGINEERING NEws-REcoRD, June
19, 1995, at 10.
90. A workers' township is similar to the physical set up of a military base. It provides
272
[Vol. 16:256
ron will also plant greenbelt 92 with over 100,000 trees and 150
hectares of mango, cashew and other plants on and around the
project site.93 The project will irrigate these orchards and fields
with some of the water discharged from the plant.9 4 Yet these efforts will still not entirely mitigate the profound and indelible
changes the Enron project is bringing to the region's population
and environment.
Aside from what Enron specifically volunteered or agreed to
do, the more important matter remains the ability of India's general framework to provide environmental protection when applied
to similar projects in the future.
IV.
INDIA'S ENVIRONMENTAL LAWS
India's formulation of environmental law as a distinct body of

law was born in the wake of the 1984 Bhopal gas leak disaster:'"
The devastation following the tragedy created a new sense of urgency to establish measures for sanction as well as prevention of
environmental harms. India's backlash against multinationals like
Union Carbide was so severe that the Supreme Court held that enterprises engaged in any hazardous or inherently dangerous activity would be held strictly and absolutely liable to compensate any
and
persons harmed, regardless of precautionary measures 9 taken
6
pay.
to
capacity
enterprise's
the
in direct proportion to
Before Bhopal, India had only specific air and water pollution
laws. In the aftermath of the tragedy, the government enacted the
comprehensive Environment Protection Act of 1986 (Environment
Act) .9 7 The Environment Act serves two main purposes: first, it
provides a framework within which economic development and environmental protection can be addressed simultaneously; and secservices and often includes, for example, a post office, grocery store, and schools. It is
designed to be a gathering place for workers.
91. Sharma, supra note 56, at 178. See also Palnitkar, supra note 87 (noting Enron's
investments in the community).
92. Bansal, supranote 64, at 143.
93. EMBASSY OF INDIA ECONOMIC WING, Dabhol Power Prject Press Note, Mar. 21, 1996,
VI, at 7 [hereinafter EMaASS].
94. Bansal, supra note 64, at 143.
95. JAIN, supra note 15, app. 3.XIV, at 224.
96. M.C. Mehta v. Union of India, A.I.R. 1987 S.C. 1086 inJAN, supra note 15, at 226.
This holding has since been "watered-down." See Charan Lal v. Union of India, A.I.R1 1990
S.C. 1480, in id.; see alsoUnion Carbide Corporation v. Union of India, A.I.R. 1992 S.C. 248,
in id.
97. BHARAT DESAI, ENVIRONMENTAL LAWS OF INDIA: BASIC DOCUMENTS 81 (1994).
POWER GAME IN INDIA
1997]
ond, it gives the Central Government a body of authority with

which to enact enforcement measures and coordinate State agencies. 98 Some aspects of the Environment Act are standard to most
national environmental laws: the Government is authorized to prescribe emissions standards, collect information, and restrict industrial location. But some of its other aspects are striking. For
example, the Government reserves for itself an apparently unrestrained right to inspect and seize property to enforce environmental procedures and standards when it believes a party has violated
the Environment Act. 99
The Central Government, through the Ministry of Environment
and Forests (Ministry), also has promulgated important rulings
since 1986, pursuant to the Environment Act.'0 0 One such ruling
provides for the Coastal Regulation Zone Notification of 1991
(CRZ). 1 As the name suggests, the CRZ empowers the Government to declare Coastal Regulation Zones in order to substantially
limit development in these areas.' 2 Another key ruling is the Envi98. SeeJAIN, supra note 15, app. 3.XIV, at 224.
99. The Environment Protection Act reads in pertinent part:
(1) .
. any person empowered by the Central Government in this behalf
shall have a right to enter, at all reasonable times with such assistance as he considers necessary, any place-(a) for the purpose of performing any of the functions of the Central Government entrusted to him; (b) for the purpose of
determining whether and if so in what manner, any such functions are to be
performed or whether any provisions of this Act or the rules made thereunder or
any notice, order; direction or authorisation served, made, given or granted
under this Act is being or has been complied with; (c) for the purpose of examining and testing any equipment, industrial plant, record, register, document or
any other material object or for conducting a search of any building in which he
has reason to believe that an offence under this Act or the rules made thereunder
has been or is being or is about to be committed and for seizing any such equipment, industrial plant, record, register, document or other material object if he
has reason to believe that it may furnish evidence of the commission of an offence
punishable under this Act or the rules made thereunder or that such seizure is
necessary or [sic] prevent or mitigate environmental pollution.
Environment Protection Act 1986, ch. III, 110 (1), in DFsm, supra note 97, at 87 [hereinafter Environment Act].
100. The Central Government often uses publication in the Gazette of India as the
means for officially informing the public of the issuance of new rules and for setting the
date upon which they become effective. See Environment Act, ch. IV, 1 25 (1); Environment Protection Rules 1986, in DEsAj, supra note 97, at 93, 95.
101. Coastal Regulation Zone Notification, 1991, in DESAxi, supra note 97, at 19-28.
102. The Coastal Regulation Zone is defined as "Coastal Stretches of seas, bays, estuaries, creeks, rivers and backwaters which are influenced by tidal action (in the landward
side) up to [sic] 500 meters from the High Tide Line (HTL) and the land between the
Low Tide Line (LTL) and the HTL .... ." Id. at 19-20. Thermal power plants fall under the
274
[Vol. 16:256
ronmental Audit Notification of 1992.13 This amendment to the

Environment Act requires certain industries which are subject to
regulation under the Water, Air or Hazardous Waste Acts to submit
an Environmental Audit Report (EAR). The EAR requires industrial companies to regularly report their water and raw material
consumption levels, as well as their hazardous waste and general
pollution emissions.1"4 The New Industrial Policy of 1991 reveals
India's growing paradoxical emphasis on the environment: while
the New Industrial Policy of 1991 abolished virtually all industrial
licensing, it actually bolstered environmental licensing
requirements. 105
Authorities soon realized, however, that in order to establish a
legal framework that would succeed in fostering an advanced environmental consciousness, India had to provide proactive legal
measures which would give rights to the public at large.10 6 The
lawmakers concluded that these goals would be achieved most effectively (and perhaps exclusively) by first studying the potential
impacts of development projects and by giving the public a right of
access to information.1" 7 India's procedures for environmental imcategory of activities that, although not prohibited, first require environmental clearance
from the Ministry of Environment and Forests. See id. 3 (iii) at 21-22.
103.
DEsm, supra note 97, at 15-17.
104. Id.
105. SeeJAIN, supra note 15, at 225. The New Industrial Policy requires, for example,
that in cities having a population of over one million people, industrial projects obtain
approval from the Central Government and that they be located 25 kilometers from cities'
peripheries or in designated industrial areas. Id.
106. In the summer of 1986, under the auspices of the Indian Law Institute, the Consumer Education and Research Center convened a "Meeting of Experts" to consider ways
in which the newly-issued Environment Protection Act could be most effectively implemented and to propose rules for its implementation. Social activists, environmental experts, the Chairperson and Member-Secretary of the Law Commission of India,
representatives of the consumer movement and industry, academicians, practicing lawyers,
social scientists and members of the media attended the meeting. The major theme that
emerged was that public participation and the right to information were central to the
Environment Protection Act's effective implementation. The work product of the meeting
calls for establishment of a National Environmental Protection Authority (NEPA) in order
to conduct environmental impact assessments. As sort of a quasi-legislative history, the
notes of this meeting offer a fascinating insight into the thought process of the leaders of
India's environmental movement. The meeting perhaps gave birth to the consciousness
which ultimately resulted in India's first rules for mandatory environmental impact assessment eight years later. See UPENDRA BAXi, ENVIRONMENT PRoTEcIoN Acr AN AGENDA FOR
IMPLEMENTATION (1987).
107. The Environmental Clearance Notification states its overriding goals to be protection of the environment and management of development projects within the capacity
of the ecosystem. And it declares that these goals "can be achieved only by careful assess-
POWER GAME IN INDIA
19971
pact assessment, examined in the following section, embody the

fruition of this thinking.
V.
A.
ENv
ONMENTAL IMPACT ASSESSMENT
The Environmental ClearanceNotification
India has provided measures for environmental impact assessment since the late 1970s, but it was only in 1994, after publication
of the Ministry's Environmental Clearance Notification, that the requirement of obtaining environmental clearance became
mandatory."' For the first time, developers would be required to
file an Environmental Impact Assessment Report, document the
potential environmental consequences of their proposed development projects, and provide for management plans in case of an
environmental catastrophe. 10 9 The Ministry would have the initial
right to block projects that failed this review, and the perpetual
right to revoke project permits if developers failed to continue
compliance."' Finally, the true watershed of the measure was giving the public access to this information and granting citizens the
right to a hearing, before development decisions were made
final.'
B.
The Enron Dilemma
What makes this major environmental development particularly

interesting is that the Enron power project itself was more advanced than the legal and environmental safeguards that India had
to regulate it. Enron had already undergone the majority of its
2
clearance process before the new clearance rules became law."
Nevertheless, given the magnitude of this project (both by itself
and as a symbol of India's future), it seemed nonsensical to avoid
applying the most comprehensive environmental protection measures available to the very situation which the Indian government
ment of a project proposed to be located in any area." See The Environmental Clearance
Notification, 1993 (Draft), in DESAI, supra note 97, at 2 (emphasis added).
108. The Environmental Clearance Notification was published on January 27, 1994,
in the Gazette of India:Extraordinary. NOTIFICATION, supra note 4, at 4.
109. Id. I(a) at 5.
110. Id.Vat4.
111. Id. III(c) at 5.
112. Enron had submitted a rapid EIA inJune, 1993 and received a clearance for the
power project in February, 1994 (just two weeks after the Environmental Clearance Notification was first officially published in final form). See Meena Menon, HC Order on Dabhol
Enthuses NGO's, THE TIMES OF INDIA, Oct. 7, 1994, at 5.
276
[Vol. 16:256
had decided presented the most serious environmental threat. At

the same time, it would have been unreasonable to blame Enron
for India's inadequate environmental procedures by revoking its
clearance and requiring it to start over again. This is precisely the
dilemma faced by the Bombay (Mumbai) High Court, the highest
court in Maharashtra, the state in which the project was to be built.
C.
Retroactive Review
In September, 1994, the Society for Clean Environment

(SOCLEEN) filed a writ petition in the Bombay High Court.' 3 It
challenged the Ministry's clearance to Enron, arguing officials
granted clearance without evaluating the project under the scope
of review required by the 1994 Environmental Clearance Notification." 4' In particular, SOCLEEN alleged that the risk analysis and
disaster management plan were inadequate." 5 SOCLEEN also
contended that by assessing each part of the project independently
("piece-mealing") and neglecting to consider other industrialization in the area, the Ministry failed to calculate Enron's actual cumulative environmental impacts."' Finally, SOCLEEN charged
that the Ministry issued the clearance without holding a public
hearing, as required by the new law. 1" 7 SOCLEEN asked the Court
to withdraw the current clearance and to order Enron to submit a
new Environmental Impact Assessment Report, which would be reviewed under the new Notification rules for environmental
clearance.
Although the suit may have seemed procedurally moot on its
face because of the timing issues explained above, the substance of
the claims captured the Court's attention. In particular, the Court
took special notice when it learned that the National Environmental Engineering Institute (NEERI) had concluded that Enron's
750-meter exclusion zone was insufficient. The NEERI report predicted that unless the zone was expanded to 887 meters, an explosion of the LNG storage tanks would result in 100% fatalities.""
Aware of its power as the state's highest court and concerned
113. See SOCLEEN, supra note 1.
114. Id. at Synopsis para. 2.
115. See id. at Synopsis para. 1-18.
116. See id. at Synopsis para. 22 (arguing that land acquisition and projects themselves affect the "livelihood and freedom" of occupation and business and that Enron has
not been required to account for the effects and consequential damages.)
117. See id. at Synopsis para. 3.
118. Although the exclusion zone Enron provided for was in excess of international
1997]
POW11ER GAME iN INDIA
that it might appear to have signed off on a future environmental

catastrophe, the Court took unprecedented action." 9 In a ruling
issued on Saturday, October 1, the Bombay High Court applied the
new environmental rules retroactively and ordered the Ministry to
re-evaluate the Enron clearance under the new standards. 120 The
Court set up a "fast-track" version of the environmental impact assessment process. It appointed a twenty-three-member expert committee to review all of Enron's and the Ministry's documents on the
power plant and gave the Ministry two weeks to issue a report with
its findings and recommendations. 2 ' These documents would
then be open to public inspection, after which a public hearing
would be held. 2 ' The process would conclude with the Ministry
23
issuing its final determination.1
D.
Comparative Analysis
This action by the Court presents India's first foray into the implementation of the Environmental Clearance Notification. It also
represents a test of the rules' viability as a framework for comprehensive environmental impact assessment. What follows is a breakdown of the principal elements of the Environmental Clearance
Notification reviewed together with their application to the Enron
project. This analysis shows that the scope and substance of India's
environmental impact assessment procedures and their application
to the Enron project both fall short in many areas. Nevertheless,
applying this evaluation to a development project is a great leap
forward for India.
1.
The application'scontent.
The Notification requires that project developers submit an apstandards, NEERI contended that it was still insufficient under Maximum Credible Accident Analysis (MCA). See Menon, supranote 112.
119. Although Articles 226 and 227 of the Constitution of India grant High Courts
the authority to issue orders and directives against the State in the form of writs, the
Court's action here was still considered to be beyond the norm and justified only because
of the urgency of the situation. SeeJmN, supranote 15, at 741-42; see also EnvironmentMinistry Asked to Review Okay for DabholProject, supranote 5.
120. The Court issued a consent order on October 1, 1994 regarding SOCLEEN's
Writ Petition No. 2921. See GOVERNMENT OF INDIA MINISTRY OF ENVIRONMENT & FORESTS
(MOEF) NOTICE OF PUBLIC HEARING DABHOL POWER PROJECt, in THE TINEs OF INDIA, Oct.
17, 1994, at 22.
121. Environment Ministry Asked to Review Okay for Dabhol Project, supra note 5.
122. Id.
123. Id.
278
[Vol. 16:256
plication to the Ministry of Environment and Forests in the form of

a project feasibility report. The report must contain an Environmental Impact Assessment Report and an Environmental Management Plan. The guidelines currently focus on climate and other
environmental conditions of the proposed site rather than the
characteristics of the project.1 2 4 Although supporters of this system
may argue that this tests the diligence of the project proponents
regarding matters that the Ministry can verify, critics contend that
the Ministry delegates work that the Ministry should do itself to
revise and issue the requireproject developers. The Ministry may
125
periodically.
ments of these reports
The Notification does not sufficiently specify the environmental
standards that qualify a site for development. The only hint at site
selection criteria is a provision stating that the Ministry will decide
on the site's "suitability"126 and that the developer will answer
to
whether usage of the site for the proposed purpose conforms
27
the "stipulated land use as per [the] local land use plan."
Although the Notification is the authoritative rule for the environmental impact assessment of a major development project, it
does not set clear parameters for site selection. Such parameters
are the "teeth" of environmental impact assessments. For example,
the Notification would be more effective if it stated guidelines such
as: "forest or prime agricultural land must not be converted in the
development of a proposed site." Similarly, it would be helpful to
state that "the site128must have appropriate space for on-site wastewater treatment."
Clear criteria in the Notification can eliminate the risk or perception that a selection is made in a "secret backroom deal." When
projects begin several years after sites are chosen, a transparent selection process provides an important reliance interest. When the
record shows compliance with specific written standards, a developer has a cause of action if the populace's receptivity to a project
at groundbreaking is different than when the contracts were initially signed.
124. For example, the application asks for information on matters such as the general air quality and the availability of water in the area. See id., Schedule 11, at 6.
125. See NoTICAION, supra note 4, at 5.
126. RL, II at 5.
127. Id., Schedule-I Application Form, 1(d).
128. For a comprehensive list of proposed site selection criteria, seeJAlN, supra note
15, at 116.
1997]
2.
POWER GAME 1N INDIA
Enron example demonstrates importance of site selection criteria.
With respect to Enron, the site selection issue is difficult to assess. Although it appears that site selection occurred some time in
1992,129 the date and criteria used to make the selection remain
unknown.' SOCLEEN has challenged the validity of the Enron
project approval based on the lack of an open selection process.
SOCLEEN charged the Government with suppressing information
about the land acquisition, and called the process "a violation of
' 31
... the principles of natural justice."'
3.
Objective evaluation.
After an application is submitted to the Ministry, it is evaluated

by the Impact Assessment Agency (IAA), a committee of experts
within the Ministry. The IAA makes its determination based on a
technical assessment of data submitted by the project proponents, 132 supplemented by the IAA's own findings. The IAA can
visit sites or factories and interact with affected populations and
environmental groups.'
The IAA can also fully inspect the project site any time before, during, or after commencement of the
project.' 3 4 After evaluation, the IAA can either reject an application, require resubmission with more information, or approve with
35
conditions.
The IAA committee consists of environmental, ecological, and
development experts from various disciplines.1 3 6 However, the No129. The Maharashtra state government reported that on June 10, 1992 the Union
Energy Secretary informed the Maharashtra (SEB) that an Enron delegation would be
visiting India. Then, the Secretary asked the Maharashtra SEB to show the delegation possible coastal sites for a power prject. The delegation arrived and signed a memorandum
of understanding (MOU) June 20. See Padmanabhan, supranote 13, at 18.
130. The notion that the selection was made according to any formal process is possibly undermined by a comment about Enron Development Corporation CEO Rebecca
Mark which suggests that perhaps she picked the site. The statement reads: "she [Ms.
Mark] journeyed six hours by car along India's rugged coastline to pick the site.". See
Brauchli, supra note 14, at Al (emphasis added).
131. SOCLEEN, supra note 1, at Synopsis para. 18.
132. NOTIFICATION, supra note 4, 1I (a) & (b), at 5.
133. Id. III (c) at 5.
134. Id. III (b) at 5.
135. Examples of the sorts of measures the MOEF has required a project proponent
to undertake before gaining clearance are the installation of air quality monitoring systems, the use of dust separation and control equipment and the constructive utilization of
fly-ash (such as in building materials). MINISTRY OF ENVIRONMENT AND FoRzs-rs, GOVER.NMENT OF INDIA, 1991-92 ANNUAL REPORT 43 (1992).
136. The disciplines are listed as follows:
(i) Eco-Systems Management
280
[Vol. 16:256
tification guidelines are vague about important issues of committee

formation, such as member selection procedures, and diversity requirements to keep any particular vested interest from controlling
the selection process.
4.
Defects in the IAA evaluation of Enron.
The data supplementation process in Enron's case could suggest impropriety by the authorities in the clearance process. For
example, the IAA committee was required to interact with local villagers and NGOs in conducting its investigation. 37 Reportedly,
however, when the IAA expert committee visited the Enron power
project site, it met with the company's representatives, but refused
to meet with local villagers and the involved NGOs. To help prevent such impropriety, or even the appearance of it, the Government needs to codify the standards for membership on the expert
committee.
5.
Availability of information.
The Notification guidelines establish that parties can request

summaries of all the above information submitted by the project
developers and generated by the Ministry's IAA.'8 In addition, the
Notification requires newspaper notices one month before public
hearings at which any member of the public can make comments
for the record.' 3 9 The public also has a right to examine140summaries of the project information at the IAA headquarters.
The Notification refers separately to "concerned parties" and
the "public," intimating that there is some distinction between the
(ii)
(iii)
(iv)
(v)
(vi)
Air/Water Pollution control

Water Resource Management
Flora/fauna conservation and management
Land Use Planning
Social Sciences/Rehabilitation
(vii) Project Appraisal

(viii) Ecology
(ix) Environmental Health
(x) Subject Area Specialists
(xi) Representatives of NGOs/persons concerned with environmental issues.
NOTIICATxION, supra note 4, Schedule III at 7.
137. SOCLEEN Protests Against Dabhol Appraisal Pane THE TIMES OF INDIA, Nov. 4,
1994, at 3.
138. NoTmNICTON, supra note 4, III(c) at 5.
139. Id.
140. See id.
POWER GAME 1N 1NDIA
19971
two; however, it defines neither.14 ' Any distinction would appear

to be immaterial because although "concerned parties" could refer
to petitioners who may have actually filed suit against the government and/or a project developer, this clearance process does not
require such triggering action as it is automatically initiated when42
ever a project qualifies under Schedule I of the Notification.'
6.
Information breakdown with Enron.
In the Enron case, any purported privilege as a petitioner

proved meaningless as both SOCLEEN, as well as the general public, were ill-served by the information process. At the public inspection, there were insufficient copies of documents, documents were
not translated into Marathi, and written materials opposing the
project were provided late or not at all. 14 3 Also, the public had
difficulty participating because the inspection was held in an office
too small to accommodate all attendees.'4
The hearings process also had its share of snags. To begin with,
the public was not given sufficient notice. The hearings were
scheduled for two consecutive days within one week of the first
public access to the information. 45 Furthermore, SOCLEEN requested a hearing before the Ministry. It was granted, but the notice did not arrive at SOCLEEN's offices until the very day that
SOCLEEN was scheduled to present its case.' 46 The Ministry Notification does not provide definite time periods between stages ,of
its proceedings, thus making hearings susceptible to hurriedly degenerating as they did here.
VI.
CONCLUSION
In November, the Ministry of Environment and Forests announced that it would stand by all previous clearances and issued a
final clearance to Enron for the power project at Dabhol.147 Along
with a request for a specific disaster management plan, this approval came with the condition that Enron "submit additional in141. Id.
142. Id
143. Marathi is the native language of Dabhol. Dabhol Plant's OriginalProject Report
Missing THE Tmis OF INDIA, Nov. 2, 1994, at 3; Guhagar's Villagers for Dabhol Plan THE
TIMES OF INDIA, Nov. 9, 1994, at 3.
144. Guhagar's Villagersfor DabholPlant, supra note 143.
145. DabholPlant's OriginalProject Report Missing, supra note 143.
146. SOCLEEN Protests Against Dabhol Appraisal Panel,supra note 137.
147. Enron Project Receives High Court Clearance, INDA ABROAD, Dec. 2, 1994, at 24.
282
[Vol. 16:256
formation within six months on the possible impact of the power

project on fisheries, marine livelihood of fishermen and the effect
of dredging necessitated by the construction of the project's
jetty."148 Although the project had been approved, the assessment
process was really not complete. More information is needed for a
full assessment of the Enron project.
A.
No Conditional Clearance
The very act of granting a clearance before complete analysis of

all the required information indicts this process as an inadequate
environmental impact assessment. Regardless of the substantive
merits of a proposed project, the clearance process loses its leverage when it grants approval before'a project developer has met all
of the clearance criteria. Conditional clearance removes any sense
of urgency for a developer who neglects his responsibility to submit
further information and is not penalized. Meanwhile, the project
itself continues to move forward, inching closer and closer to being
an irreversible reality.
This reasoning is not just abstract logic. This unfortunate situation has already presented itself in other environmental impact assessment situations in India. In 1995, scientists from six regional
offices of the Ministry of Environment and Forests testified before
the Ministry Environmental Appraisal Committee that, to date,
90% of dams and other river valley and hydro-electric projects had
not fulfilled the conditions of their environmental clearance. 149
Typically, clearances were issued "pari passu;" 150 but project developers continued construction without submitting the remaining information, disregarding the measures requested by the Ministry.
This custom renders India's environmental clearance procedure
little more than a paper tiger. Although the sheer celebrity status
of a project like Enron may be enough to keep attention focused
on its compliance with clearance requirements, India's past failures
148.
149.
Aug. 11,
150.
1d
See Ashish Kothari, Project Shocks: The Environmental Clearance Farce, FRONTLINE,
1995, at 77-78.
"Pari passu" relates to carrying out the environmental impact assessment in tan-
dem with developing a project, rather than before the major development decision is undertaken. One example is the controversial Sardar Sarovar project, which the Ministry
allowed to proceed before its assessment was completed. The Ministry required various
environmental impact assessment documents be submitted by 1988 in its 1987 clearance

letter. The documents were not submitted by 1988 and some are still missing. Id. at 79.
1997]
POWER GAME IN INDIA
with conditional clearance prove that an environmental impact assessment process that is not absolutely strict is not likely to succeed.
B.
An Impossible Overlay
The problem with the Bombay High Court's quasi environmental clearance of Enron was all in the timing. There was simply no
way to conduct a thorough proceeding on such an accelerated
schedule. The Notification calls for a three-month process, with
the final Ministry ruling to come after an additional thirty days. 5
Here, the Court issued its ruling on October 1, requiring the committee to convene, collect and review the documents, and issue recommendations, all within one month. After that, the public and
interested groups had just one week to examine the documents in
preparation for hearings on November 8 and 9.152 With such little
room for error, it was almost inevitable that administrative delays
3
15
would besiege the whole process.
Further, an effort to try to superimpose new clearance criteria

on a project already undergoing its evaluation process was bound
to create serious discrepancies. For example, environmental
groups contended that because the expert committee report disclosed that Enron had, in fact, not submitted a final disaster management plan for its new fuel jetty location, its clearance should be
voided under the Notification's provisions of clearance revocation
upon the Ministry's finding "false information."' 54 The Ministry responded, however, that the full Notification guidelines could not
apply to Enron since the project's original clearance process was
almost completed before the new 1994 rules took effect. In usurping the original clearance process and trying to retroactively impose the stringent new guidelines for environmental impact
assessment, the Court risked that inevitable process gaps due to
minor technicalities would be perceived as a signal that the Ministry was executing a formality of an assessment, substantially stacked
151. NOTIFICATION, supra note 4, III (c) at 5.
152. The Ministry confirmed this timetable in its announcement of the Notice of
Public Hearing.
See GO\ERNENT OF INDIA MINISTRY OF ENVIRONMENT AND FORESTS
(MOEF) NOTICE OF PUBLIC HEARING DABHOL POWER PROJECT, supra note 120.
153. The process fell prey to almost comical foul-ups. For example, because the Ministry would not allow the public to make copies of the documents, villagers stole some of
the originals outright, taking them from the office of the Deputy Director of Ministry. See
Dabhol Plant's OriginalPrject Report Missing supra note 143.
154. See NGOs Doubt Enron's Ability, THE TMES OF INDIA, Nov. 10, 1994, at 5; Meena
Menon, Enron Eco-ClearancesRedoubtable, THE TIMES OF INDIA, Nov. 11, 1994, at 17; NOTIFICATION, supranote 4, V(4) at 5.
284
[Vol. 16:256
in Enron's favor. 155

C.
But Still A Good First Step
That being said, this process was still, in principle, a major step
forward for environmental law in India. Despite flaws in the details, the requirements of project assessments and public hearings
constitute a watershed for Indian democracy. As India opens itself
for the first time to a torrent of foreign investment and sophisticated multinational corporations, its citizens at least will know that
they are now equipped with the proper legal tools. Managed correctly, this new environmental clearance process will be the necessary safeguard to ensure that industrial development undertaken
on India's soil will first honor a commitment to India's
environment.
D.
Other Considerations
This article has sought to focus primarily on the merits of the

substantive and procedural issues involved with the Enron power
project at Dabhol. But even an objective evaluation of the merits
of the Enron project cannot overlook the political interests of Enron's opponents. Although the environmental and legal aspects of
Enron can be analyzed without getting sidetracked, the element of
56
politics must inevitably be considered.
1.
Swadeshi
The Enron deal was originally negotiated at a time when both

the Central Government and the Maharashtra state government
were controlled by the Congress (I) Party. After the elections of
March 1995, however, a coalition government formed by the Shiv
Sena and Bharatiya Janata Party (BJP) took control of the
Maharashtra government. 15 7 In opposition to the Congress Party's
155. See Menon, supra note 154, at 17.
156. Since politics was a key motivating factor behind the breakdown of the Enron
agreement as state administrations changed, this paper refrains from exploring whether
the Indian federal structure is fundamentally flawed in the way it allocates responsibilities
for power so as to make contracts generally susceptible to abrogation after the fact. In this
case, the central government seemed to exercise sufficient stabilizing control over the
states by formulating the ingenious condition that, should the counter-guarantee be invoked, the amount the central government had to pay would be deducted from that state's
appropriation the following year. See Shekhar Hattangadi, State Willing to Renegotiate with
Enron, PLAr's OI.RAM NEWS, Aug. 24, 1995, at 2, available in LEXIS, Energy Library,
PONEWS File.
157. See Padmanabhan, supra note 13, at 18.
19971
POWER GAME IN INDIA
policies which had fostered all-time high levels of foreign investment, the Shiv Sena-BJP coalition ran a nationalistic campaign.
Specifically, the coalition embraced Mahatma Gandhi's historic
movement of swadeshi and reinvigorated the theme (though not
necessarily as Gandhi had envisioned it) to capture the hearts and
minds of many Indians. The nationalists transformed many people's general anxiety into aversion or even hatred towards outsiders. 5 1 Since the Enron project represented the prevailing symbol
of foreign intervention in India, it became the target of this movement, which the Shiv Sena-BJP coalition rode all the way into
office.
Having all but promised to scrap the Enron project, the
Maharashtra state coalition government moved forward after the
election at least to appear to deliver on its campaign plank.1 5 9 At
the same time, however, it could not thwart Enron outright in a
blatant exercise of raw power, so it couched its attack in the guise
of a "review" of the project.1 60 The state government convened a
committee to scrutinize the deal and to issue a report which could
justify the government's decision on the project's fate. 6 1 On July
18, 1995, the committee submitted its report to Chief Minister Manohar Joshi. The submission led to the public announcement
about terminating the project on August 3, 1995.162
Five months later, however, the Enron project was renegotiated
158. Gandhi's swadeshiwas an "exhortation to the people" of India to prefer domestic
goods over imported ones when adequate domestic substitutes were available; it was symbolized by his wearing of homespun loincloth as a rejection of imported British textiles.
Today's swadeshi, however, is manifested in xenophobia against multinationals premised
on the fear that liberalization policies will lead to a surrender of India's sovereignty. BJP
leader Murli ManoharJoshi demonstrated the new swadeshi in the summer of 1995 when
he set fire to a cardboard cutout of a Pepsi bottle donned with an Uncle Sam hat. In
Gandhi's days, the policy served to promote self-sufficiency; today, however, the founding
premise giving rise to the Enron project is that India is at this time not self-sufficient in
power. See C.T. Kurien, Swadeshi, Again?. FRONTUNE, Jul. 29, 1995, at 88-89; KS. Nayar,
Nationalists Rouse Rage Against Multinationals,INDIA ABROAD, Aug. 25, 1995, at 22.
159. SeeHardev S. Sanotra & SunilJain, The PowerFaUout, INDIA TODAY, Aug. 31, 1995,
at 40.
160. See Smruti Koppikar, Turning on the Heat; INDIA TODAY, May 15, 1995, at 84.
161. Id. The four-person committee was chaired by Deputy Chief Minister Gopinath
Munde. Minister Munde had made an election speech earlier in the year in which he
promised to "throw Enron into the Arabian Sea." Hattangadi, supra note 10; see also Koppikar, supra note 160, at 84 (treating the committee's critical perspective on the Enron
deal).
162. The report criticized the agreement in five ways: "absence of competitive bidding, unnecessary secrecy and lack of transparency, insensitivity to environmental concerns, acceptance of unrealistic capital expenditure on the project, and an escalating
tariff." Padmanabhan, supra note 13, at 18.
286
[Vol. 16:256
and back on line. Although the coalition government had persistently attacked the Enron project as an environmental hazard, the
points of renegotiation consisted mainly of adjustments in the project's cost, not its environmental character.1 63 Interestingly, the renegotiation was finalized just days before arbitration proceedings
were set to begin regarding Enron's $300 million suit against the
State of Maharashtra. 64 Thus, even after much political machination, the Enron project was back and posed essentially the same
environmental concerns as before.
2.
Power as paramount priority.
But ultimately, no amount of political posturing or environmental criticism detracts from India's desperate need for power,
perhaps at any cost. India's economic future depends on the continued success of its economic reforms. These reforms, however,
will come to a halt if India cannot supply the requisite "electricity.
India's State Electricity Boards may be partly to blame for the
power shortage; and India's nascent environmental safeguards may
not be as effective in environmental protection as scholars and theorists might hope. But in the end, urgent and unprecedented action must be taken to avert a power crisis. Former Maharashtra
State Minister Sharad Pawar summed up the bottom line: "Not a
single foreign company showed any interest in setting up a power
project in India except Enron." 165
VII.
A.
LESSONS FOR THE FUTURE
Enron Was An Exception
To some degree, the lessons one can draw from the saga of the
Enron power project have only limited application. Enron was an
exception. Although Enron is considered the trailblazer in an expected rush of foreign investor-led industrial development projects
in India, no one expects India to want or need to offer such generous terms in the future now that interest in its market has caught
163. One reported environmental measure that Enron agreed to undertake was to
set up pollution monitoring stations at the site. See Hattangadi, supra note 156.
164. The suit was for breach of contract and for compensation for work already completed on the project. It was believed that Enron's chances of winning the arbitration were
quite good considering that all 14 cases brought against Enron had been decided in its
favor. See id.
165. Sharad Pawar was Chief Minister of Maharashtra at the time the agreement was
first approved. Milind Palnitkar & K.S. Nayar, MaharashtraScraps Enron PowerProject,INDIA
ABROAD, Aug. 11, 1995, at 24.
POWER GAME IN INDIA
1997]
on. Additionally, the Enron project, as a pioneer, was likely to be

besieged with criticism regardless of the way it was conducted, simply due to anxieties associated with ushering in unprecedented foreign investment on such a massive scale. Ironically, the lapses and
loopholes associated with Enron will probably prepare India as well
as foreign investors for the high standards of environmental scrutiny that will be placed on future development projects.
B.
Recommendations
Yet, in the area of principal concern to this article, environmental clearance, the Enron experience does provide lessons for the
future. India must understand that merely having laws on the
books will do little to accomplish their protective purpose unless
they are backed by the will to enforce them. India must fully realize the high stakes of the game in which it is, engaged: it has
sounded the clarion call to be catapulted into the modern economic arena, but the fate of its environment hangs in the balance.
Nonetheless, India need not be discouraged by the challenge it
faces nor preoccupied that it must emulate conventional approaches to regulation or else have no chance of protecting its resources. Rather, India has a special opportunity to harness the
energy of both its market and its people in order to implement
approaches to environmental protection that are truly innovative
and uniquely Indian.
1.
Citizens must have immediate independent access to courts.
Citizen standing is one of the central tenets of the four major

environmental statutes in the United States. Citizens can order the
Environmental Protection Agency (EPA) to take action by bringing
suit in the courts. 166 Such "citizen suits" empower members of the
public at large to serve as a check on the vigilance of the Agency's
own enforcement of the environmental laws at issue. In effect,
166. Cass R. Sunstein, What's Standing After Lujan? Of Citizen Suits, "Injuries," and Article 111, 91 MicH. L. REv. 163, 165 (1992). Citizens can bring suit against the EPA if the EPA
is in violation of an order issued by the EPA, is failing to perform its "non-discretionary"
authority, or is in violation of the Acts. See Clean Air Act 304(a) (2), 42 U.S.C. 7604
(1994); Clean Water Act 505(a) (1), 33 U.S.C. 1365(a) (1) (1994); Resource Conservation & Recovery Act. (RCRA) 7002, 42 U.S.C. 6972 (1994); Comprehensive Environmental Response Compensation & Liability Act (CERCLA) 310(a), 42 U.S.C. 9659(a)
(1994).
288
[Vol. 16:256
they are a "private attorney general." 67 The right of citizens to

force the EPA to act has made important contributions to the vigor
of environmental law enforcement in the United States. 168
India's system, however, is ineffective in this regard because it
requires citizens to bring their charges against the Ministry to the
government itself. The citizen suit provision of India's Environment Protection Act reads:
No court shall take cognizance of any offence under this Act except on a complaint made by(a) the Central Government or any authority or officer
authorised in this behalf by that Government; or
(b) any person who has given notice of not less than sixty days, in
the manner prescribed, of the alleged offence and of his intention to make a complaint, to the Central Government or
the authority or officer authorised as aforesaid.' 69
Although the statutes in the U.S. similarly require that EPA receive two months notice, such a requirement can have a much different result in a developing country, where mechanisms for
environmental enforcement may not be refined, efficient, or resource-ready. A citizen suit in this case would stem from disapproval with Ministry inaction, therefore placing the Ministry in a
position of defacto approval which defeats the purpose of the suit.
When presented with a suit, the Ministry, under the current system,
can decline to take action, in effect placing a stamp of disapproval
on the merits of the suit. This determination, however, may have
resulted from such self-interested motives as protecting the bureaucracy from scrutiny or other factors 70not flowing strictly from an
objective environmental assessment.
More probably, Ministry inaction on a citizen suit may be the
unintended result of an inadequate enforcement infrastructure.
Such problems are not uncommon in a country that has still to
develop economically, let alone develop in the more specific area
of administrative environmental responsiveness. The hope that a
sixty-day notice of a citizen suit will suddenly and sufficiently inspire vigilant Ministry action ignores the probability of an
167. Harold Feld, Saving the Citizen Suit: The Effect of Lujan v. Defenders of Wildlife and
the Role of Citizen Suits in EnvironmentalEnforcement 19 COLUM.J. ENTL. L. 141, 144 (1994).
168. Id.
169. DEsAi, supra note 97, at 92 (emphasis added).
170. In proposing citizen suit provisions for the 1970 Clean Air Act, the U.S. Senate
cited inaction by the Department of Health, Education, and Welfare (which was responsible for Clean Air Act enforcement at that time) and insulation of the bureaucracy as reasons for granting citizens a federal cause of action. See Feld, supra note 167, at 146.
1997]
POWER GAME IN INDIA
overburdened and inefficient administration which likely gave rise

to the problem. 17 1 Thus, Ministry inaction on a citizen suit could
send the wrong message.
A requirement that a Ministry no-action decision be accompanied by an explanation could help citizens decipher the Ministry's
reasoning. 172 On the other hand, it might only exacerbate the
problem by setting off a vicious cycle of further administrative inaction due to time spent answering for previous inaction. The environmental interests of India may be ill-served by routing critical
environmental grievance procedures through the same institutional arteries that were originally clogged. Especially in this era of
major foreign development projects, the Indian public needs to
have an alternative route at its disposal to prevent administrative
breakdown and protect against environmental casualties.
India's Environment Protection Act was rightfully hailed for giving citizens access to the courts for the first time. Inherent in the
granting of that right, however, was the incorrect assumption that
the Ministry will always be willing and able to act on such suits.
The current system does not offer a sufficiently responsive avenue
of judicial resort when a plaintiff is suing against the Ministry or
when the Ministry is simply unable to take action. The perception
that the Ministry has expressed its esteemed opinion on the suit's
merits may unduly prevent any further action or recourse.
The Bombay High Court took a corrective step to remedy this
outcome by agreeing to hear the petition of SOCLEEN. The Court
ultimately ordered the Ministry to review retroactively Enron's environmental clearance under the Notification's new rules. While
this result is theoretically appealing, subjecting the Ministry to jurisdiction by surprise did not inspire it to function more effectively.
Providing an established right of immediate independent court access for citizen plaintiffs, however, will supply the necessary deterrent effect to invigorate effective enforcement over the long term.
Agencies will be more likely to plan and prioritize in order to mitigate against the occurrence of such administrative adjudications.
2.
India should provide its private sector with economic incentives

for pollution prevention.
It is, of course, an oversimplification to suggest that non-com171. See BAxi, supra note 106, at 39
172. See id. at 40.
290
[Vol. 16:256
pliance with conditional clearances results simply from lax environmental authority; it is equally caused by a shortage of resources.
India has made great strides in adopting advanced environmental
impact assessment procedures in preparation for monitoring its anticipated development boom; however, it is still a developing country. Often, Ministry officials are simply outmatched in trying to
assess the environmental effects of an assortment of development
proposals simultaneously.173 If they delay, political pressure may
force a quick decision to approve development. 74 In effect, then,
they may abandon the assessment process altogether. 75 In addition, staff often cannot follow up on project clearances due to the
number of new projects which need attention. The Impact Assessment Agency's responsibility to conduct its own site evaluations can
require extensive travel, proving to be a yeoman's task, given the
shortcomings in transportation infrastructure and the overwhelmingly agrarian topography. While India clearly needs additional resources for environmental enforcement now that it has opened its
economy to foreign investment, there is no guarantee that the
176
funds will exist to expand the Ministry's budget.
Economic incentives which stimulate environmental compliance through market mechanisms may be a better way to increase
resources and ensure effective enforcement. The United States has
seen the rise of economic incentives in environmental regulation
in the area of "pollution trading," 177 where a less-polluting firm A
can sell an unused portion of its pollution discharge permit to a
more-polluting firm B.' 78 Such incentive-based regulation shifts
the resource burden of information gathering and monitoring
away from understaffed government agencies to plant polluters,
which are best suited to undertake pollution control measures, and
which now have vested interests in doing So. 17 9 Economic incen173. See Kothari, supra note 149, at 79.
174. See id.
175. See id.
176. One option might be to require that foreign investors allocate a certain amount
of a project's costs to finance the environmental clearance operations of the Ministry officials required to perform the environmental impact assessment. This would correlate Ministry costs with project size and grow the environmental authority in proportion to the
increase in development.
177. Lisa Heinzerling, Selling Pollution,ForcingDemocracy,14 STAN. ENVrL LJ. 300, 301
(1995).
178. Bruce A. Ackerman & Richard B. Stewart, Reforming Environmental Law, 37 STAN.
L. REv. 1333, 1341 (1985).
179. Id. at 1337, 1341-43.
1997]
POWER GAME 1N INDIA
tives also invigorate enforcement because the polluter internalizes

the social costs of pollution, thereby placing actual value on pollution reduction. 80
In the area of power projects in India, market-based regulation
has already been implemented with rates of return paid to developers for power efficiency. For example, if a power producer operates its plant at a Plant Load Factor (PLF) of 68.5%, then its rate of
return is 16%. But if a producer increases its PLF, then it earns an
increased rate of return.181 It has an incentive to produce power
efficiently. Similarly, the Ministry can encourage "environmental
efficiency" in the generation of clean power. A project like Enron
will have on-site pollution monitoring stations making calculations
of air quality.18 2 Also, Enron will be required to submit an environmental audit report every year. 1 3 As in the PLF system, if the environmental report shows a reduction in air pollution, the Ministry
can give Enron certain percentage point increases in its rate of return. The developers will thus have a vested interest in producing
power in a manner that is environmentally-conscious. Such incentives will alleviate the resource burden on the government while
actually enhancing the level of enforcement.
3.
India should empower NGOs.
The development of a bona fide extra-governmental authority

for environmental enforcement in India would also help to alleviate the resource problem. NGOs can potentially fulfill this role.
Sophisticated NGOs have expertise and can operate as third parties
independent of both the government and the developers. Yet they
tend to share the Indian government's interest in permitting only
development that is sensitive to the environment. The government
should adopt provisions in its environmental laws that give stature
to NGOs and validate their important contribution to environmen180. See Speech of Richard Stewart before the Administrative Conference of the United States
(1990), 8 YALEJ. ON REG. 463, 468-69 (1991). A third purpose of incentive-based environmental regulation is to enhance democracy by forcing the people to first make a choice
about the total level of pollution that society will allow. This Note, however, will not address the democracy rationale for economic incentives because, as Enron is considered
only the first of the foreign investor power projects, the critical mass required to spark this
democratic debate has not yet been reached. SeeAckerman & Stewart, supra note 178, at
1353.
181. See EnronProject Cancellation, supra note 41.

182. EMBASSY, supra note 93, IV at 6.
183. This is required under the Environmental Audit Notification. See THE
MENTAL AUDIT NoTwI cATIoN, 1992, in DEsAi, supra note 97, at 15-16.
ENIRON-
292
[Vol. 16:256
tal impact assessment. It has already taken some important steps

toward this goal under the Environment Protection Act by authorizing NGOs to participate jointly with Ministry officials in site inspections, and under the Environmental Clearance Notification, by
reserving one seat on the Impact Assessment Agency to an NGO
member. 184
NGOs have played a central and constructive role in the longrunning Enron dispute. As discussed above, it was the Society for
Clean Environment (SOCLEEN) that commissioned important research on the fuel storage exclusion zone. 85 The study, carried
out by the National Environmental Engineering Research Institute
(NEERI), was an important part of SOCLEEN's case which convinced the Bombay High Court to order the Ministry of Environment and Forests to review Enron's environmental clearance
under the country's most advanced rules. This NGO-initiated action was a breakthrough for Indian environmental law enforcement.186 Although the review had its shortcomings in this highpressure situation because it was hastily timed, it should give rise to
greater benefits over the long term because urgency shrank the
learning curve.
C.
A New Environmental Consciousness
The accelerated birth of a vigorous environmental movement

in India is perhaps the greatest legacy of the Enron power project.
Enron believed that its project served as an education for India
regarding issues of contracts, property and financing. But Enron
underestimated the vitality of the environmental movement it
spawned in India-perhaps it is Enron who was the one truly educated. While law may provide an important framework, ultimately
the strongest guardian of India's natural resources is the development of a true environmental consciousness among the population. As India embarks towards the new century on the exciting yet
unsettling journey of opening itself to the world, its citizens must
be vigilant in preserving their country's environment through a
sound legal structure with true public access, market-based incentives, and the development of an active and strong NGO sector.
184. BAxI, supra note 106, para. 11.8 at 38. NOTIFICATION, supra note 4, Schedule
II(1) (xi) at 7.
185. See Environment Ministry Asked to Review Okay for Dabhol Project, supra note 5, at 3.
186. Id.

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Citation: 16 Stan. Envtl. L. J. 256 1997

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Power Game in India: Environmental

A. Economic Liberalization .........................

A. Project Profile ....................................

B. Environmental Concerns .........................

1. Fuel Type ....................................

3. General Ecosystem ...........................

Retroactive Review ...............................

D. Comparative Analysis .............................

POIAER GAME IN INDIA

Availability of Information ...................

No Conditional Clearance ........................

In September 1994 the Bombay High Court in India heard a

2. SOCLEEN, supra note 1, Synopsis para. 3-13.

STANFORD ENVFRONMENTAL LAW JOURNAL

mental clearance criteria issued by the Ministry of Environment

Extraordinary, Part II- 3(ii), at 5 [hereinafter NOTIFICATION]. The publication date of

POTWER GAME IN INDIA

the government had approved the Enron power project at

Aug. 9, 1996, at 4, available in LEXIS, Energy Library, PONEWS file.

STANFORD ENVIRONMENTAL LAW JOURNAL

resolution can protect the country's natural resources from being

THE OPENING OF INDIA

POWIER GAME iN INDIA

STANFORD ENVIRONMENTAL LAW JOURNAL

regulatory system to protect its environment from the impending

State electricity boards.

POWER GAME IN INDIA

In the Indian federal system, the administration of electricity is

The Indian Government did not have the resources to rectify

33. SeeJain, supra note 27, at 53.

STANFORD ENVIRONMENTAL LAW JOURNAL

electricity sector, India needed to take immediate alternative

New power policy.

tors to own up to 100% of the power projects they developed.35

POWER GAME IN INDIA

foreigners.43 Although the government has since discontinued the

STANFORD ENVIRONMENTAL LAW JOURNAL

III. ENTER ENRON

The $2.5 billion Enron power project is being developed by an

POWER GAME IN INDIA

sell to consumers.5 '

53. See infra text accompanying notes 147-148.

CORP., supra note 3, at 26.

STANFORD ENV[RONMENTAL LAW JOURNAL

Fuel storage is probably the most contentious environmental

POIRER GAME IN INDIA

The Enron site is located on the Konkan coastal belt region of

STANFORD ENVIRONMENTAL LAW JOURNAL

PO4ER GAME IN 1NDIA

The Enron power project occupies a 1,480-acre space at

STANFORD ENVIRONMENTAL LAW JOURNAL

INDIA'S ENVIRONMENTAL LAWS

India's formulation of environmental law as a distinct body of

POWER GAME IN INDIA

ond, it gives the Central Government a body of authority with

. any person empowered by the Central Government in this behalf

STANFORD ENVIRONMENTAL LAW JOURNAL

ronmental Audit Notification of 1992.13 This amendment to the

DEsm, supra note 97, at 15-17.

POWER GAME IN INDIA

pact assessment, examined in the following section, embody the