Countdown to $6bn arbitration at Dabhol on 5th July

Vol 9, PW 3 (18 May 05) Midstream & Downstream

This is one controversy that continues to make headlines.

On 29th May, the idle Dabhol power plant enters its fifth year of deterioration. But if hints from the government are to be believed a solution to this five-year problem is not far off.

As we write, finance ministry officials are apparently working day and night to fix the Dabhol problem once and for all. Why the urgency Concern for the citizens of Maharashtra, faced with unprecedented power cuts Or has the Indian government suddenly found a novel solution to the problem No, its none of these.

Frantic efforts by the Indian government to resolve the Dabhol row stem from one very simple fact: unless India comes up with a viable solution before 5th July this year, the Manmohan Singh government in Delhi will face the prospect of two very unpleasant - not to mention unprecedented - arbitration cases, held simultaneously in London and The Hague. At stake is a massive $6bn worth of claims against the Government of India by Bechtel and General Electric, two of the original Dabhol promoters.

GE and Bechtel have filed two claims against the Government of India under two bilateral investment treaties one with Mauritius and the other with The Netherlands. The Indian side knew about this litigation more than six months ago, a source from the GE-Bechtel team tells us.

Their lawyers were convinced that India would lose. You cant wish away the expropriation of DPCs assets by (Indian) government agencies (GAIL and NTPC).

Both sides have begun preparing their case ahead of arbitration proceedings on 5th July.