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Fernandes D and Saldanha L 
Deep Politics, Liberalisation and Corruption: The Mangalore Power Company Controversy

Law, Social Justice & Global Development
(An Electronic Law Journal) 

Deep Politics, Liberalisation and Corruption: 
The Mangalore Power Company Controversy 

Desmond Fernandes 
De Montfort University, Bedford, UK
 dfer@dmu.ac.uk

Leo Saldanha
The Environment Support Group
Bangalore, India
esg@bgl.vsnl.net.in

This is a commentary published on: 9 January 2001 

Citation: Fernandes D and Saldanha L, 'Deep Politics, Liberalisation and Corruption: The Mangalore Power Company Controversy', 2000 (1) Law, Social Justice & Global Development Journal (LGD). <http://elj.warwick.ac.uk/global/issue/2000-1/fernandes.html>
Abstract
This paper examines the arduous political and legal struggle against the Cogentrix/Mangalore Power Company (MPC) power plant in Dakshina Kannada district, Karnataka, India. Using the key concept of ‘deep politics’, links are drawn between the liberalisation policy in India and corruption. The avowed need for liberalisation, specifically in the Indian power sector, is analysed in an elaborate manner by examining the economic aspects of generation, transmission and distribution of power in India prior to - and post - liberalisation. Drawing upon the deep political experiences of Enron, the case of Cogentrix is followed from the time of its arrival in India, the many highs and lows in the struggle against the project, through to its hard fought exit. The attempt to resurrect the MPC project through deep political means is also charted. The findings of this study suggest that liberalisation backed initiatives of the ‘model’ Cogentrix-MPC kind have merely served to corrupt governmental and judicial systems further, and sought to constrict those very democratic spaces which, in the past, have provided at least some theoretical measure or opportunity for redress of public grievances. 

Keywords: Deep Politics, Liberalisation, Corruption, Cogentrix, Political, Environment, Governance.

1. Introduction
In the early 1990s, the Indian government committed itself to a World Bank-International Monetary Fund (IMF) inspired economic liberalisation programme as part of its New Economic Policy (NEP). Official announcements at the time had suggested that this programme would usher in a new era of sustainable economic growth, efficiency, public accountability, transparency, ‘open’, democratic and less corrupt governance. Through a process of privatisation, Trans-National Corporations (TNCs) and Independent Power Producers (IPPs) were to be actively approached and invited to present a lead in instilling model ethical codes of conduct in various sectors of the economy, including that of power generation, transmission and distribution (T&D). Karp and Kaye, for example, note that in the power generation sector, a US TNC, Cogentrix Energy Inc. (Cogentrix) was invited to proceed with a US $1.1 billion project which was supposed to be the ‘model’ for India’s new private power policy (Karp and Kaye, 1996, 52). Cogentrix’s model stance, one was informed, extended towards understanding that its customers were not only end users, but also:

‘employees … (as well as) people living in communities where its operating facilities are or will be located … and the environment that is shared by all. To that end, Cogentrix remains steadfast in its commitment to operate at production levels that are the envy of the electric power industry while protecting the environment. The company will continue to … strive to understand the concerns and needs of the people in the communities in which it operates to achieve another reliable partnership based upon the notions of sustainable development’ (Mangalore Power Company, 1997, 1).

Special incentives were offered to stimulate TNC and IPP investment, including:

‘100% equity participation to foreign investors … assured returns (and) a five-year tax holiday (for) … new industrial undertakings … anywhere in India for either generation or generation and distribution of power’ (Mujumdar, undated). 

The High Court of Karnataka has noted that the Government of India’s:

‘liberalised policy also envisaged the establishing of power projects by the foreign companies exclusively or in collaboration with each other. The Government of India decided to provide sovereign guarantee and permission to use imported coal in pursuance of the liberalised policy … After the power sector was opened for private investors and entrepreneurs, no effort was made to involve local investors and entrepreneurs having (an) interest in the establishment of power plants in the country’ (Arun Kumar Agarwal & Kantha vs. State of Karnataka and others, 106, 109).

Judgement of the High Court of Karnataka dated 27^th February 1998 in pursuance of Writ Petition 10696 of 1997; hereinafter referred to as Agarwal v State.

For an overview of the differing perceptions on this process, refer to the documentary by Wall, 1997.

A political decision was also made to ensure that the first eight TNC initiated power projects to be approved and recognised by the government were to be accorded ‘fast track’ status and promised sovereign counter-guarantee by the Union Government, in case the largely bankrupt State Electricity Boards (SEBs) defaulted on payments for power supplied. The offloading/unbundling of SEBs was mooted with the intention of privatising the entire power chain of generation-transmission-distribution systems. The tariff for the supply of power by the private parties was as follows:

The Cogentrix initiated MPC power project was identified as one of these ‘fast track’ projects. See The Hindu, December 10, 1999.

‘Private parties were told that they could sell the electricity on a cost-plus basis, that is, after accounting for all costs and a reasonable rate of return. A 16% return on the equity investment was assured by law’ (Mehta, 1999, 24).

In the case of Cogentrix, it was to be favoured in more than one way:

‘Firstly, 100% taxable profit of the company has been exempted from income tax for five years beginning from the year of commercial operation; the stamp tax on purchase of immovable property has been waived for the company; similar is the case for registration fees for movable property. Further, property tax, including tax on land and buildings, sanitary tax, lighting tax and water supply tax as levied by the local authorities are being treated as waived. Even entry tax and other local taxes are being treated as exempted including excise duty on construction contract. Finally, research and development cess has been waived on the assumption that there will be no payments made for the import of technology’ (Assadi, 1996, 2130). 

Mehta further concludes that profits from the project, according to conservative estimates, were expected to total about US $ 120-180 million a year. Officially, the return on equity was expected to be of the order of 28.5%, or US $ 80 million per year (Mehta, 2000).

Enron’s Dabhol Power Corporation (Enron/DPC) and Mittal-Ispat-GEC Alsthom-EdF of France’s Bhadrawati project were to also be favoured in a number of ways. When it was discovered, for example, that the official rate of return to Enron would have rendered:
 
‘DPC’s Power Purchase Agreement (PPA) illegal … a series of surreptitious amendments to the (Indian) laws … as suggested by Enron’s lawyers … were issued by bureaucratic fiat, bypassing Parliament’s mandate completely’ (Mehta, 1999, 126). 

Consequently, a new notification was provided which ensured that the rate of return in Enron’s case could now stand at 31.5% (Mehta, 1999). It was officially agreed that: 

‘the minimum return Enron will secure, on its purported equity, is about US $ 4 billion over the life of the contract. The change of five words in the law allows it an additional 3 billion dollars. Further, the rate of return is computed on admittedly very-very inflated capital costs as well as very high rates of interest. Effectively, the rate of return on real equity is limitless’ (Mehta, 1999, 125).

Electricity laws were to also be completely reinterpreted to favour the Enron and Bhadrawati projects. The projects were to additionally benefit from exemptions from Section 10(15)(iv) and Section 10(6A) of the Income Tax Act, 1961; Section 205A(3) of the Companies Act; the Bombay and Maharashtra Sales Tax Act; payment of stamp duty and payments of water tax and octroi (Mehta, 1999).

These ambitious and highly controversial power sector reforms were adopted by the government on the grounds that:

(a)	They would positively lead, within a short period of time, to a massive and assured increase in power generation and desperately needed investment in the power sector which would otherwise have been starved of government funds;

(b)	The privatisation of power utilities would lead to significantly cheaper electricity rates for members of the public, as well as environmentally sensitive and sound, sustainable planning, management and operational strategies;

(c)	TNC intervention in this sector was absolutely necessary if inefficiencies, a lack of transparency in decision-making, poor Indian bank project lending practices and corrupt and ‘deep political’ processes were to be confronted and addressed in any meaningful manner. Privatisation through liberalisation was proposed as the panacea for all ills affecting the power sector (The Hindu Survey of Indian Industry, 1996).

As Linda Powers, an Enron employee, was at pains to point out: 

‘Working through this process (of liberalisation, as well as Enron’s TNC involvement in the DPC project) has given the Indian authorities a real and concrete understanding of the kinds of legal and policy changes needed in India, and has given the Indian banks a real and concrete understanding of sound project lending practices’ (as cited in Mehta, 1999, 121). 

Ron Somers, Managing Director of the Cogentrix linked Mangalore Power Company (MPC) project, had similarly noted that the standard to be set by his proposed project and company was likely to serve as the type of model and benchmark for future projects which Indian planners and politicians would use to ensure that complete transparency took place, and environmentally friendly programmes were being promoted (The Hindu, 12 August, 1995; The Hindu, July 27, 1995).

It was also argued that the crisis relating to the country’s growing demand-supply gap would never be resolved if one remained sorely dependent upon corrupt and inefficient, deep political operational structures of the SEBs and Public Sector Power Generation Enterprises. As Bhupal Singh, ex-chairman of the Uttar Pradesh State Electricity Board and Chairman of the All India Power Engineers Federation has confirmed, such inefficiency in the public sector certainly existed due to:

‘irrational tariff, political and bureaucratic interference and, above all, rampant corruption, together with massive theft of  energy … (which was responsible for) a nosedive in the performance levels’ (Singh, 1997, 17, 19).

In analysing the actual progress of these reforms in the power and other sectors, however, it has become abundantly clear that several of these stated objectives have not been achieved. Harriss points out that the recent exposes of corruption scandals, for example, have indicated that ‘the evidence is clear that the scope and range of corruption has tremendously increased’, not decreased, ‘during the era of liberalisation’ (Harriss, 1998, 80). According to Harriss: 

‘huge scandals at the top have been unearthed. At the centre … the securities, sugar, urea, housing, petrol pumps, railways … hawala … and telecom scams. In the states, the fodder scam of Bihar, the Enron (power station) deal of Maharashtra, the cloth and school uniforms, colour TV sets, transport spare parts, steel doors, slippers, crematorium, furniture purchase and coal import scams of Tamil Nadu’ (Harriss, 1998, 80, 81).

For further details of the ‘telecom scam’, refer to Purkayastha, 1995 and Muralidharan, 1995.

For further details, refer to Padmanabhan, 1995, Sridhar, 1998 and Padmanabhan 1996.

In Karnataka, the government promoted model Cogentrix-MPC project would also appear to have been embroiled in a series of corruption scandals. The ‘key players’ in these corrupt exercises, moreover, ‘seem safe, heavily protected as they move around or hiding in safe bunkers’ (Harriss, 1998, 80).

As S S Gill, in his path-breaking study, The Pathology of Corruption, has observed:  

‘(It was) generally assumed that with the progress of liberalisation … the (corrupt) business-politician nexus would weaken and wither away’ … (However), the new regime of liberalisation, instead of removing handles for extortion, ha(s) actually broadened the horizons for corruption….Earlier, one had to conduct prolonged negotiations with foreign suppliers, involve a battery of nit-picking officials in the process, and then receive his (or her) cut at the end of a long tunnel. Now, the culture of deregulation (has) encouraged ministers to bypass procedures to avoid delays … rely on the expertise of touts, and deal directly with multinationals. This direct approach (has) enabled a minister to sign a Memorandum of Understanding (MOU) without much delay or hassle, and direct the hefty commission to his (or her) foreign account … 

Liberalisation … has created a mind-set where economic offenders are not only being treated with kid-gloves, their misdeeds are being considered as pre-conditions for growth. Furthermore, there has mushroomed a whole army of wheeler-dealers and fixers who have not only acquired mastery over government procedures, but (who) are also adept at circumventing them. They call themselves consultants and lend their expertise to ministers in fixing deals with multinationals’ (Gill, 1998, 28,178, 149, 182).

In the power sector, Bhupal Singh has concluded that these reforms have clearly failed to achieve the stated aims:

‘(Of the) 40 projects in the private sector in competitive bidding route, (and) 100 projects … on the negotiated route (amounting to 20,000 MW with an investment of  Rs. 65,000 crores) … construction has started only on about 3,500 MW capacity in additional projects in the private sector. The counter-guarantee had been given by the Government of India (favouring) fast track projects initially … as according to it, the credit rating of the country was supposed to be quite low. 

The fact, (however), is that a number of foreign countries with advanced power technology were willing to back up their country’s equipment manufacturers initially to promote the sale of equipment to India … despite its so-called poor credit rating. But personal visits abroad by vested interests in authority made (foreign companies) more aggressive and assertive putting (India) on the defensive ... A disadvantageous scenario (has) emerged (resulting in) most of the fast-track projects (coming up) through negotiations without competitive bidding. 

The likely (adverse) impact of forex commitments of allowing repatriation of profits    
(due to) sovereign counter guarantees on India’s meagre financial resources struck the formulators of this policy quite late. Most of the private power projects have been dragging as the proposals have run into controversy that have led to delays mainly because of lack of transparency. Unforeseen hurdles have been encountered because either experts were not consulted in advance (and/or) people with flimsy knowledge were made to append their signatures here and there with a view to offload the responsibility of the bureaucracy and politicians’ (Singh, 1997, 22, 23).

And here, only when their attention was drawn to it repeatedly by independent experts, Non Government Organisations (NGOs), the media, etc.

V. Ranganathan, Professor of Economics at the Indian Institute of Management (IIM), Bangalore, has also detailed the way in which these reforms in the power sector have been effected:

‘(They) are being driven by a shortage of Government finance, and to a large extent, the reforms are externally driven in the form of conditionalities for funding and are, consequently, force-fed. One consequence of this has been the blurring of the distinction between ends and means; privatisation which should be regarded as a means to achieve the end of competition, is in our context resorted to as an end in itself, resulting in a public monopoly being replaced by a private monopoly. We must clearly understand that privatisation alone, without scope for competition, need not deliver improved results, ipso facto. 

Regrettably, even in areas such as generation where competition is possible, we have not attempted the right steps. We assure a guaranteed load, and a guaranteed return for each specific location and for each specific fuel, thereby protecting inefficiency and providing super-normal profits to the private IPPs ... There is a certain lack of confidence in the reform process even in the bureaucracy itself. At best, it is done, as a means to get World Bank or Asian Development Bank (ADB) loans, because, like Charlemagne who commandeered ‘baptism or total annihilation’, these organisations say: ‘Privatisation or no loans’’ (Ranganathan, 1997, 64, 65).

A report by Assadi confirms that heavy concessions to TNCs via the reform process have been granted at the cost of taxpayers:

‘Awarding tax holidays despite the taxable profit would mean that large amounts of profit may be siphoned off from India to the western world, principally the US. Further, in the US, (TNCs like Cogentrix have) taken into account 4% annual inflation but Indian inflation is counted at 10% per annum. This would mean inflated cost of output, mainly electricity, and a stagnated cost of inputs. This would, when it is translated into monetary form, absolutely squeeze the Indian economy in general, different categories in particular’ (Assadi, 1996, 2130).

Assadi has also contested the claim that the public will stand to benefit from lower electricity prices with the process of liberalisation: 

‘An argument has … been advanced that the cost per unit of Cogentrix electricity power, (for example), will come down from Rs. 2.59 per unit to Rs. 2.40 per unit and that, in the longer term, the price will settle down to Rs. 1 after 20 years, as the capital cost will be loaded in the beginning. This particular argument is untenable in the context of the fact that the contract is renewable every year. Since the contract is linked to prevailing dollar rates - or equivalent to Indian rupees - it is obvious that, given the sliding rupee value in the international market, power purchase will become costlier and … Indians will have to pay a heavy price for inviting MNCs in the years to come. 

Further, the collection of fixed charges by the company … will also be … passed on … later … to the consumers. This will have multiple consequences: increasing cost of all essential commodities and increasing the cost and prices of industrial goods in the context of the declining purchasing power of the people. Most affected in this context would be the middle class in the urban areas and the peasants/farmers in the rural areas’ (Assadi, 1996, 2130).

More recent assessments, by Mehta (1999) and Mahalingam (2000), would appear to confirm the basis of Assadi’s concerns. Mahalingam, for instance, observes that Enron’s DPC, in its first bill to the Maharashtra State Electricity Board (MSEB), is charging electricity at the rate of Rs. 5.92 a kwh, ‘a far cry from Rs. 2.03 a kwh (as) specified in the PPA’ (Mahalingam, 2000, 88). The Hindu also confirms that the most recent cost estimate for the Cogentrix linked MPC power project ‘works out at Rs. 4.42 a unit on the assumption that the project becomes fully operational by April 2004. Further, the cost estimate refers only to the first year of generation. The cost of the project, as such, will go up substantially with the weakening of the rupee vis-à-vis the dollar in recent years’ (The Hindu, 19 December 1999). 

2. ‘Deep Politics’, Corruption and the Repercussions of the Liberalisation Process in the Power Sector
A number of academics, business and political analysts, Central Electricity Authority (CEA) and SEB officials/former officials have, equally alarmingly, begun to document the way in which the liberalisation process has further protected inefficiency, increased corruption and entrenched ‘deep political systems’ within the power sector. Corruption, for the purposes of this study, is broadly defined to:

‘refer to what may be legal but is considered illegitimate by large sections of the public; in normative terms, abuse of positions of public trust for private gain; in the Aristotelian sense, derogation from the common good’ (Girling, 1997, 7). 

To Yves Meny, corrupt activities of this nature can involve:

(a)	‘The violation of rules and norms associated with what is perceived to be the general interest - or public ethics - in a political society at a given time;

(b)	The course of … secret exchange(s) among political, social and economic markets;

(c)	Provid(ing) individuals or groups with resources of access and influence in the process of political and administrative decision making that are superior to those available in the (normal) course of open dealings;

(d)	(Engaging in abusive practices which) eventually result in tangible benefits, material or otherwise, for the party or parties involved in the transaction’ (as cited in Girling, 1997, 10).

Saldanha, Fernandes and Mathai clarify that the following actions should be considered as a violation of rules and norms associated with what is perceived to be the general interest - or public ethics - in society:

1.	‘Subversion of the State mechanism through bribes, kickbacks, etc.

This is a term used to describe improper, corrupt payments.

2.	Deliberate withholding of material information, or the glossing over of relevant facts.

3.	Blatant disregard for norms and procedures of evolving public rationale about (mega-development) projects at scale.

4.	Reluctance to adopt the best possible technology or distortion of the exact nature of technology being adopted.

5.	Attempts to subvert civil society processes’ (Saldanha et al, 2000, 25).

A ‘deep political system’, as defined in this study, is also one in which institutional, non-institutional and para-political bodies, criminal syndicates, politicians, judges, media, TNCs and leading government employees have been able to ‘habitually resort to decision-making and enforcement procedures outside as well as inside those publicly sanctioned by law and society’ (Scott, 1996, xi) in order to push through highly controversial and corrupt, environmentally destabilising developments which have been bitterly opposed by community groups and people’s movements: 

This represents Peter Dale Scott’s definition of what constitutes ‘deep political systems’ and ‘processes’. See Scott, 1996.

‘What makes these … procedures (deep) is the fact that they are covert or suppressed, outside general awareness, as well as outside acknowledged, (transparent and open) political processes. Sometimes the secret is an open one … But some secrets are more closely held … Deep political analysis focuses upon the usually ignored mechanics of accommodation (between parties and individuals)’ (Scott, 1996, xii).

As Peter Dale Scott has clarified, these deep political systems or processes, by operating through corrupt means that can also involve collusive secrecy and law breaking, necessarily threaten the very fabric of democratic societies:

‘Corporations, like mobsters, find it profitable to corrupt those who are supposed to keep their behaviour within legal limits’ (Scott, 1996, xii). 

Citizens rights organisations, NGOs, concerned politicians, community groups and people’s movements in the region; lawyers; government employees, academics and members of the public who dare to question, oppose and/or expose this system, will necessarily discover that their views and initiatives are either being ignored or targeted by this system.

According to Bhupal Singh, deep political systems are certainly being strengthened by the liberalisation reform process that is being undertaken in the power sector: 

‘The magic formula of restructuring is being advertised and rushed through … to serve some vested interests and to buy time before an aggrieved public’ (Singh, 1997, 17,19). 

These views are also shared by M I Baig (Chairman) of the Central Electricity Authority CEA), Abhay Mehta, M R Srinivasan (Member of the Indian Planning Commission: Energy, Science and Technology) and S N Roy (former CEA chairman):

•	‘The entire power generating system has been hijacked by vested interests and politicians’- M I Baig (The Hindu, 4 March 1997).

•	‘The subversion of the law has graduated from the farcical to the tragic’- Abhay Mehta (Mehta 1999, 179). The so-called rationalisation, privatisation and unbundling of the SEBs, which were ‘purportedly induced by the dictates of the World Bank’, have also scandalously resulted ‘in the sale of assets worth several tens of thousands of crores, needless to say, for a song’ (Mehta, 1999, 178).

•	‘Government policies pertaining to power have gone against all wisdom and rationality. The government has abdicated its responsibility’- M R Srinivasan (The Hindu, 4 March 1997).

•	‘The government is exaggerating the country’s requirement of an additional 143,000 MW by 2001. If rampant corruption and power thefts (during the post-1991 liberalisation phase) are curbed, then we can do with a net addition of only 16,000 MW. This would lead to a saving of more than Rs. 180,000 crores’-  S N Roy (The Hindu, 4 March 1997).

In the case of the Enron linked DPC liberalisation initiative in Maharashtra, furthermore, Mehta has exposed the way in which it has directly led to ‘the complete and total abdication of even a semblance of what could be construed as (good) governance’ in the region (Mehta, 1996, 177). As a consequence of  deep political processes which have attempted to push through the environmentally, economically and politically questionable project, numerous human rights violations have been committed. The collusion of State Reserve Police, local police and DPC security guards has resulted in a situation in which ‘goondas’- who have issued death-threats to community leaders - have been protected. Opponents of the project have been placed on trumped-up, attempted murder charges and have also frequently been physically attacked, injured, arrested and confined in conditions which Amnesty International has described as amounting to cruel, inhuman and degrading treatment (Mehta, 1996).

According to Human Rights Watch, peaceful protests against the way in which the Enron backed project is being imposed and developed, have 

‘met with serious, sometimes brutal, human rights violations carried out on behalf of the state’s and the company’s interests … Leading Indian environmental activists and representatives of villagers’ organisations in the affected zone … have been subjected to beatings and repeated short term detention. In many cases, they have been detained for periods ranging from several days to two weeks without being produced before a magistrate as required under Indian law … Protesters have been beaten with canes (lathis) or otherwise assaulted by police … (who) have also tear-gassed peaceful demonstrations’ (Human Rights Watch, 1999, 2, 3)

Deep political processes in this model liberalisation venture have also led to the:

‘complete failure (and/or corruption) of every conceivable institutional structure - the government, the press, courts as well as of institutions - constitutional, statutory or those emerging from the executive. The number of institutions (that conveniently) chose to look the other way, (and/or) were subverted, (corrupted), bypassed and simply ignored is almost unbelievable. These include the CEA, the Ministry of Power (MoP), the judiciary - from the High Court to the Supreme Court - even obscure departments of the Government of Maharashtra (GoM) like the Ports Department, the Maharashtra State Electricity Board (MSEB), the law ministry at both the Centre and in the State, the IDBI (Industrial Development Bank of India), the GoM (Government of Maharashtra), the Finance Department, Central and State Cabinets, the department of Industry and Energy in Maharashtra, the MoF (Ministry of Finance), the press, all two-party parliamentary committees, the Auditor General of the country, the Accountant General of Maharashtra - the list goes on’ (Mehta,1999, 177).

As Human Rights Watch has concluded: 

‘The state government of Maharashtra has engaged in a systematic pattern of suppression of freedom of expression and peaceful assembly coupled with arbitrary detentions, excessive use of force, and threats … In addition to the state … the Dabhol Power Corporation (DPC) and its parent company, Enron, are complicit in … human rights violations…

Other institutions bear responsibility for human rights violations as well … The financiers of Phase 1 of the project’s construction (1992-1999) and US government agencies that financed and lobbied for the (liberalisation) project are complicit in human rights violations … The consortium of public and private investors that financed Phase 1 – the Bank of America, ABN Amro, the consortium led by the Industrial Bank of India, OPIC, the US  government’s Overseas Private Investment Corporation (OPIC), and Export Import (Ex-Im) Bank – bear special responsibility for the human rights violations because of a lack of due diligence which led to a failure to address and condemn the human rights violations while they extended financial support for the project … 

In the case of the Dabhol Power Project (DPC), it seems that the government of the United States acted as a forceful advocate for open markets at the expense of  human rights and the rule of law. Throughout the development and implementation of the Dabhol project, US government officials and various governmental agencies including the Department of Energy, Department of State, Department of Commerce and Central Intelligence Agency (CIA) consistently lobbied the Indian government heavily on behalf of the companies … The lobbying effort extended to the point of cautioning the Indian government to allow the project or face the consequences … 

The US government and (these) … financial institutions, were negligent because they failed to monitor the project for human rights violations while they extended hundreds of millions of dollars in support for it … The US government … seemingly ignored its own regulatory requirements to assess the risk to human rights. 

The (Indian) courts (have also failed to) address any of the controversial aspects of the project. Instead … the judiciary (has sought to) look the other way and dismiss claims rather than adjudicate or arbitrate a case where billions of dollars were at stake - even when faced with substantial evidence of irregularities during the projects development’ (Human Rights Watch, 1999, 3, 4, 115, 117, 124, 125).
3. Critical Perspectives
These critical perspectives have suggested that liberalisation programmes - especially within the power sector in India - have facilitated corrupt and deep political processes. In the case of the 1000 MW MPC project, however, it is instructive to note that the project’s backers and representatives of the State Government of Karnataka have officially denied that any corrupt or deep political, irregular actions have been undertaken in order to promote this model liberalisation initiative. Several investigative journalists, research bodies, politicians, academics, NGOs and community/public interest groups have contested these views and argued that the Cogentrix linked MPC project has, in fact, further corrupted the political system to a frightening extent. 

It has been argued that deep political and/or corrupt actions - which have been undertaken in order to promote this liberalisation project - have:

(a)	Targeted and harassed honest bureaucrats and concerned citizens and academics in a manner which is hardly in keeping with the norms of an open, democratic society;

(b)	Ensured that clearances for the ethically, politically, economically and environmentally problematic project have been obtained in a highly questionable, undemocratic, unaccountable and often secretive manner;

(c)	Subverted state mechanisms and bought the services of politicians and other government and industrial representatives through extensive kickbacks;

(d)	Led to a series of highly questionable court judgements and decisions which have arguably failed to abide by two codes of the Restatement of Values of Judicial Life: ‘The first code says justice must not merely be done, but must also be seen to be done. The behaviour and conduct of members of the higher judiciary must reaffirm the people’s faith in the impartiality of the judiciary ... The last (16th) code mentions that every Judge must at all times be conscious that he is under the public gaze and there should be no act or omission by him which is unbecoming of the high office he occupies and the public esteem in which that office is held’ (Venkatesan, 2000, 47);

(e)	Led to the suppression of key reports and findings which have been critical of the project and its promotion;

(f)	Suppressed and/or illegally bypassed the decision-making powers and influences of committees which have voiced their concern and opposition towards the project;

(g)	Prevented the Central Bureau of Investigation (CBI) from initiating a probe to investigate allegations of corruption and deep political involvement in the project;

(h)	Ensured that doctored and clearly inaccurate and bogus reports have been submitted to planning and decision making bodies to secure clearances in a questionable manner;

(i)	Been undertaken by representatives of MPC, the Ministry of Environment and Forests (MOEF), the Government of Karnataka, various regulatory agencies, Tata Consultancy Services and a number of TNCs and international consultancies, including Cogentrix, China Light and Power Company (CLP), General Electric, Arthur Anderson and Associates and Transoft, amongst others.

This article details and critically evaluates the nature and basis of these allegations, claims and counter-claims. In seeking to analyse whether any mechanism of accommodation exists, or has existed, between parties and/or individuals to effect secretive, corrupt and/or deep political transactions to favour the MPC liberalisation project, the article will necessarily systematically focus upon a number of alleged and/or proven, covert or suppressed, processes and actions which have been identified by a number of community groups, investigative reporters, politicians, academics, NGOs and environmental/human rights campaigners. The repercussions of any identifiable deep political and corrupt actions will also be examined.

It has to be acknowledged at the outset, however, that investigations of alleged and/or actual corrupt and deep political actions over the MPC-Cogentrix power project by politicians, members of the judiciary, corporations and their representatives, government ministries and/or their individual representatives are constrained in the following ways. Over the issue of debating the nature of judicial accountability (or lack of it), several analysts and organisations have shied away from publicly criticising and/or academically analysing or commenting upon highly questionable judicial actions over the Cogentrix-MPC affair due to the following constraints which are enforceable in India: 

‘Anyone who seeks to shed light on the behaviour and conduct of judges is always deterred by the judiciary’s latent power to penalise under the contempt of court provisions. In the past, those who have chosen to challenge the conduct of judges in particular cases have been made to pay a price: either earning a reprimand or being compelled to apologise on pain of more serious punishment’ (Venkatesan, 2000, 44).

S S Gill identifies other constraints which potentially also stop government officers from reporting the corrupt practices of their superiors: 

‘The rules contain no provision under which an honest officer can even confidentially bring the bribery of a corrupt minister to the notice of a superior authority … There should be some way for a Secretary or other senior officials to report against the corrupt deals of their minister without fear of retribution … A serious lacuna in our system is the absence of a forum to entertain complaints of corruption against the ministers’ (Gill, 1998, 181, 241, 242).

Deep political and corrupt actions, by their very nature, are often also undertaken in a secretive manner. As Gill has observed, ‘it is often imperative for the success of such enterprises that the political link is kept hidden. That is why it becomes very difficult to identify such links’ even when they exist (Gill, 1998, 193). And even if and when they are known, ‘it is in the very nature of such links that they often cannot be established in a court of law’ (Gill, 1998, 198). Moore has arrived at similar conclusions:

‘Neither the briber or the bribed will admit to their crime unless they fall out, or outrageous decisions are made which draw attention … (to their crimes). Even then, the difficulty of proving complicity in a court of law often means the guilty escape justice’ (Moore, 1997, 1). 

This often means that the precise nature of such transactions may never be fully revealed, documented or confirmed. Analysts have also had to contend with disinformation that has been produced, as well as the refusal of particular politicians, companies (including MPC) and bureaucrats to part with requested information which might shed further light on the matter. Key ‘public domain documents’ in the possession of the state government and MPC which relate to the Cogentrix-MPC corruption/deep politics controversy, for instance, which should - at the direction of the High Court - have been made publicly accessible and ‘available for inspection’, remain inaccessible to date and cannot be scrutinised by the investigators and petitioners (Saldanha et al, 2000, 9). It is disquieting to note that several of these key documents - for instance, cabinet papers, records of the deliberations of the Council of Ministers, secretaries and other officers, as well as minutes or records of advice including legal advice, opinion or recommendations made by an officer or a public authority during the decision-making process prior to the executive decision or policy formulation to clear and/or pass the MPC project - are unlikely to ever become public if the proposed Indian Freedom of Information Bill becomes law.

Saldanha, Fernandes and Mathai, for instance, have argued that MPC has been ‘guilty of subverting the process of justice … by making false submissions in the entire process of litigation’ (Saldanha et al, 2000: 38)

The Freedom of Information Bill may be accessed at <http://www.humanrightsinitiative.org/RTI/foibill1.htm>.

Aruna Roy, for instance, argues that if Sections 8d and 8e of the proposed bill are made law, it will be possible for ministers and government officers to ban any scrutiny of such files and records (DH News Service, 2000, 9). Such a process can only serve to frustrate any investigation which seeks ‘to know why certain decisions were taken and what role various officials played in the decision making process when such decisions are anti-people’ in nature (Roy, as quoted by DH News Service, 2000, 9).

CBI probes and/or public inquiries into the MPC controversy, which potentially have the capacity to investigate the basis of corrupt/deep political dealings in a more effective fashion (for example, by pressing for and/or obtaining public disclosure of particular confidential offshore banking transactions and/or company/government papers and minutes of meetings, in order to ascertain if any irregularities have taken place to unduly favour the MPC project) have also not been undertaken, despite ‘wide public opinion favouring an enquiry’ (Chettri, 2000, 33), requests for the same by public interest litigation (PIL) groups, concerned MPs, NGOs, the High Court of Karnataka (in Agarwal v State), Seetaram (2000, 1) and a number of community organisations. Analyses of the Cogentrix-MPC corruption/deep political controversy, consequently, have had to rely upon the limited nature of findings that have been obtained through other types of investigative enquiries.

The authors acknowledge, however, that CBI probes can also be manipulated into ‘soft-pedalling’ on corruption-linked issues - Refer, for instance, to Gill, 1998.

4. Background to the MPC Controversy
From the time Cogentrix decided to locate a 1,000 MW MPC coal based thermal power plant in the environmentally sensitive coastal district of Dakshina Kannada in northern Karnataka, the project has been resisted actively by local project affected communities on social, economic and environmental grounds. Community organisations (many with a popular mass base) which have opposed this mega-project, together with the deep political processes which have accompanied its promotion, include Janajagrithi Samiti of Nandikur (People’s Awareness Committee), Environment Support Group, Dakshina Kannada Meenugarara Parisara Samrakshana Samithi (Dakshina Kannada Fishworkers Environment Protection Committee), a number of student organisations, the National Alliance of People’s Movement (NAPM) and the Save Dakshina Kannada Campaign.

Almost all the elected representatives from the district, including the Dakshina Kannada Jilla Panchayat (the local government district council), joined issue with these independent people’s organisations against the project. Public marches and protests against the proposed project in Mangalore and Padubidri (the proposed project site) have attracted the active attendance of tens of thousands of people. A number of financial analysts, politicians, and journalists have also expressed concern and levelled serious allegations of deep political interference and corruption against those who have been directly promoting and facilitating the deal. Leading energy planners and economists have criticised the Karnataka Government for its uncharacteristic zeal in promoting - and seeking to provide questionable clearances for - the project.

Six legislators from the Dakshina Kannada district jointly addressed a Press Conference opposing the Cogentrix project on socio-economic and environment grounds, and their key concerns are reported in The Deccan Herald, 14 August 1996. Soon after this event, the Dakshina Kannada Jilla Panchayat passed an official resolution declaring unanimously their opposition to the project in a meeting held on 30^th August 1996.

For an extensive analysis of the local resistance to the project, see Saldanha, 1999.

The project has rarely been discussed in the Karnataka State Assembly or Parliament without attendant controversy. Nevertheless, the project has continued to be vigorously promoted by the Karnataka government as a key model sustainable development initiative, even after two public interest litigations (PILs) were filed against it. The first PIL was filed by Janajagriti Samithi - a committee that works with communities, which have been affected by the Cogentrix-MPC project. This was filed on the grounds that the Government and Cogentrix had:

For a discussion of the nature and scope of PIL in India, visit <http://www.indlaw.com>.

(a)	Proposed to locate the plant in one of the most ecologically sensitive regions of the country;

(b)	Deliberately suppressed or distorted information on the potential adverse impacts of the project on the health of the local population and on the environment; and

(c)	Deliberately ignored several other viable options which related to the location of the power plant.

Arun Kumar Agarwal, a public interest activist and President of the Southern Region of the Indian Investors Protection Council, filed the second PIL on the grounds that Cogentrix had secured the deal through corrupt and deep political means.

In contrast to the Enron controversy that brought down one Government and promoted another in Maharashtra State, the Cogentrix-MPC project has, rather unabashedly, won the consistent and active support of five successive Chief Ministers of Karnataka, across two Governments of different political parties, over eight years. Mr Deve Gowda, former Chief Minister of Karnataka who went on to become Prime Minister of India for a brief period during 1996-97, has been especially targeted with serious allegations of corruption and deep political interference over the deal. Mr George Fernandes, Union Defence Minister, and Ms Maneka Gandhi, Union Minister of State of Social Justice and Empowerment in the present BJP led Government at the Centre, have both alleged that Mr Gowda benefited directly from the deal through deep political interventions and processes.

Fernandes, who was a Member of Parliament in the Opposition during the tenure of Deve Gowda as Prime Minister, had even moved a privilege motion stating that the Prime Minister had clearly resorted to misleading the house in defending the deal (Times of India, 19 July 1996). Just before this, a major controversy had also erupted when Maneka Gandhi had linked Deve Gowda to a Rs. 100 crore corruption scandal centred around the Cogentrix backed MPC project. At the time, Maneka Gandhi was a Member of Deve Gowda’s Janata Dal, and in retaliation for her remarks, she was promptly targeted and summarily dismissed from the primary membership of the party for damaging the prestige and dignity of both the party and the United Front Government (The Hindu, 3 July 1996). In justifying her stance, she had stated that:

‘It is not I who have brought embarrassment upon the party but the person who authorised the deal … What is damaging to the reputation of the party is that the Cogentrix deal should have been pushed through in such a furtive manner, ignoring the interests of the rural community whom we claim to represent’ (The Hindu, 3 July 1996).

Gandhi further substantiated her open opposition to the project and her targeting of Gowda in an article she wrote for the Times of India: 

‘In spite of opposition from local people, senior environmental bureaucrats and all political parties, the Cogentrix deal file was sent by the Chief Minister to the MOEF at the Centre for clearance. Here, it went to several technical committees, which carried out site-inspections. The project was not cleared’ (Times of India, 13 July 1996). 

Nevertheless, ‘as soon as the Prime Minister of the United Front, who was till recently the Chief Minister of the state that had forwarded the file, assumed office, he was careful to keep the environment portfolio with him. The Cogentrix file was asked for by the PMO (Prime Minister’s Office) and within two days of the assumption of office, the project was passed’ in highly controversial and unacceptable, deep political circumstances (Times of India, 13 July 1996). Justifying her attack at the unseemly haste by which the project was accorded environmental clearance, Gandhi had concluded her article with the following comment: 

‘(S)ince this is the first act of the Prime Minister and the United Front Government, it will set the tone for the party’s future actions and its attitude towards law and financial transparency. It is against the principles of natural justice that the same person should forward the proposal and then, even after its rejection by scientists, should pass the file  without any objective evaluation’ (Times of India, 13 July 1996).

Whilst Gowda, as Prime Minister, consistently denied that he had cleared the project, Assadi confirms that ‘a submission of the Karnataka Chief Minister that he (Gowda) had signed a PPA’ for Cogentrix-MPC, would seem to suggest ‘that either the Prime Minister or the Chief Minister has bungled’ – i.e. clearly lied over – ‘the issue’ (Assadi, 1996, 2129).

Cogentrix also sought to quash Gandhi’s charges by stating that the MPC deal was ‘as clean as a whistle from the corruption angle’ (MPC, as quoted by The Deccan Herald, 6 August 1996). In a point by point rebuttal, the company - seemingly forgetting that it had been recently exposed in a corruption and deep political scandal in Puerto Rico - claimed that it could not be charged on any corruption grounds because it had never, as a company, indulged in any unethical business dealings at any time and had never paid kickbacks of any kind to any government. As an American company, Cogentrix had stated that it was subject to a Foreign Corrupt Practices Act, which had ensured that its executives could not indulge in any corrupt activities anywhere. Any corruption charges, it stated, were consequently entirely baseless, needed to be ignored and merely served to needlessly politicise the project (Deccan Herald, 6 August 1996).

Refer to Fernandes, D (1996) and Meyn (1996).

To George Fernandes, however, the nature of Cogentrix’s rebuttal appeared to be questionably geared towards distracting public attention away from his and Gandhi’s central contentions. In response to Cogentrix’s public relations drive, he continued to insist that corrupt, deep political interventions had taken place, and demanded that a probe be officially undertaken in order to expose the true nature of the deal. In a Press Conference held in Bangalore during October 1996, he revealed the contents of a letter he had written to Prime Minister Deve Gowda which questioned the exceedingly fast pace at which the project had received clearances soon after the latter’s United Front Government had assumed power at the Centre. In the letter, he made scathing attacks against the ‘very crude and brusque’ manner by which Gowda had dismissed ‘the various objections raised by several concerned citizens over this project, including those by the local people of Dakshina Kannada district and by environmentalists’ (Fernandes, 1996).

Basing his charges of corruption against Gowda on an analysis of the balance sheets of a TNC involved with the Cogentrix project (China Light and Power - CLP), he clearly accused Gowda of being:

‘the Chief Minister of Karnataka between July 1995 and 30 September 1995 when the money from China Light has come in as kickbacks. I suggest that, as Prime Minister, you order an immediate investigation by a joint committee of parliamentarians or by a sitting judge of the Supreme Court, to find out who was the recipient of these kickbacks … As of now, the needle of suspicion points towards H. D. Deve Gowda, the then Chief Minister of Karnataka’ (Fernandes, 1996).

See also Ravindran, 1997.

As the Hindu has reported:

‘Mr. Fernandes said that in view of the fact that China Light had confirmed that part of the so-called development expenditure had been incurred on the Indian project, while refusing to specify the amount and break-up, there was a reasonable presumption that substantial amount of money was spent in India, which cannot be accounted legitimately. At that point of time (1994-95), these expenses could not have been incurred otherwise than bribes or kickbacks. According to the latest records available with the Registrar of  Companies, China Light did not hold a single share in MPC (at the time) and therefore it had no legitimate reason to incur expenditure on the project, he added’ (Hindu, 18 October 1996).

The questionable role of Mr S Bangarappa in the Cogentrix-MPC affair has also been the subject of debate. As Chief Minister of the Congress led government, he had signed the Memorandum of Understanding (MOU) with Cogentrix. He had also made it publicly clear that ‘he took strong exception to (any) objections against the 1000 MW power plant’ (Indian Express; 31 July 1995) and stated that such acts raised a needless ‘hue and cry’ and directly opposed the interests of the state: ‘Objections and controversies would only affect efforts to attract foreign investment’ (as cited by The Indian Express, 31 July, 1995). When he was removed from power due to a political shake-up and allegations of corruption during his rule, there was talk of reviewing the Cogentrix deal. However, his successor from the Congress party, Veerappa Moily, proceeded to sign the PPA with Cogentrix, claiming that any re-negotiation would send the ‘wrong signals’ to foreign investors.

Mr Bangarappa is presently undergoing an investigation by the CBI on various charges of corruption during his tenure as Chief Minister of Karnataka.

Soon after the court directed an enquiry into the Cogentrix deal, Mr. Verrappa Moily was the first politician to publicly state that he had not received any pay-off from Cogentrix. The judgement is discussed in the following section of the paper.

J H Patel has also been repeatedly criticised for his highly questionable support for the project, both as Power Minister of Karnataka when Deve Gowda was Chief Minister - and major features of the deal were concluded - and later as Chief Minister, when he succeeded Deve Gowda. Parvathi Menon, for instance, has clearly implicated Patel in an expose of the way in which the CEA provided in principle clearance to the Cogentrix linked MPC project through questionable and corrupt, deep political means. According to Menon, the then Karnataka Power Minister, J H Patel, has conceded that clearance was, indeed, rushed through primarily as a consequence of clear pressure being exerted by the then State Chief Minister, Deve Gowda. The Chief Minister’s ‘political step’ - which initiated such pressure - subsequently resulted in a ‘clearance’ being granted through illegal, and clearly corrupt, deep political means (Menon, 1995, 118).

As acknowledged by J H Patel - cited in Menon, 1995.

As The Times of India has confirmed, the Chief Minister did questionably attempt to pressurise the Environmental Clearance Committee (ECC) into passing the project irrespective of any concerns it might have: 

‘I do not want to search for omissions and commissions. I want to see the project through ... I have taken a stand that the power project should not be delayed ... In principle, the Cogentrix project will be cleared in the next three to four days’ (as quoted by The Times of  India; 25 July 1995). 

The Hindu further confirms that the Chief Minister seemed to wish to disturbingly treat the ECC’s deliberations as a mere ‘formality, what with the Chief Minister ... himself indirectly bringing pressure on it by repeatedly mentioning that the environmental clearance to the project would be granted in a couple of days. The Chief Minister, who was in Singapore (on July 25th, 1995), made a similar statement even on Monday’ (The Hindu, July 26, 1995). When such pressure failed to effect the desired response, a cover-up/disinformation campaign was effected. It was falsely claimed that the ECC had passed the project. Clearances were then provided upon the basis of this falsehood.

The first stage of the environmental clearance was, indeed, accorded on 25 July 1995 by way of granting a ‘No Objection Certificate’ (NOC) from the Karnataka State Pollution Control Board, an ‘autonomous’ body which has been repeatedly accused of being subservient to political pressures and of being complicit in the undertaking of corrupt practices which serve to benefit major decisions of the Karnataka Government.

As Menon clarifies: 

‘The environmental clearance for the Cogentrix project ... was not given by the ECC as claimed by the Karnataka Government. The ECC, in fact, had raised serious objections and refused to sanction the project’ (Menon, 1995, 118). ‘It was on the basis of a No Objection Certificate (NOC) given by the Karnataka State Pollution Board (KSPCB) that in principle clearance was given by the CEA for the 1000 MW power plant ... The KSPCB issued this certificate (only) after its report was supposedly cleared by the State ECC. It now transpires that the ECC, in fact, did not clear the project but raised objections to several points put up by the KSPCB relating to environmental safety of the project’ (Menon, 1995, 118). 

The ECC was then headed by Mr A N Yellappa Reddy. It had rejected the project on environmental grounds. For this, Mr Reddy was targeted and eventually forced into resigning his position. This instance is discussed later.

To Menon, it is consequently difficult to ascribe any justifiable and above-board reason for such stubborn and uncritical support for the project, despite mounting criticism and public concern (Menon, 1995). The Environment Support Group further notes that governmental support for Cogentrix’s project continued through into the late 1990s, even after it was apparent, by the company’s own accounts, that it was in debt to the tune of US $ 1.5 billion.

This figure comes from the 1998 Annual Report of Cogentrix (ESG, 14 December, 1999, 1).

5. Agarwal and Kantha’s PIL and the Ensuing Judgement on Corrupt and Deep Political Interventions
Allegations of corruption were raised by Agarwal in a PIL before the High Court of Karnataka. Mr S K Kantha, the Karnataka Chief of Fernandes’ Samatha Party, backed these allegations. The Court admitted the same as a PIL in the manner of a Writ Petition No. 10696 of 1997 (hereinafter cited as WP 1997). In an extensively argued judgement that exercised great care in detailing and analysing the controversial facts of the deal, the Bench held ‘that the circumstances noted herein’, as in the petition, ‘cannot be termed to be frivolous, baseless, concocted or referred to (as) malafide’ as the respondents had claimed, or used ‘only for the purpose of defaming the respondent foreign company’ (Agarwal vs. State, 173).

As the Justices explained:

‘Tons of papers and tanks of ink (which) have been utilized in the pleadings of the case which are argued by distinguished Advocates of national eminence (on behalf of the petitioners) for days before us and in the light of rival contentions regarding the circumstances enumerated … also persuades us to have a prima facie view that all, many or any of the respondents along with others may on probe and investigation be ultimately found triable for many, any or few of the offences referred to and highlighted by the petitioners … (N)o benefit of doubt can be given to the respondents at this stage. 

Investigation cannot be shut or facilitated to be closed on technical pleas couched in sweet, attractive and glittering capsules of artful advocacy. Both sides of the coin are required to be tested by the experts in the field. Judicial caesarean is necessary for diagnosing the disease noticed in the beginning (of the judgement), for protecting, safeguarding and nourishing the developing democracy and the Rule of Law in this great country known as Bharat’ (Agarwal vs. State, 173-174). 

The judgement, in fact, commenced with an analysis of the repercussions of deep political processes and corruption on civil society: 

‘(C)orruption in a civilised society is a disease like cancer, which if not detected in time is sure to malign the polity of (the) country leading to disastrous consequences ... It has also been termed as royal thievery. The socio-political system exposed to such a dreaded communicable disease is likely to crumble under its own weight. Corruption is opposed to democracy and social order, being not only anti-people, but aimed and targeted against them. Unless nipped in the bud at the earliest, it is likely to cause turbulence, shaking the socio-economic-political system’ (Agarwal vs. State, 4). 

The court concluded that it was ‘satisfied that a prima facie case has been made out’ by Agarwal which ‘requir(ed) further probe and investigation for allaying the apprehensions conceived by the petitioners and other citizens’ (Agarwal vs. State, 174). On such a basis, the court ordered ‘the respondent state’ of Karnataka ‘to get a First Investigation Report (FIR) registered with the CBI’ towards initiating the process of investigation ‘for various cognisable offences without naming any person or group of persons as accused’ (Agarwal vs. State, 177). Such investigation, the court felt, ‘shall not be influenced by any of the observations made’ by the court and shall ‘be conducted by an Officer under the supervision and direct control of an official not below the rank of Deputy Director General of the CBI’ (Agarwal vs. State, 177). The court directed that: 

‘such investigation shall be commenced without any delay and completed within one year from the date of registration of the FIR ... Monthly progress reports of the investigations shall be submitted by the Investigating Officer to the Registry of this Court in a sealed cover’ (Agarwal vs. State, 176-177).

In arriving at its decision, the judgement had carefully sought to detail the way in which ‘a seminar on power generation was held in India’ in June 1992 in which Cogentrix ‘was invited to attend’ and officially ‘introduced to the Government of Karnataka’ (Agarwal vs. State, 118). A month later, ‘a draft MOU was submitted by Cogentrix’ (Agarwal vs. State, 106). Within a fortnight and ‘before getting the draft MOU examined, the state cabinet is alleged to have approved the entering into the MOU’ with Cogentrix (Agarwal vs. State, 118).

The judgement established, beyond reasonable doubt, that this decision was also questionably undertaken without having issued any tenders internationally or nationally to other prospective power producers. By 30 July 1992, less than a month after the draft MOU was submitted by Cogentrix, it was noted that ‘the MOU was entered with Cogentrix’ (Agarwal vs. State, 107).

Petitioners Agarwal and Kantha, the judgement confirms, were of the opinion that ‘everything was not well in arriving at a settlement’ for the 4,200 crore rupee project, in which ‘all efforts were made’ - in violation of rules and norms associated with what is perceived to be the general interest (or public ethics) in society – ‘to confer undue largess upon the said company at the altar of national interests. Various discrepancies’ and irregular, deep political, secretive actions ‘regarding the submission of the MOU, its approval and ratification’ were clearly identified (Agarwal vs. State, 119, 120-124).

Approximately converts to US $ 1.3 billion at then existing rates.

Chief Justice Sethi and Justice Gowda’s judgement, drawing upon Agarwal and Kantha’s concerns, additionally queried how ‘this MOU could have been entered on 30 July, 1992’, whilst a delegation led by then Karnataka Chief Minister S Bangarappa, that included the Secretary of the Energy Department, the Principal Secretary to the Chief Minister, the Director of the Industries and Commerce Department and the Resident Commissioner of Karnataka, was ‘allegedly (still) contacting … foreign companies (overseas) and discussing with them their proposals and offers to construct, own and operate power plants in Karnataka’ (Agarwal vs. State, 124).

Other questionable issues were also covered: On 10^th August 1992, the Cabinet is stated to have been informed that an MOU had been signed with Cogentrix for two 250 MW power projects, at Bangalore and Mangalore respectively. This MOU is reported to have controversially enabled Cogentrix to enter co-sponsorship deals with other investors. Soon after, Mehta additionally notes that ‘the Government of Karnataka signed two MOUs with Cogentrix in the US for two plants’ - now of the higher order of ‘500 MW capacity each at Mangalore and Bangalore respectively. In express violation of its own orders, the Government of Karnataka in the MOU with Cogentrix’ again appeared to have ‘allowed Cogentrix to bring in any partners they wished. Additionally, in another explicit violation of the Government of Karnataka’s orders, the MOUs signed with Cogentrix were for two 500 MW projects. The government had only (formerly) sanctioned two projects of 250 MW capacity. These are not trivial errors. The additional 500 MW capacity would mean payments of Rs. 30,000 crore’ (Mehta, 1999, 129).

With a new state government assuming office on 19 November 1992, an undertaking was made to review all MOUs in order to ‘make sure that the selection of parties for the power projects was through adequate publicity, to ensure fair play and protect the good name of the administration’ (Mehta, 1999, 130). However, as Mehta notes, ‘these motives’ and initiatives ‘were given short shrift by specific officers of the central government’ (Mehta, 1999, 130). On 3 March 1993, instead, another MOU was issued wherein a surprisingly much larger 1000 MW thermal plant at Mangalore (and promoted by Cogentrix) was approved and permitted. As noted in the verdict, ‘the circumstances under which the MOU was initiated, negotiated, settled and concluded are allegedly not free from doubt’ (Agarwal vs. State, 131).

As Agarwal and Kantha have argued, the first questionable, deep political aspect of the MOU relates to the closed and secretive way in which Cogentrix was awarded the contract for the Rs. 4200 crore project and accorded with a sovereign counter-guarantee, and this without recourse to any national or international tendering process or open, public scrutiny. Shockingly, this deal was executed at a time when it was publicly known that the company had been clearly and actively engaged in:

1 crore = 10,000,000; Rs. 70 = 1 pound sterling (approx., August 1999).

(a)	The promotion of a highly questionable and excessively costed power project proposal in the USA which was vigorously and successfully opposed on health and safety, environmental and economic grounds by public interest groups, members of the public, the US Parks Service and the Tennessee Valley Authority (McGraw Hill Inc., 1994; Fernandes, 1996).

(b)	Bribery and corruption in Puerto Rico, where it had similarly been attempting to push through a controversial proposal (Fernandes, 1996; Meyn, 1996). As Marianne Meyn has noted, Cogentrix’s behaviour was nothing short of scandalous, as actions were taken to corrupt governmental and other political processes, and reduce the democratic spaces through which public interest bodies and people’s movements could operate. US $15 million, according to Meyn, was invested by a Cogentrix-Endesa consortium ‘in bribes … Those with a taste for detective work uncovered dishonest advertising by the consortium; lawyers successfully defended harassed activists such as the geology professor who was sacked for pointing out that the plant was going to be built on a geological fault; opportunists with some conscience denounced the bribes they had been offered … Heads of agencies (were bought and) injunctions (were placed) to restrict the public expression of people’s feelings’ (Meyn, 1996, 168, 177).

According to Agarwal and Kantha, ‘the selection of Cogentrix’ by a clique of Indian politicians, through this questionable, closed tendering, liberalisation process ‘was … with the oblique motive of finding out a party for the ulterior purpose of creating circumstances to facilitate the receipt of undue pecuniary gains at the costs of the national interests and its economy’ (as quoted in Agarwal vs. State, 139). With documented evidence of bank transactions in British Virgin Island accounts, they argued that the liberalisation policy and strategy through which Cogentrix was selected, resulted in a situation in which ‘bribes’ were paid, ‘amounting to whole or part of Hong Kong $ 122 million in the year 1994-5 and Hong Kong $ 69 million in the year 1995-6’ (WP 1997, 2).

These bribes, in Agarwal and Kantha’s opinion, were used to push through the highly questionable mega-project in Padubidri, Nandikur and surrounding villages (near Mangalore on Karnataka's west coast), at a time when it was being vigorously opposed on a number of ethical, cultural, human rights, environmental and economic grounds by local fishing and agricultural communities in the district, environmentalists, public interest and local community groups. As elucidated in their petition, Cogentrix, as part of its initiative to proceed with the tendering, financing and management of the mega-project, promoted and incorporated an Indian Company on 3^rd March, 1994, called the Mangalore Power Company (MPC). MPC was to assume all legal responsibilities for the promoters of the project in the future.

Cogentrix and General Electric of the USA were presented in subsequent transactions as the joint partners, investors and co-sponsors of MPC when official approval for the 1000 MW mega-project was sought and gained from the Karnataka Electricity Board (KEB - via a PPA) and the Karnataka State’s Secretariat for Industrial Approval. Yet, as Agarwal and Kantha reveal, this company, which incredibly sought and obtained these requisite approvals for a Rs. 4200 crore mega-project with a paid up capital of only Rs 2000/- (a highly questionable issue in itself - a sum of less than UK £30 at 1999 exchange rates), apparently did so in a highly deceptive manner (WP 1997).

On 30^th September 1994 - As detailed in WP 1997, 8.

On 11^th May 1993 - As detailed in WP 1997, 6.

Although General Electric had been named as a co-sponsor and arrangement partner of Cogentrix in MPC - in order to secure the PPA and other agreements and official approvals – 

‘in reality General Electric at no point of time owned any shares in MPC … General Electric d(id) not have any Director on the board of MPC … However, MPC (again, even) submitted a techno-economic feasibility report in which MPC was described as a subsidiary of Cogentrix and General Electric in January 1995 ... This clearly shows that the name of General Electric was deliberately misused by both Cogentrix and the (Karnataka) Government to lend credibility to the agreement’(WP 1997, 7, 10).

As Agarwal and Kantha clarify, such actions and declarations are clearly and legally of a corrupt nature. Under Section 4 of the Companies Act, MPC could not be described as (General Electric’s) subsidiary company (WP 1997). Chief Justice Sethi and Justice Gowda, in evaluating the basis of these contentions, confirmed in their High Court judgement that ‘the(se) allegations (of corruption and deep political processes) made by the petitioners in this regard cannot be held to be either imaginary or concocted, or motivated or devoid of any substance’ (Agarwal vs. State, 139).

Further scandals were outlined in the petition: The Government of Karnataka would appear to have entered into an agreement with Cogentrix Energy to proceed with the mega-project during 1993 - via MPC - even at a time when it was ‘not a listed company even in the USA and had no balance sheet’ (as quoted in Agarwal vs. State, 138). Moreover, the Government appears to have proceeded with its dealings with Cogentrix, and its aggressive endorsement, encouragement and promotion of the MPC project, in spite of the following situation: 

It had no balance sheet due to the fact that it was incorporated as a company with that name (Cogentrix Energy) as of 1993. It claims to have been the legal successor of Cogentrix Inc., which was established in 1983.

‘The debt equity ratio of the company was 19.2:1 which is alleged to be nearing total bankruptcy. Under normal circumstances, such companies are stated to not be in a position to raise financial resources on their own strength to meet the requirement of a mega-project. It is contended that (Cogentrix) did not even have the money to fund its own equity commitment in the MPC project’ (Agarwal vs. State, 138). 

See also WP 1997, 13.

To Agarwal and Kantha, the above facts clearly indicated that politicians acting on behalf of the Government of Karnataka - by seeking to nevertheless continue providing Cogentrix (via MPC) with MOUs and resources of access and influence which were far superior to those which would normally have been available to other companies in the course of open dealings - were clearly engaged in corrupt and deep political dealings and receiving kickbacks.

The petition, equally disturbingly, documented the way in which the Government ignored the advice of its own consulting team, which recommended against signing the PPA with MPC due to clear irregularities: ‘(T)he Government of Karnataka in 1994 commissioned a (SAIC) study to review the PPA for the Mangalore Power Project. The consulting team comprised of GOPA (Germany), SAIC (Science Application International Centre) of USA and TERI (Tata Energy Research Institute) of India. The very commissioning of a team of experts to review the PPA of MPC at a sizeable cost to the Exchequer shows that neither the Government of Karnataka nor the KEB (Karnataka Electricity Board) possessed the expertise to negotiate the PPA. Nor were (they) in a position to apply their mind ... It is significant to note that the report was never made public’ once it became apparent that it had expressed severe concerns over the nature of the PPA. Nor were the recommendations and findings of these independent experts taken on board. These governmental actions, Mehta concludes, are questionable when one realises that ‘the central government … in January 1994 … made it a pre-condition to have the PPA vetted’ - i.e. approved - by this very team of ‘independent experts for issue of sovereign guarantee for the obligations of the state electricity board’ (Mehta, 1999, 131).

The cost of this review was estimated at US$ 100,000. A part of the amount not used was returned to the State by SAIC, as revealed to the second author by Dr Rohini K Mattu of SAIC, the principal author of the report, in a telephonic conversation during 1996.

According to Ranganathan and Mehta, the SAIC reports’ main findings suggested that incentives for cost minimisation in the PPA were distressingly absent. Most of the terms of the PPA, moreover, were clearly one-sided, unduly favouring MPC:

‘Consider just one single observation. The report after examining the technical aspects of the project concluded that the heat rate of the generating units was too high compared to that of international plants with equivalent capacity. What the technical jargon boils down to is that on this single item, Cogentrix was either getting in second-hand or hopelessly outdated equipment, or that if it were using state-of-the-art equipment, it stood to gain about Rs. 70 crore a year as hidden profits on this single account. Additionally, the padding in the capital cost and other such factors would add very substantially to the company’s profits at the expense of the exchequer’ (Mehta, 1999, 131).

Such was the fear over the implications of such a critique, that the Government, through deep political actions, suppressed an ‘occasional good work ... by resorting to a thick veil of secrecy’ (Ranganathan, 1997, 64). As Agarwal and Kantha confirm: 

Part of the responsibility for this report remaining secret could rest with Tata Energy Research Institute of India (TERI). Despite being fully aware of the controversies involved in the project, TERI, in contrast to their stated claims of being a public interest research agency, chose not to publicly reveal the serious concerns raised in the report over the Cogentrix PPA. Express India (<http://www.expressindia.com>, official website of the Indian Express Group of newspapers) organised a ‘web chat’ on 21 September 1998 with Dr R Pachauri on issues related to the power sector. The second author participated in this chat and enquired why TERI had chosen to remain silent about the study findings, especially when it revealed serious threats to the wider public interest involved. Dr Pachauri skirted this issue completely, and offered a rather tame response that ‘the Govt. of Karnataka made good use of (our) report …’

‘The findings of the (SAIC) study, commissioned by the Government of Karnataka to review the PPA at a cost of US $100,000, were deliberately suppressed and were not made public. The study had shown cost padding (i.e. excessively inflated figures) at various stages and the exceptionally high rate of return offered to MPC …

The report has only been brought into the public domain as a result of the efforts of the second author of this article.

The fact that the Government and KEB disregarded - (indeed, suppressed) - the report and negotiated the (controversial) PPA with all the cost padding leads to the suspicion that the study to review the PPA was commissioned only for extraneous reasons … 

Such massive benefits in a contract favouring the power developer can only be negotiated on the basis of kickbacks. The cost of the exorbitant power will have to be borne by the consumers year after year because some of the key decision makers were more interested in their petty kickbacks without, (or despite), realising the full implications of the decision and the cost that the future generation will have to pay’ (WP 1997, 30, 33). 

These revelations would appear to directly challenge Ron Somers’ contention that there was nothing ‘hanky panky’ about the signing of the draft PPA, as it was conducted in a ‘transparent’ fashion which ‘could be a role model’ for other PPAs (As cited by The Hindu, 27 July 1995).

Agarwal and Kantha’s petition also drew attention to the following deep political and corrupt actions which were ‘suggestive of kickbacks, payoffs and bribes which are offences under our laws’ (WP 1997, 29):

1)	It would appear that MPC submitted ‘bogus’ balance sheets for the financial period between 3^rd January, 1994, and 31^st March, 1995, despite agreeing to an undertaking with the government that it would ‘keep proper records in which full and correct entries shall be made of all dealings and transactions under this agreement and in relation to its other business and affairs. Such books and records shall be kept in compliance with all applicable laws’ (WP 1997, 36). Arthur Anderson and Associates, the international consulting firm, audited these figures and is accused of being a party to corrupt practices and deep political processes, which sought to promote MPC in a particular way by concealing certain financial transactions. 

As Agarwal and Kantha note, Arthur Anderson’s audit of MPC ‘does not show any expenditure for the 15 month period though Rs. 37,480/- has been paid towards incorporation of the company alone as evidenced by the receipt of the Registrar of Companies. During the relevant year, the PPA was signed between the Government of Karnataka on 30^th September, 1994 and the company was also maintaining an office with staff and the fees of the auditor and management fees also accrued during the year. Strangely, the balance sheet of the relevant period shows total funds as Rs. 2000/-, which is shown as deposited in the bank. This clearly shows that the balance sheet is a fictitious one and the auditor cannot be relied upon for uncovering any bribes that may have been paid, specially when they have failed to account for even the legitimate expenses. Given the fact that M/s Arthur Anderson were involved in the incorporation of MPC and are also auditors of Cogentrix in the USA, it is reasonable to presume that they are in active abetment with the company in the preparation of bogus accounts in violation of FERA (Foreign Exchange Regulation Act), Company Law, the Undertaking given in the PPA, and Accounting Standards as prescribed by the Institute of Chartered Accountants … The balance sheet of MPC, audited by its auditors (Arthur Anderson and Associates), lacks credibility’(WP 1997, 21, 22, 26).

2)	MPC is alleged to have officially described itself at a later date as a subsidiary of China Light and Power (CLP), when this could not have legally been the case. As Agarwal and Kantha have noted, this strategy would have been used to further legitimise and promote MPC’s credentials in India through deceptive practices: ‘Though MPC has been described as a subsidiary of CLP in the detailed project report submitted to the Government in October 1995, CLP did not hold a single share in MPC, as per the records available with the Registrar of Companies’ (WP1997, 25).

3)	‘There was no competitive bid and the project was negotiated bilaterally and, therefore, the Karnataka Electricity Board (KEB) enjoyed arbitrary discretion in conferring undue financial benefits on MPC by permitting it to overprice the entire project cost and fuel cost’ (WP 1997, 27).

4)	‘No due diligence was done on the balance sheet (by the Government of Karnataka or KEB) which would have revealed that Cogentrix was a company with a paid up capital of Rs. 45 Lakhs and a debt equity ratio of 19.2:1 … It is clear that Cogentrix did not have the financial means to put up even 10% of the equity of MPC. The balance sheet of Cogentrix itself is sufficient proof of non-application of mind’ (WP1997, 27) on the part of the Government and KEB. ‘If the lack of capital (in India) was the reason (for the Government) entering into bilateral negotiations (as officially stated in its liberalisation policy), then there was a duty to examine the financial capabilities of Cogentrix, vis-à-vis Karnataka Power Corporation (KPC), National Thermal Power Corporation (NTPC), and various Indian producers in the private sector. For example, Tata (Indian) Electric Companies have a debt equity ratio of 0.8:1 and are capable of putting up 1000 MW power projects each year and also capable of borrowing money in the national and international market at a much cheaper rate than Cogentrix even without sovereign guarantee’ (WP 1997, 28).

5)	‘The shifting of half of the project from Bangalore to Mangalore was done deliberately to facilitate the justification of using imported coal (which would derive greater profits to MPC) as fuel stock’ (WP 1997, 30).

6)	‘The original MOU entered into with Cogentrix provided for sale of electricity directly to industries and not to KEB which was later revised to the sale of the entire electricity directly to KEB. This was done deliberately as there was no market for direct supply of cost padded and expensive electricity to the industry’ (WP 1997, 30). ‘This single decision’, observes Mehta, ‘involves guaranteed payments of over Rs. 2000 crore a year for a period of thirty years, i.e. a guaranteed purchase order of Rs. 75,000 crore, to a company whose total equity was (only) Rs. 45 lakh’ at the time (Mehta, 1999, 130).

7)	‘Though neither General Electric Capital nor CLP held any shares in MPC (during a crucial period in which negotiations were taking place), MPC was allowed to misrepresent that it was their subsidiary while submitting the techno-economic feasibility report in January 1995 and October 1995 respectively’ (WP 1997, 31).

8)	‘The Government is now proposing as per newspaper reports to invest over 100 crores as equity in the MPC project which is going to be higher than the actual investment of Cogentrix in the project. This clearly shows that the government itself (wa)s capable of implementing this project’ without any recourse to Cogentrix (WP 1997, 31).

9)	The state, in pursuing the MPC project, has endorsed deep political processes which are directly ‘now subjecting KPC (the state-held Karnataka Power Corporation) to hostile discrimination’ (WP 1997, 32).

10)	‘Complete discretion was given to MPC in selecting the Construction Management Contract, subject to its production of 5 international bidders of which 3 were short-listed. This has enabled the promoter to produce sham bids and select the equipment that gives it the maximum cost padding, or select equipment that suits the interest of CLP (which has since become an official promoter of MPC) which is facing a massive demand recession’ (WP1997, 32).

11)	In successive negotiations, MPC has been able to alter/misrepresent the fuel rates in its PPA calculations. To Agarwal and Kantha, ‘the fact remains that if MPC can misrepresent the fuel rate which is a scientifically verifiable fact, it is clear that the company is not in good faith and is out to cheat the consumers as far as possible’ (WP 1997, 34).

12)	‘Evidence has been provided regarding bribes paid through British Virgin Island ... These may only be a part of the total kickback. The prima facie evidence provided requires further investigation by independent investigative authorities like the Comptroller and Auditor General … the Enforcement Directorate … and the CBI’ (WP 1997, 40).
It was upon the basis of these well documented arguments and allegations of corruption by the petitioners that the High Court held that there were reasons which were significant enough to require further probe and investigation by an officer not below the rank of Deputy Director General of the CBI (Agarwal vs. State). All parties referred to in the corruption petition, inclusive of the Central Government and the State Government concerned, were to furnish all necessary information to the investigating agency. Cogentrix, Arthur Anderson, General Electric and CLP were all requested to render all possible assistance in the completion of the investigation by the High Court (Agarwal vs. State, 177). 
However, as Saldanha, Fernandes and Mathai have observed, the Government of Karnataka, rather than complying with the High Court’s ‘order (Agarwal vs. State) to uphold the public interest and herald a process of transparency in decisions relating to this project in a critical sector as energy development … preferred an appeal against the judgement in the Supreme Court of India. It claimed that such actions (i.e. the CBI probe) would scare away investors’ (Saldanha, Fernandes and Mathai, 2000, 12). Karnataka’s then Law Minister, M C Nanaiah, also claimed that the Court had no jurisdiction to issue such an order as ‘it is the prerogative and special provision of the state government (alone) to accord permission for a CBI probe’ (Indian Express, March 1998). Agarwal and Kantha, for their part, strongly contested the basis of the government’s defence in their own Special Leave Petition before the Supreme Court of India. They also filed several rejoinder statements. 

The Special Leave Petition and other related material can be downloaded from the website <http://www.altindia.net>.

6.	Appeal to the Supreme Court
The Supreme Court Bench, lead by then Chief Justice M M Punchi, stayed the High Court verdict on 3 April 1998. A Supreme Court judgement was made on 13^th December, 1999, by Justices Saghir Ahmad and Rajendra Babu. Controversially, the Business Standard notes that ‘details of the judgement could not be ascertained’, initially, ‘as the copy ha(d) not been released by the Court’ (Business Standard, 1999, 1).The judgement, when it was pronounced, was greeted with dismay in some quarters. It – naively and controversially to some – sought to strangely argue that ‘it (wa)s difficult’, at the outset, to even begin ‘to visualise that when an agreement had been entered into with a foreign company, it had been done under suspicious circumstances’ (State of Karnataka vs. Arun Kumar Agarwal 1999 SOL Case No. 735) 

Hereinafter referred to as State vs. Agarwal.

Such naivete is truly startling, given the rash of public exposes over the past few years – from Bofors and Sukh Ram to GEC Alshom – which have clearly detailed tens of corrupt transactions between ‘foreign companies’ and Indian government departments and politicians from differing political parties. S S Gill’s (1998) book, The Pathology of Corruption, for instance, details a whole range of such suspicious and corrupt, deep political actions. The Supreme Court judgement further stated that this concept - of there being any ‘suspicious circumstances’ in an agreement with a foreign company – was even more difficult to fathom ‘when it (i.e. the project proposal) had stood the test of scrutiny under three different governments headed by at least three different Chief Ministers’ (State vs. Agarwal). The judgement then, controversially to some, challenged and overturned the High Court’s previous orders and opinions on the grounds that:

To provide just some notable examples which the Justices must surely have been aware of, as they made their statement: ‘Once (Surendra Jain’s) reputation had been established as a friend of (Indian) ministers, foreign companies started approaching him for help in clinching their contracts with various (government) ministries. He had two interests in thus lending his good offices. One, as per prior understanding, he obtained the sub-contract for erection and fabrication work if his intervention fructified. Second, he got his commission for the services rendered. This included a kickback for the concerned minister and officials. For instance, in his famous statement made to the CBI on 11^th March, 1995, he explained how he helped (the foreign company) GEC Alshom bag the contract for the Kawas Project in Gujarat. The case was pending with the energy minister, Arif Mohammed Khan, and Jain got orders issued in favour of the company. In return, Jain got the sub-contract … and a commission of Rs. 10 crore. He had the amount transferred to India … and paid Rs. 6.5 crore to the minister out of this amount … The CBI investigation revealed that he had bagged more than 22 contracts for steel and power sectors. It was these contracts and the commission he got from foreign companies which gave him the money to cultivate high political contacts, and hawala was only a means of playing the game’ (Gill, 1998: 106). A further 29 page statement by Jain to the CBI on 11^th March, 1995, had clearly implicated ‘a number of senior Congress ministers and leaders of other political parties’ in a range of his corrupt dealings (Gill, 1998:108).

‘the High Court ha(d) looked at different circumstances in the case with a jaundiced eye … We think that the order made by the High Court has got to be set aside … The foundation laid for the whole case arises out of suspicion alone on the strength of dubious and amorphous material. On such material, no case can be registered, much less, an investigation can be done … None of the thirteen circumstances noticed by the High Court can be characterised as giving rise to any suspicion, much less a basis for investigation by a criminal investigating agency’ (State v Agarwal).
In commenting on this judgement, Saldanha, Fernandes and Mathai note that ‘the High Court had argued its judgement over 178 pages, and the Supreme Court’s overruling of the same consisted of 11 pages. Ten of those included reporting of proceedings’ (Saldanha et al, 2000, 17). Arun Agarwal, on hearing of the decision, also refused to let matters rest: 
‘I will approach the US Attorney General to prosecute Cogentrix under the Foreign Corrupt Practices Act (FCPA). The FCPA of the US bars any company from paying bribes, etc., to win contracts in foreign countries’ (as quoted by Nag, 1999, 5). 
Karnataka Chief Minister S M Krishna’s perspectives on the matter were altogether different: 
‘I am thankful to the Supreme Court’ (Times of India, 1999). 
To Ron Somers, MD of MPC: 
‘The verdict by the Supreme Court vindicates what we have said from the beginning - That the allegations against us are frivolous and baseless’ (Nag, 1999, 5). 
MPC, in a press statement, noted that the verdict:
‘vindicates what we have said from the very beginning … We are pleased that our names are finally cleared and that justice has ultimately prevailed’ (as cited by The Asian Age, 14 December, 1999). 
Strikingly, one notes that the Supreme Court verdict was pronounced the weekend after Cogentrix had formally announced its decision to pull out of the MPC project, claiming protracted delays as its reason (Cogentrix, 1999).

7. Sabhapathy's Allegations of Corruption Involving MPC and Cogentrix
Even as MPC and Cogentrix have sought to publicise the fact that the Supreme Court judgement has exonerated them from any charges of corruption, evidence from other quarters has, yet again, challenged their view that the project and its clearance has been ‘as clean as a whistle from the corruption angle’ (as cited by The Deccan Herald, 6 August 1999). As the investigative journalist BV Seetharam revealed in an article for The Canara Times on 23^rd April 2000:
‘The Udupi Member of the Legislative Assembly (MLA) has exploded a bombshell: that he was offered a crore of rupees by the American based Cogentrix Company - which moved heaven and earth to set up its thermal plant at Nandikur near the city, but eventually pulled out - in a bid to shut his mouth against the project. Sabhapathy has revealed this at an open meeting in Udupi … 
Surely his allegation does merit a probe - nothing short of a CBI probe, as it involves a multinational company and a huge bribe amount … Since the revelation came from the MLA, that too, of the ruling party, it cannot be taken lightly … An attempt by the multinational Cogentrix to bribe an MLA is indeed an affront to the Assembly and constitutes a breach of Privilege of the House. 
The Cogentrix MD, Ron Somers, who according to Sabhapathy, had gone to him with the suitcase containing Rupees one crore, can be hauled up on the floor of the House and can be jailed for interfering with the working of legislators … There is a lesson for environmentalist groups and public spirited individuals who have opposed the Cogentrix project on grounds, both environmental and otherwise. The matter can never be allowed to be buried, but (has to be) resurrected for the sake of making our public life more transparent. Even the police can, suo moto, take cognisance of the complaint of bribery charge against Cogentrix, as the allegation was made at a public meeting and there is video recording of what Sabhapathy said at the meeting’ (Seetharam BV, 2000, 1). 
Despite such evidence and a request for a CBI and police probe, it is disquieting to note that no action has been taken by the authorities to date.

8. Further Deep Political Concerns over the MPC Project
From the time Cogentrix had proposed to locate its power plant at Nandikur in coastal Dakshina Kannada region, several critical concerns have been raised with regard to the social and environmental impacts of the project. Janajagriti Samithi of Nandikur, a committee of project-affected persons, has been resisting the location of power plants in the district for over a decade now. It has made hundreds of representations to various ministries of the Government and raised critical concerns over the social, economic and environmental impacts of thermal power projects. All along, its concerns have been backed by a number of extensive and authoritative research findings. Despite these documented concerns and civic and legal appeals, the government would appear to have chosen to ignore them by attempting to ‘push the project through, come what may (through an) extremely speedy environmental clearance, granted by the Ministry of Environment, within days of Mr. Deve Gowda’s government taking oath at the Centre in June 1996’ (Saldanha, 1999, 5). 

Janajagriti Samithi has successfully resisted the location of thermal power projects in the past as well. During the late eighties, the Karnataka Power Corporation proposed a thermal power plant in the very location where Cogentrix proposes its project; this was successfully opposed. Soon after, the National Thermal Power Corporation proposed to locate a Super Thermal Power Project of 2,400 MW capacity in collaboration with erstwhile government of the USSR. Resistance mounted against this project, too, and NTPC was forced to abandon plans despite sinking crores of rupees in investigative studies and housing colonies that lie abandoned today. NTPC, however, blames the failure of its venture on the break-up of the USSR and the lack of techno-economic support after this event.

It is necessary at this point, however, to detail just how ethically, legally and operationally problematic the MPC liberalisation project is in many ways, and how questionably it has been promoted through deep political and/or corrupt means. As Saldanha and others have clearly shown:

1.	The MPC project was accorded environmental clearance by the Ministry of Environment and Forests (MOEF) without a valid and comprehensive Environment Impact Assessment (EIA) of the project having been undertaken, which is required by law, and before any MOEF site visit had even been undertaken (Saldanha, 1999). As the Canara Times observed with some concern, the MOEF’s Deputy Director was even actively involved in a highly irregular, on going, ‘cover-up operation for Cogentrix’ (Canara Times, 1999, 1). It noted, amongst other things, that a distressing ‘MNC-politician-bureaucratic nexus’ was clearly operating and employing highly questionable ‘short-cuts’ to push through the project (Canara Times, 1999, 1). As it was becoming increasingly clear that some of these short cuts were going to be publicly exposed through public interest group petitions and investigations, cover-up actions were being undertaken. Kalai Perumal, Deputy Director of the Southern Cell of MOEF, for instance, was now ‘conducting a site visit of the proposed location of Cogentrix power plant between 20th and 22nd of September 1999. A site visit is normally conducted before a project is taken up for clearance and to consider if its location is environmentally or socially safe. But for very questionable reasons, including possibly high-level corruption, the last thing came first for Cogentrix. As in the proverbial cart before the horse scenario, the final environmental clearance preceded even the most basic and primary step, of site visit’ (Canara Times, 1999, 1). As the newspaper investigation concluded: Given the circumstances, ‘it is thus not much of a surprise that Perumal is making this site visit (at this late stage). What is shocking is that he proposes to do this visit with the support of Cogentrix, not the District Administration or the local Panchayat or even Janajagriti Samithi of Nandikur’ (Canara Times, 1999, 8).

2.	Cogentrix-MPC has failed to comply with official instructions to produce publicly accessible half yearly compliance reports on the progress of the project. As an investigative report for the Canara Times concluded: ‘Cogentrix claims in the interest of transparency that it is a super clean, green and honest company. To test its honesty, we wrote to them requesting them for their half yearly compliance reports … If, indeed, Cogentrix is what they claim to be, they would have quite readily parted with these reports, for not only are they public domain documents, but (the documents) would also be the best test of their claimed transparency. Considering the clearance was granted in 1996, at least 6 such reports should have been available, detailing all the steps taken by the company to meet the conditions imposed by the MOEF and KSPCB. Not one has been produced, even to the Ministry’ (Canara Times, 1999, 8).

3.	‘The location of the project (is) in violation of various guidelines of the Ministry of Environment and Forests (MOEF) for thermal power plants, particularly given that it (is) being located on prime agricultural land and in an environmentally sensitive region in the proximity of the Western Ghats and on the banks of the Mulki estuary’ (Saldanha, 1999, 6). Moreover, ‘Article 48A of the Constitution requires the State to protect and improve the environment. But this principle is forgotten by the Ministry of Environment and Forests (MOEF), and all the environmental laws (in pushing through the MPC project) have been ignored, such as the Environment (Protection) Act and the Rules framed thereunder, Guidelines for Development of Beaches, Water Pollution Control Act, Air Pollution Control Act, Coastal Zone Regulation Notification, 1991, Environmental Impact Assessment Notification, 1994 and guidelines and policies for the abatement for pollution and protection of environment while granting clearances to hazardous projects’ (Janajagriti Samithi and Maneka Gandhi, 1997 vs. Union of India and others - hereinafter referred to as Samithi case) 

Pursuant to WP 28651 of 1996 c/w 790/97.

4.	‘It will be impossible to unload coal from large ship liners’ onto barges and bring it to the shore ‘during the monsoon months, due to rough seas’ (Saldanha, 1999, 6), as Cogentrix has claimed in order to justify a coastal location for the MPC plant and the consequent advantage it will have of importing high quality coal for the project (with all its attendant cost padding benefits).

5.	‘The full utilisation of fly ash from inception that was made mandatory for coal fired plants by the (Indian) Energy Secretary was relaxed drastically to benefit Cogentrix’ (Saldanha, 1999, 6). This, in turn, enabled it to controversially and scandalously obtain a nine-year moratorium for the project to achieve full-utilisation of ash (KSPCB-NOC, 25 July 1995).

6.	‘The impact on the marine environment due to the discharge of effluents’ is liable to ‘devastate the fisheries potential in the region’ (Saldanha, 1999, 6).

7.	The project has distressingly sought to ‘acquir(e) land far in excess of actual requirements, for given the international standard of 300 sq. metres/MW of installed capacity, the project would need no more than 200 acres of land. Particularly given that the Nandikur-Padubidri region (is) intensively cultivated prime agricultural land, this would entail a great loss to the local ecology and cause (unnecessary and) massive displacement and misery to the local population. Further, by acquiring such pristine land, five-times-more-than-what-is-internationally-mandated, Cogentrix intend(s) to make a profit on non-performing assets’ (Saldanha, 1999, 6).

Janajagriti Samithi has collected standards from both developed and developing countries to prove that the standard requirement of land for coal-based thermal power plants, including all environmental protection features, is 300 sq. metres/MW installed capacity.

8.	In ‘the PPA signed by the (Karnataka Electricity Board - KEB) with Cogentrix and produced in the Karnataka Assembly, the company (has scandalously) propose(d) that they would not be liable for any environmental damage or impact on human health. This, despite (the) horrific experience with Union Carbide in the Bhopal Gas Tragedy’ (Saldanha, 1999, 6). The PPA, for instance, clearly states that: ‘It is assumed that there is not and will not be any tax which is charged, levied or imposed, whether directly or indirectly in connection with harm to the environment. (The latter is understood in terms of) actual or potential adverse effects on the environment or living organisms (including man) and includes changes in climatic conditions or other natural physical systems or functions in the world or any part thereof, harm to the health of living organisms (including man, animal and plant life) or other interference with the ecological systems’ (as cited by Assadi, 1996, 2130). As Saldanha, Fernandes and Mathai (referring to page 106 of the PPA between MPC and the KEB, 1994) have clarified: ‘A particularly repulsive clause in the PPA’ clearly ‘did include absolution of all risks to the company in the event of an accident and impact on human health and environment’  (Saldanha et al, 2000, 5). With a public outcry over this revelation and agreement between KEB and MPC-Cogentrix, the government was forced to backtrack. It subsequently claimed that this clause was withdrawn. It has not been possible, however, to verify this as the ‘revised’ PPA has still not been made available to the public.

9.	‘The project which shifted from Bangalore to the Nandikur region on the excuse of utilising the Mulki waters for the plant was, indeed, a big lie, for such amounts of water as are needed in a thermal plant are not available in th(is) river (which) … goes dry through the summer months’ (Saldanha, 1999, 6).

10.	No public hearing over the MPC-Cogentrix project was held. According to KSPCB guidelines, such an event is required in order to provide site clearance for a project proposal. Despite KSPCB’s acknowledgement - in an affidavit to the High Court of Karnataka in Janajagriti Samithi v Union of India and others (Writ Petition no. 28651 of 1996) - that no such event took place, clearance was nevertheless provided to MPC (Saldanha, 1999, 6). As Saldanha, Fernandes and Mathai have observed, the alleged public hearing and event which was held, was, in practice, a very private, very deep, political affair: ‘On 22^nd July, 1995, a private gathering including the State Minister for Environment, Board officials and a film actor representing ‘environmentalists’ (sic), along with other local elite, were claimed to be the public and a hearing was claimed to have been held on that day. When there was public hue and cry over the matter, the immediate reaction was that another hearing would be held a month later. However, the NOC was accorded without waiting for the promised hearing on 25^th July, 1995. As the state wide criticism of such subversion caused deep embarrassment to the authorities concerned, MPC started distributing copies of its Rapid Environmental Impact Assessment (REIA) in private meetings with various local schools, colleges, associations, etc., claiming such distorted processes to be public hearings’ (Saldanha et al, 2000, 26).

11.	KSPCB would also appear to have - against any rational judgement or norms associated with what is perceived to be the general interest (or public ethics) within India - granted MPC-Cogentrix a clearance to absurdly draw 280 million cu. m. of water annually from the Mulki river. This figure, Sagar Dhara notes, is actually 15% more than the total average annual flow of the river (Dhara, 2000). In granting such a clearance without any public debate, at a stroke, ‘the rights of older users of the Mulki’s rivers’ were dangerously and scandalously ‘compromised’ (Dhara, 2000, 221). Moreover, had MPC not been banned by another Ministry from drawing or discharging Mulki river water, ‘this river would have died’ (Dhara, 2000, 221). KSPCB’s actions in this affair may additionally be queried with knowledge of the following: ‘Presently, with Mr B Shivalingaiah as its Chairman, it has reached the height of inefficiency and corruption … He has been charged with corruption and with making money in appointments, sale and purchase of office equipments, etc. He has also been charged with filing cases against polluting industries and then collecting money for not pursuing the cases’ (Kamat and Mali, 2000, 2). 

12.	‘The project, as proposed, (is) based on obsolete technology and one of the most destructive environmentally’ (Saldanha, 1999, 6). Despite this, ‘even the internationally mandatory basic and environmental safeguards of installing de-sulphurisation units and full utilisation of ash’ has been ‘left merely to economic considerations benefiting Cogentrix’ (Saldanha, 1999, 6). Consequently, the costs of incorporation of the Flue Gas De-sulphurisation unit (over Rs. 300 crore) to control air pollution impacts is scandalously being borne not by the company but the consumer, due to a little known cost plus feature which has been added to the PPA (Saldanha, 1999).

13.	‘According an NOC on the basis of an REIA’, as the KSPCB has done, represents ‘a fundamental violation of the Environment Protection Act of 1986. For along with its subsidiary notifications, the Act demand(s) that highly polluting projects, such as the Cogentrix power plant, must not only conduct a detailed Environment Impact Assessment (at least considering the impacts in all the seasons), but also prepare an Environment Management Plan and Disaster Management Plan as the basis of obtaining clearance’ (Saldanha, 1999, 6). Yet, none of these required assessments or reports were even prepared.

It is important to appreciate that these highly irregular clearances which favoured Cogentrix-MPC were brought to the notice of High Court of Karnataka through a PIL by Janajagriti Samithi (Writ Petition No. 28651 of 1996). Even as this petition was being considered in preliminary hearings in the High Court, Maneka Gandhi filed an interlocutory application in the PIL of the Indian Council for Enviro-Legal Action (ICELA), which was pending before the Supreme Court (I.A.21 of 1996 in W.P. (Civil) No. 664/1993). This petition, which focused essentially upon the Cogentrix backed MPC project violations in the Central Coastal Regulation Zone (CRZ), alleged that:

Hereinafter referred to as WP 1996.

(a)	Project clearances were clearly violative of the CRZ notification;

(b)	Various other environmental impacts of the project had also been ignored.

On the basis of the ICELA-Gandhi petitions, the Supreme Court Bench, consisting of Mr Justice Kuldip Singh and Mr Justice Saghir Ahmed, ordered a review of the Cogentrix project, along with other similar coastal projects. It was to be conducted by the National Environmental Engineering Research Institute (NEERI). As the Supreme Court Bench had requested, this was to examine the viability of the project from an environmental point of view that was based on the principle of ‘sustainable development’. The Supreme Court also recommended that visits to the project area were to be undertaken and conformity of the project with various notifications issued by the Government of India - regarding Coastal Zone Regulation, etc. - were to be assessed critically to determine whether corrupt and/or deep political, irregular actions had been undertaken.

9. The Findings of the NEERI Report
Following an extensive process of investigation by an interdisciplinary team of experts, which involved site inspection, interactions with the State Government, company officials, project affected communities and local civil society groups, NEERI submitted its report to the Supreme Court. The report - which was highly critical of the irregular and undemocratic way in which environmental clearances for the project had been granted - questioned the very environmental viability of the project and warned that it would be disastrous to carry on with the project in the region (NEERI, 1996).

The NEERI report critically observed that:

1.	'In the absence of information on definite plans for coal transportation, power evacuation, intake of water and disposal of wastewater, and fly ash utilisation, it should have been difficult for the Ministry of Environment and Forests (MOEF) to assess the environmental impacts of the proposed project of the MPC. The MOEF, as per the provisions in the Environment Impact Assessment Notification, should not (in normal circumstances) have considered the project for appraisal without comprehensive information on the project. Instead, the MOEF ha(d) chosen to grant the conditional clearance to the project’ on the basis of highly distorted and superficial information (NEERI, 1996, 35).

2.	The Rapid ‘Environment Impact Assessment by the MPC was limited to the impact of coal burning at the thermal power plant for generation of electricity. The impact of coal transport facilities as also the power evacuation proposal, was not assessed’, as one would have expected it to have been for a project proposal of this type (NEERI, 1996, 35).

3.	‘Sovereign rights of residents of Dakshina Kannada district, in which project is proposed to be located, were not honoured in the appraisal process. In the project appraisal process, the affected population and the environmentally aware citizens were not taken into confidence ... The proposed project is not based on endogenous choices of the contiguous population. The local population envisions this development as an aberration to the existing harmonious balance of ecology and economy in the region’ (NEERI, 1996, 35).

4.	‘The environmental appraisal for this proposed power project and the proposed industrial projects should have been carried out, based on results of the to-be-conducted carrying capacity of the region’ (NEERI, 1996, 35).

5.	‘The planning and socio-economic development in the State of Karnataka warrants a carrying capacity based analysis, viz., supportive capacity of ecosystem and assimilative capacity of environmental media. Such an exercise would lead to the delineation of preferred scenario for sustainable socio-economic growth. The preferred scenario would adopt a bottom-up planning paradigm, would reflect endogenous choices, equity and social justice, economic efficiency and ecological harmony in keeping with the paradigm of sustainable development’ (NEERI, 1996, 35, 36).

Other significant findings and conclusions which are of relevance to this study were made:

1.	‘The MPC project site is 3 km to the east of the Arabian sea and is violative of the Environmental Guidelines for Thermal Power Plants, 1987’ (NEERI, 1996, 23).

2.	‘Disaster Management and Emergency Preparedness Plans have not been included (as they should have been) in the Rapid EIA report prepared by the MPC’ (NEERI, 1996: 23).

3.	‘While the MPC has recorded plans to utilise fly ash through the establishment of a separate company ... and MOEF has imposed a condition on the MPC to utilise 100% fly ash by the ninth year, provision for landmass has been made for 25 years storage of fly ash at the site. The land requirement for fly ash ponds has thus been estimated as 581 acres, i.e. 51.7% of the total land requirement for the project’, thereby claiming land much in excess of actual requirements (NEERI, 1996, 33).

4.	‘In order to meet the land requirement of NTPC’s thermal power project in 1990, around 2,800 acres of land was identified for the purpose of acquisition. The land requirement for the MPC plant has been estimated as 1124 acres. (Even so), (t)he excess land has not been denotified by the State Government’ (NEERI, 1996, 33).

5.	‘It is anticipated that significant pollution problems in the aquatic eco-systems could occur if the planned and projected heavy industrialisation in the region is not properly planned and managed in respect of ecological protection, and pollution prevention and abatement measures. If the present rate of industrial growth continues, the gaseous and liquid emission loads would increase by nine and four folds respectively’ (NEERI, 1996, 24).

6.	‘The SO2 (sulphur-dioxide) concentrations (30.6 ug/m3) will exceed the stipulated standard of CPCB (Central Pollution Control Board) for sensitive areas at the Western Ghats. The SO2 and Nox concentrations will (also) exceed the stipulated standards of CPCB for residential/rural areas, considering the existing and proposed major industrial point sources. The proposed project, even with the installation of a Flue Gas Desulphurisation unit with 70% SO2 removal efficiency, is environmentally unviable’ (NEERI, 1996: 27, 28, 31).

7.	‘The rich horticultural resources would also be impaired due to gaseous emissions and potential surface run-offs from the coal and ash storage areas’ (NEERI, 1996: 31).

8.	‘The coal and ash storages have a high potential of contamination of ground water. The rich aquatic resources in the Mulki estuary and the impacted coastal regions would be impaired by the proposed jetty /wharf operations and run-offs from the coal and ash storages. This would effect the fisheries potential, and thus the livelihood of vulnerable sections of the population in the region, violating the premises of Sustainable Development delineated in ... the report’ (NEERI, 1996, 31, 33).

9.	‘No primary survey has so far been conducted by MPC/its consultants (i.e., Tata Consultancy Services) on th(e) vital issue that decides the resettlement and rehabilitation packages. The detailed plan for a proposed project township accommodating over 5,000 persons, including water supply and waste management facilities, has not been prepared. No plans have been prepared by the MPC to generate employment avenues to the people who would be without the means of livelihood due to the project’ (NEERI, 1996, 34).

10.	‘The environmental clearance for the construction and operation of Wharf and Jetty at Padubidri and the intake of sea water and the discharge of wastewater has not yet been sought by the MPC’ (NEERI, 1996, 33).

11.	‘No EIA for the transmission lines has been carried out. The power evacuation plan is also not yet delineated’ (NEERI, 1996, 34).

Regarding the process of granting environmental clearances in general, NEERI distressingly concluded in its report that:

‘the appraisal process for all the projects examined in this report is found to be fragmented, based on insufficient and inadequate information, and subjective in nature. The lack of application, transparency, accountability and objectivity while granting clearances/conditional clearances/refusals, and consequent revoking/reinstating/retracting have caused major delays in the implementation of the developmental initiatives. The lack of transparency has also resulted in loss of  credibility, which is so crucial for the active involvement of the community at large for 
meaningful internalisation of environmental concerns in developmental planning on which the Fourth and Fifth National Five Year Plans made specific commitment, and the same rhetoric reiterated in the Eighth Five Year Plan’ (NEERI, 1996, 69, 72). 

With specific regard to MOEF’s conditional environmental clearance which had been granted to the MPC project, NEERI was clearly ‘not satisfied’ that it was in keeping with the attributes of ‘Sustainable Development’ which had been identified by the Supreme Court (NEERI, 1996).

Such glaring omissions, distortions, compromises, and lack of verification and judgement in considering the social, environmental and regional impacts of the project, as revealed by NEERI, is a shocking revelation of the extent to which MPC and the Ministry seem to have compromised critical public interest, environmental and welfare concerns on deep political grounds to favour the project. Certainly, for an agency that is supposed to be charged with championing critical public interest and welfare/environmental concerns, such poor quality decisions by MOEF have been viewed with suspicion by several commentators and public interest groups. Janajagriti Samithi would appear to be one such group which, in its petition before the High Court, had concluded that the:

‘environmental clearance granted by (MOEF) betrays total non-application of mind’ (Janajagriti Samithi, 1996, 70). 

The NEERI report, interestingly enough, not only endorsed this statement in full, but further revealed the grossness of the lacunae involved in the decision making process.

10. Deep Politics and the Ministry of Environment and Forests
To gain a deeper understanding of the circumstances that may have compelled the MOEF to arrive at such a controversial decision, the second author met with Dr Nalini Bhat (Additional Director, Environmental Clearances) in the MOEF, soon after clearance was granted. Expectedly, Dr Bhat refused to comment on any aspect of the clearance concerning the Cogentrix project. However, she did admit that such glaring lacunae could and should not be repeated for subsequent project(s). In conceding this point, Dr Bhat arguably seemed to be admitting that the MOEF did clear the project in questionable circumstances.

Concerning the nature of the deep political system in India and the corrupt actions of the MOEF, Bittu Sahgal, Editor of Sanctuary Magazine and an expert advisor to MOEF, has observed that:

‘there is actually no mystery about the manner in which environmental concerns are converted to cash by the nexus between businessmen, politicians and bureaucrats. Such people have learned to milk the system (especially in the age of liberalisation) for all it is worth by twisting laws, covering up scams and hoodwinking the public. The Prime Minister’s Office has often been directly involved in such shenanigans, with special ‘messages’ being sent to the MOEF to pass mega-projects that benefit politically well-connected people … I have worked with the Ministry of Environment and Forests … and I speak with authority when I say that it is a virtual puppet (now) in the hand of profiteers’ (Sahgal, 1998).

11. Deep Politics, The Targeting of ‘Opponents’ of the MPC Project, and the Suppression of Local Rights
Repressive deep political actions have also been effected in order to secure the MPC project. The intolerant attitude that the Government developed in defending the deal reached such an extent that it began to cost honest bureaucrats their jobs. A well documented instance is that of  A N Yellappa Reddy, a widely respected senior Indian Forest Service officer who, as Special Secretary of the Karnataka State Ecology, Environment and Forest Department, had raised concerns relating to the environmental and public health risks posed by the Cogentrix-MPC project. For this, he was pressurised into resigning from his post, with the then Chief Minister of Karnataka, Deve Gowda, even threatening to sack him by issuing him with a ‘show cause notice’ for refusing to withdraw his criticisms. 

Unable to tolerate the pressure, Reddy resigned and explained his reasons for this in a Press Conference that he called on 12^th November, 1995. During the Press Conference, he revealed that he had decided to ‘voluntarily resign’ when the Cogentrix-MPC environmental clearance had been obtained by the State Government from the KSPCB, ‘overriding’ the recommendations of the ECC which he had headed (The Hindu, 13 November 1995). ‘Issuing clarifications and justifying his opinion on the environmental aspects of the Cogentrix project at a technical seminar did not amount to betraying the Government's confidence, he had reasoned’ (The Hindu, 13 November 1995).
 
Similarly, academics have also been intimidated for daring to criticise or publicly debate several controversial aspects of the Cogentrix-MPC project. Professor Pattabhirama Somayaji of Mangalore University, to take one example, was suspended for his comments concerning the Cogentrix project and for protesting:

‘the fact that Ron Somers of Cogentrix had misused the University platform and that he had spoken in a derogatory manner about our people, our culture and the policies of our Government’ (Somayaji, 1997). 

Smear campaigns were conducted against him. As Somayaji had stated at the time, it was:

‘unfortunate that I have not been given any opportunity to defend myself in spite of the fact that the charges levelled against me are thoroughly baseless and untimely. This is contrary to the law of natural justice’ (Somayaji, 1997).

Although Somayaji was later reinstated, following widespread criticism of the decision, there have been further threats to his freedom of expression. As Professor Narahari, President of Mangalore University College Teachers Union has confirmed, Somayaji, along with colleague Professor Jogan Shankar, have continued to be constantly ‘questioned’ by the police on their daily schedule: 

‘Professor Somayaji is even being pressed by the police to vacate his residence’ (Deccan Herald News Service, 1998).

The Deccan Herald further notes that Professor Narahari, ‘strongly condemning the police encroachment on university jurisdiction … wondered how police could enter the campus without the permission or invitation of the Vice-Chancellor. He also alleged that Professor Somayaji had’ - through deep political intervention - ‘been transferred to the (under-graduate) degree college in Madikeri (of neighbouring Kodagu district) from the postgraduate department of Mangalore University for vindictive reasons … Professor Shankar, who was present at the meeting, stood up to say that his family had been terrorised by the frequent visits and enquiries by the police who didn’t even have a written complaint by anybody. The police only … went on asking the whereabouts of Professor Somayaji’ (Deccan Herald News Service, 1998).

The suppression of local rights and the deliberate distortion of democratic control by duly elected bodies has also occurred: 

‘For instance, every Panchayat in the project affected areas has passed unanimous resolutions against the project. The zilla panchayat endorsed the decision of the Village Panchayats, again unanimously. Not very surprisingly, the State Government used all its powers to advance MPC’s purpose (and undermine the democratic rights of the panchayat bodies by) employing crude administrative short-cuts. Utilising its administrative powers through the office of the Chief Executive Officer of the zilla panchayat, a state government employee, it overruled all the decisions made by the village and zilla panchayat … (in) 1996. When all the members of the Legislative Assembly elected from Dakshina Kannada also rejected the location of the project, once more the state dismissed their appeal’ (Saldanha et al, 2000, 13).

Further repressive actions have been documented: 

‘MPC never (fully) made its rehabilitation package public, leaving the details to negotiated settlement, which in real terms meant coercing people through the use of police powers of the State, as acquisition is a State power, to bend the will of the people under duress to the company’s advantage’ (Saldanha et al, 2000, 39). 

When sections of the project affected communities discovered that the State Government was overruling panchayat resolutions and initiating forced land acquisition proceedings against them in order to set up a rehabilitation colony for the MPC project, they expressed their opposition towards plans to fence over 70 acres of Kumki land (village grazing pastures) for this purpose. These communities suddenly found themselves facing:

‘massive police action. Arrests of several local activists on trumped up charges were made, clearly with the motive of dissipating energies by dragging affected individuals, mainly key local leaders, through protracted court proceedings on criminal grounds’ (Saldanha et al, 2000, 13).

As the Environment Support Group has distressingly concluded, liberalisation, tied as it is to the wider deep political structure in India, is increasingly beginning to serve the interests of  TNCs, corrupt bureaucracies and local elites who believe more in the:

‘defence of the Corporate Sector than the Constitutional 73^rd or 74^th Amendments. Deliberately avoiding the constitution of District Planning Committees (and other more accountable and open democratic structures) so that no further hurdles are created by the aware citizenry to such pet projects, the State Government (has been able to increasingly) centralise powers to such an extent that no more does it make sense to suggest ours is a decentralised democracy. Rather, it would be facing the truth to admit that the dictates of the Bretton Woods institutions (and deep political circles in India and abroad) are more acutely listened to’ (ESG, 1998, 5).

Also known as the Panchayat Raj and Nagarpalika Acts, they guarantee ‘power to the people’ by constitutionally empowering local governments in the discharge of certain functions as prescribed in Schedules 11 and 12 of the Constitution of India. ‘Urban Planning and town planning’, ‘Planning for economic and social development’, ‘Water supply for domestic, industrial and commercial purposes’, ‘Public Health’ and ‘Protection of the environment’ are some of the items listed for the attention of the local governments.

12. Deep Politics and the Involvement of the US Government in seeking to Favour MPC
MPC has also been charged by ESG and Janajagriti Samithi of Udupi of acting in a deep political and corrupt manner: 

‘Lack of transparency, utter disregard for human rights and environmental concerns, and an extraordinary sense of purpose to corrupt local polity by liberal donations to win support for the project have been the traits of this company’ (as cited by The Morning News, 1999). 

In Saldanha, Fernandes and Mathai’s opinion, local democratic control has been subverted through the deep political actions of Cogentrix-MPC:

‘Efforts in subverting local democratic control were not limited only to influencing particular politicians, their parties or local associations or attempts to win support by … extending liberal donations to all and sundry that approached it … It extended itself to the overt involvement of the US government as well. 

During 1995, the US Commerce Secretary, Ron Brown, flew in with an entourage of US TNC CEOs that included the Cogentrix CEO. His visit to Bangalore was with the specific and clear motive of extracting a commitment of the then Karnataka Chief Minister, Deve Gowda, of ensuring a ‘no-further hitches’ progress of the Cogentrix project. Such particular attention paid to a specific project raised considerable concern of the impropriety of such coercive efforts and also raised suspicions of the potential involvement of corrupt practices, especially in the context of charges of corporate donations for favours extended (to) the Democratic Party … 

When such high profile visits failed to effect the necessary actions, the company decided to rope in support from the US Consulate. The US Consulate began to engage Mangalore University in academic consultations, which were thinly disguised attempts at promoting US investment and winning the support of the influential intellectual class in exchange for lucrative consultancy. The MPC Managing Director, Ron Somers, even went to the extent of  winning support of the Mangalore University Student’s Union by … making liberal donation(s) for student cultural activities … 

So deep was the extent of his involvement in university affairs, that when Professor Pattabhirama Somayaji protested such actions, the University Senate summarily suspended him from service. It was (only) following wide public protests that he was reinstated’ (Saldanha et al, 2000, 14, 15).

Reports from the Hindu clarify that intense US government support and lobbying activity was, indeed, extended in order to push through the Cogentrix-MPC project. The late Ron Brown, US Commerce Secretary, for example, had actively campaigned for the Cogentrix venture whilst on an official visit to India, claiming the company to be a model venture of ‘Indo-US co-operation’ (The Hindu, 19 January 1995). George Lewis, chairman and CEO of Cogentrix, accompanied Secretary of Commerce, Ron Brown, on a trade mission to India in January 1995, and it was at a time when Cogentrix was negotiating its $1.4 billion deal. During this visit, Bangalore was his second stop, and his only main appointment was with Deve Gowda, who was then Chief Minister of Karnataka. At a joint press conference addressed by Gowda, Brown and Lewis, Gowda - seeking to respond to Brown’s concerns - gave him ‘positive and specific’ assurances that his Government would promote Cogentrix by hastening procedural formalities so that the people could benefit from the ‘efficient power’ of Cogentrix ‘as soon as possible’ (The Hindu, 19 January 1995).

There were doubts expressed if US Corporates related this trip to illegal donations to the Democratic Party. A Washington based group ‘Justice Watch’ was investigating this aspect. For more details about this, visit: <http://www.publicintegrity.org/rbrown.html>.

As Charles Smith has revealed, there are disquieting trends which need to be understood concerning the way in which the US government has often sought to secure, lobby and campaign for power station deals in Asia which favour particular US backed power utilities. A few months prior to Ron Brown's visit to Deve Gowda to promote and lobby for the Cogentrix-MPC project, for instance, he had personally travelled with US President Bill Clinton to the Asia Pacific Economic Conference in Indonesia where Clinton had lobbied for, and secured, a two billion dollar deal for a US backed power project. This had been secured through a $ 15 million ‘free gift’, or bribe (effectively 0.75% ownership of the US backed project) to President Suharto's daughter, which had been obtained through the use of US taxpayers’ money. The total formal kickback to Suharto's relatives, notes Smith, amounted to $ US 50 million. In return for these kickbacks, we are told, ‘the Indonesian dictator selected (US) companies owned by major Clinton donors to build the Paiton power plant in East Java’ (Smith, 1999, 1).

Such disturbing deep political, corrupt trends have made some commentators privately and publicly wonder what precise secretive inducements might have been offered - if at all - during the Ron Brown visit to Bangalore to see Deve Gowda. A lack of public access to minutes of closed meetings between Ron Brown, the CEO of Cogentrix and Deve Gowda, or to the bank accounts of Deve Gowda (which could possibly have been accessed had a CBI probe been ordered) means that one can only speculate on such matters at this moment in time.

13. Deep Politics and the Use of a Flawed Report and REIA
A highly inaccurate and flawed Environmental Impact Statement (EIS) by Dr Chockalingam, the Head of the Department of Civil Engineering at Annamalai University, was questionably used by MPC and various regulatory authorities to justify the siting of the project in the ecologically sensitive region of Dakshina Kannada. The EIS was originally produced in order to more carefully evaluate the social and environmental viability of a proposed 2,000 MW coal based thermal power plant, which was to be developed in 1988 over six stages, by the state owned Karnataka Power Corporation Ltd. (KPCL). In the report, Chockalingam had described the villages of Nandikur, Padubidri, Nadsal, Yellur, Padebettu, as appropriate for the location of power plants due to the fact that these areas were ‘mostly barren’ and ‘degraded, marshy, undulating and uncultivable’ (Saldanha et al, 2000, 27). This project was abandoned as KPCL was unable to raise the appropriate finances. The findings of the Chockalingam EIS/Report, however, have continued to be used by authorities and power project promoters (including MPC-Cogentrix) to questionably justify the clearances of other power projects in the region.

The veracity of the Chockalingam report, for instance, was strongly contested by Janajagriti Samithi in its MPC-Cogentrix project linked petition (WP 1996). This stated that the allegedly barren and degraded, marshy, undulating and uncultivable lands which were to form the project site were so fertile that:

‘farmers normally grow two paddy crops and one crop of pulses in the same field, in a year. Many farmers have bore wells and irrigation systems developed (in order to sustain their verdant) coconut, arecanut and sugarcane fields. Therefore, it can be clearly seen that the villages of Nandikur, Thenka, Yellur, Nadsal, Palimar and Padebettu - where lands are being acquired -are not only ecologically sensitive, but are also economically productive and culturally rich’ (WP1996, 44, 45). 

Furthermore, the petition highlighted that ‘there are a large number of higher primary and secondary schools and a few colleges in the area’ under acquisition (WP 1996, 44, 45).

To substantiate their objections to the Chockalingam EIS findings, Janajagriti Samithi, backed by the Environment Support Group (ESG), requested scientists from Centre for Ecological Sciences at the Indian Institute of Science (IIS) to conduct a ground verification based land use survey of the proposed site, and to also use satellite imagery to further clarify issues. This study, which was conducted in early 1997, confirmed that:

‘natural vegetation and cultivation accounts for about 78% of the land use observed in the study area … Thus, very little area falls under barren, unused land’. 

This report, which clearly exposed the bogus ‘findings’ of the Chockalingam EIS, was submitted to the Court to scientifically verify the claims of the petitioners (John and Suresh, 1997, 3).

In the same manner, another scientific study was commissioned by Janajagriti Samithi to review the findings of the REIA which had been prepared by Tata Consultancy Services for MPC. This REIA had, controversially, earlier been used by MPC to justify and obtain final environmental clearances for its project. Sagar Dhara, the author of this review of the REIA, had already conducted a Comprehensive Environment Impact Assessment for the NTPC project, precursor to the Cogentrix project, and was thus very familiar with the ecological, geographical, demographic and socio-economic features of the region (Dhara, 1997).

Dhara’s report made some startling revelations. First and foremost, it revealed that there were critical problems with the meteorological input data that had been used in the REIA for air quality modelling to prove beyond reasonable doubt that the project would have no significant air pollution impact (Dhara, 1997). Dhara’s report exposed the way in which the Tata-Cogentrix-MPC report had clearly, consciously and scandalously, fudged critical meteorological data - through its use of a French firm, Transoft - to falsely conclude that air pollution levels in the region were much lower than they actually were. The consequences of such dangerous distortion, Dhara explained, could be quite serious to the health of the local population, and could result in respiratory tract ailments such as increased incidence of chronic bronchitis, asthma and some eye ailments as well (Dhara, 1997). 

To Dhara, the MPC REIA report had, equally disturbingly:

‘not done, nor suggested doing, baseline and periodic cross-sectional and case control epidemiological studies in an area of 10 km radius around the plant, with specific emphasis on respiratory tract and eye diseases’ (Dhara, 1997, 8-12).

The Dhara report also detailed the way in which, more often than not, critical data on significant health and environmental impacts was suppressed or even distorted in order to present a ‘least-impact’ or ‘no-impact’ scenario. This, from the REIA of a company (MPC) which publicly claims that it is ‘dedicated to environmentally safe power project development’ (MPC, undated, 1). It was pointed out, for instance, that the:

‘wet ash disposal system poses a threat to ground water resource through percolation of soluble cations of alkali metals and those containing traces of arsenic, fluorine, molybdenum, selenium, mercury, etc. In such an event, shallow aquifers, which are the main source of fresh water for domestic and agricultural uses, may be contaminated’ (Dhara, 1997, 12-15). 

Despite such a situation, the:

‘MPC REIA study report does not suggest any method for treating ash in the ash ponds to reduce soil contamination risk, converting toxic ash constituents into benign compounds and hydrological management to reduce contamination of aquifers below the ash ponds’ (Dhara, 1997, 12-15). 

Furthermore, ‘quantities and characteristics of solid wastes to be generated by the FGD, and desalination plant and the method of their disposal, have not been provided in the MPC REIA’ (Dhara, 1997, 12-15). ‘The wind data used by Cogentrix’s consultants for predicting the post-plant ambient air quality (AAQ) was inappropriate ... The possibility of mercury pollution, which occurs when large amounts of coal is burnt, was ignored by Cogentrix’s consultants. Mercury pollution has happened at the Singrauli area, which has several power plants’ (Dhara, 2000, 221).

Flue Gas Desulphurisation, also known as Scrubbers, that are employed to remove Sulphur dioxide concentrations from gaseous emissions.

Originally, MPC had proposed to utilise the Mulki River water for its plant operations, by proposing to build a dam upstream. This proposal was cleared by the KSPCB but eventually withdrawn by the MOEF, which demanded that the plant use desalinated water for all purposes. Both Cogentrix and MOEF claimed this to be an environmentally progressive intervention, without considering the impact of brine from desalination plant on the marine environment.

These shortcomings clearly indicated that that there was a crucial ‘need for reviewing MPC’s environmental clearance in a broader context’, as the MPC REIA, beyond providing inaccurate, and even distorted, estimates of the environmental and social impacts, deliberately ‘d(id) not attempt to understand the broader dimensions of the proposed rapid industrialisation of the Mangalore-Udupi belt and the impact it will have on the environment’ (Dhara, 1997, 25).

Dhara’s conclusions are worth reflecting upon:

1.	‘There is an urgent need to make EIA/EMP, risk analysis, DMP/EPP, environment audit reports and all environmental documents and data, public accessible documents so that such information is available to all those who may ask for it’ (Dhara, 1997, 25);

2.	‘It is the right of every citizen to participate in an informed way in decisions that affect his/her environment in an equal way. Experience suggests that such participation, whether by common practice or by law, helps in protecting the environment better’ (Dhara, 1997, 25);

3.	‘I concluded that the EIA and environmental clearance for the Cogentrix project had not been viewed in the context of the plans to industrialise the Mangalore-Udupi belt; and therefore that the environmental clearance for the project required review; and that if this was not done’- as has been the case thus far - ‘India would renege on the environmental protection commitments it made at the 1992 Rio conference’ (Dhara, 2000, 221).

Whilst the Dhara and IIS reports dealt specifically with regard to the impact of the proposed MPC project and were both initiated by the petitioners, the Karnataka Department of Environment had been deeply concerned with the mega-industrialisation of the Dakshina Kannada region. With technical and financial assistance from the Danish International Development Agency (DANIDA), a four year long research exercise had been initiated at a cost of Rs. 20 crores. This had resulted in the preparation of an ‘Environmental Master Plan Study for the Dakshina Kannada District’. 

Popularly referred to as the ‘DANIDA report’, this study conducted an exhaustive review of the social and environmental characteristics of the district and prescribed a paradigm of development that was in keeping with the natural resource base and in securing appropriate land use development. In view of this report, a key sponsor for which was the Government of Karnataka, the location of the Cogentrix power plant seemed to clearly fly in the face of the study’s prescriptions, and also appeared to belittle all concerns expressed against locating such projects in this ecologically fragile region. The findings of this study were also produced in court to highlight the way in which the Government had strangely acted against its own study recommendations in order to push through the MPC project.

Even as these study findings, by themselves, strongly presented a case against locating the MPC venture in the Dakshina Kannada region, petitioners did not rest in exposing further deep political and corrupt processes at work in defeating the public cause and promoting MPC’s interests. A confidential letter written by Ron Somers, MD of MPC to the Member Secretary of the KSPCB, was made public. It clearly revealed that MPC was not interested in complying with the conditions which it was obliged to follow after its clearance had been granted. 

In this letter, dated 20 January 1997, Somers clearly stated that MPC had planned for a ‘comprehensive EIA’ of the project. However, it was to only be conducted after June 1997, after site control had been gained (Somers, 1997). Such a proposal, which ‘is utterly contemptuous of (the) law’ (Saldanha et al, 2000, 25), clearly violates the fundamental premise of the Environmental Impact Assessment Notification on the basis of which the controversial environmental clearance was granted to MPC. 

The EIA Notification, for instance, essentially argues that environmental and social impacts should be assessed, and necessary controls adopted, before inception of a project. Any violation of conditions imposed is to be seriously considered, and revocation of clearances is to be effected. The relevant regulatory body, as Saldanha, Fernandes and Mathai clarify, should - upon receiving this letter - have actually, in above board circumstances, ‘have immediately cancelled the clearance accorded and initiated contempt proceedings against MPC in safeguarding public interest. Rather, this letter was suppressed’ in order to continue to favour the MPC project proposal and clearance continued to be granted (Saldanha et al, 2000, 28).

Originally issued in 1994, this Notification was amended on 10 April 1997 making Public Hearings mandatory for certain highly impacting projects, including thermal power plants above 500 MW capacity. The discretionary clause allowing for Rapid Environment Impact Assessment (a rather preliminary statement based on one season date only) as being the basis for according conditional clearances controversially continued in the 1997 amendment. The full text of the EIA Notification can be accessed at <http://www.envfor.nic.in>.

The letter, equally disturbingly, reveals that Somers was aware that coal could not be unloaded from ships onto barges during the four monsoon months due to rough seas. MPC’s official position, however, had stated that there would be no such problem. This revelation confirmed the basis of the petitioners’ concerns. The petitioners had estimated that 2.1 million tonnes of coal were liable to be stored to offset this problem during the monsoon period. As a result of this problem - which the public was not notified of officially - it was also likely that MPC could exploit the situation in an under-hand manner to claim reimbursement costs for power not generated under the ‘deemed generation’ clause included in the PPA. Equally distressingly, it was possible under these circumstances for MPC to demand much more land for project development. To Janagrithi Samithi, such a policy could further impact upon the livelihoods of the local people, and also result in the further destruction of the ecologically sensitive region (WP, 1996).

14. Deep Politics, The Repercussions of the NEERI Report and the Suppression of the Petitioners Right to Information
Keeping in view NEERI’s strong criticisms – indeed, rejection - of the environmental clearances granted to the MPC project, the Supreme Court was of the view that ‘this matter can be better dealt with at the High Court level’ and directed the Court ‘to treat these matters as petition under Article 226 of the Constitution of India’ along with the pending petition of Janajagriti Samithi. The Supreme Court, furthermore, gave liberty to the parties to file further affidavits/documents in the High Court (Singh and Ahmed, 1996).

In pursuance of I.A.21 of 1996 in W.P. (Civil) No. 664/1993.

The blow that the NEERI report had delivered to the project and to the credibility of the various institutions which accorded clearances was so very severe, that the respondents, including the MOEF, KSPCB, the Karnataka Environment Department and, expectedly, MPC, were quick to vigorously denounce the findings. The rush to excuse themselves from irregularities which had been detailed by NEERI was such that glaring contradictions emerged in the statements they filed in the High Court on the very same facts. While the KSPCB, for instance, finally admitted the Janajagriti Samithi position that public hearings had, indeed, not been held before clearance was accorded, the MOEF had still attempted to evade this position. This, even after the due regulatory agency to hold the public hearing, the KSPCB, had conceded the argument.

Their rejoinder statements filed in the High Court in response to the NEERI report are replete with such denunciations.

In view of such contradictory statements made by the regulatory agencies, the petitioners, Janajagriti Samithi, together with Maneka Gandhi, pressed the High Court to make official documents which related to the granting of clearances, publicly accessible for inspection. The High Court conceded this demand, somewhat reluctantly, and directed the respondents to provide the petitioners with requested documents in an interim order. However, ‘weeks turned to months and none of the documents requested were provided by any of the respondents. Mischievously, Dua Associates, legal advisors to MPC, offered (only) to provide such documents that were already part of the petition. This was brought to the notice of the Court but no specific action was taken’  (Saldanha, 1998, 9).

When ‘(t)hree months after seeking the documents, they were still not produced, even as the High Court referred the matter for final hearings’, the senior counsel appearing for Janajagriti Samithi,  R N Narasimha Murthy, formerly Advocate General of Karnataka state, ‘raised serious concerns over the lack of information and made forceful appeals for the same. Constrained, (further), by the lack of response from the respondent’ and even the Court for not ordering the respondents to comply with its direction, Mr Murthy ‘made a written submission that, given the failure of the respondents to produce the relevant information based on judicial direction, the arguments’ could not be ‘advanced’ any further than they had already been in the petition (Saldanha, 1998, 9; see also the memo filed by Janajagriti Samithi in this regard in the High Court on 31^st March 1997).

When this stated position failed to elicit the desired response, the well-known environmental lawyer, M C Mehta, appearing for Maneka Gandhi, expressed his complete ‘lack of confidence in the manner in which the Court dispensed justice’ when it was dealing with the MPC-Cogentrix affair (Saldanha, 1998, 9). Initially, the Bench threatened to ‘throw the case out and even ordered the petitioners counsels to file appropriate application seeking transfer to another Bench. However, even before (the necessary transfer papers) could be filed (the Chief Justice Mr R P Sethi, by an administrative order) decided that the same Bench would continue to hear the case’ (Saldanha, 1998, 9). The hearings proceeded on this basis, even as the petitioners were constrained by a lack of transparency on the part of the respondents and the court failed to ensure that the respondents furnished information which they were obliged to part with.

This decision was taken on 1^st April 1997 and was widely reported as the main story of the following days newspapers.

Even though the verbatim recording of this direction was reported widely in the newspapers on 8^th April 1997, the Section Officer of the High Court denied the petitioners a copy of this order claiming administrative privilege. The statement issued in defence of this position is rather abtruse, and is as follows: ‘The counsel for the petitioner has filed a copy application in W. P. 28651/96 (i.e. Janajagriti Samithi) for the certified copy of the order dated 7.4.97 (7^th April) which is passed by the Hon’ble Chief Justice. On verification of the order sheet dated 7.4.97 in the W. P. No. 28651/96 c/w 790/97 there is no such order passed by the Hon’ble Chief Justice. But there is an endorsement made by the Section Officer of the Board Branch The Hon’ble Chief Justice has again assigned these cases to the Division Bench consisting of the Hon’ble Mr Justice S Rajendra Babu and the Hon’ble Mr Justice B S Sreenivasa Rao for hearing (separate order has been passed by the Hon’ble Chief Justice). On further verification it is found that the order has been passed by the Hon’ble Chief Justice on the Administrative side. Hence, if approved the copy application may be rejected as the Administrative Order cannot be issued certified copy as per High Court Rules’. Thus, it continues to be a mystery as to who slipped this order to the newspapers, when the petitioners were even denied a copy.

15. A Controversial ‘Deep Political’ Judgement?
Justices Rajendra Babu and Sreenivasa Rao delivered the judgement on 27 August 1997. In their 165 page verdict, they stated that:

‘there was due application of mind by (the respondents), the KSPCB and the MOEF in this regard … There was due justification for the location of the project at Nandikur’ (Samithi case, 150). 

The judgement was made despite an acknowledgement that the petitioners had produced material to prove, beyond any reasonable doubt, that the region which was to house the MPC mega-project was not degraded or barren - as had falsely been claimed by the respondents in order to justify site selection - but extremely fertile and culturally vibrant: 

‘The area is a vast agricultural land where paddy is grown and there are coconut plantations. Apart from that, there are certain species of wildlife, species of rare wild or plant life and there are places of religious interest such as two mutts, and there are also Nagabanas which are sacred forests’ (Samithi case, 150).

The Justices additionally conceded that the petitioners had successfully:

‘pointed (out) that establishment of the project will destroy religious, education and cultural centres as it would displace two Moola Mutts of Udupi Shri Krishna Temple - that is, Admar Mutt and Palimar; 29 famous temples; 55 historical Boothastanas; 10 Mosques; 3 churches; 163 religious Nagabana’s, Bhajan Mandalis and Madarasa’s. It is stated that 19 schools will have to be displaced and established elsewhere’ (Samithi case, 89). 

As explained in the Gazeteer of South Kanara (later, Dakshina Kannada) district (1973) published by Government of Karnataka, ‘during the thirteenth century, there arose in this district a powerful influence of Vaishnavism propounded by Madhvacharya, an illustrious saint and scholar who was the exponent of the Dvaita philosophy (Dualism) . His Dvaita school won a number of followers in various parts of the country. He established eight mathas (monasteries, also known as Mutts) and appointed eight of his disciples to be in charge of these to administer the affairs of the famous temple at Udipi in which he installed a lovely image of Krishna, said to have been found by him in a lump of clay (gopichandana) given to him by the Captain of a ship in token of the gratefulness he felt for the Acharya who rescued his ship from distress’(p. 98, 99). The Palimar and Admar Mathas that fall within the proposed area for location of the power plants, are two of the eight mathas, and are over 700 years old and still practice the philosophy in all its glory.

‘A peculiar and pronounced feature of the district is its spirit-worship, a kind of propitiation of spirits. Almost every village in the district has its Bhootasthana or spirit temple. There are various kinds of spirits, those belonging to the forest, those that guard the villages, and those that safeguard public health. There are also family spirits and it is not uncommon to find a separate room set apart in many houses for these spirits. The Bhootasthana is usually a small plain structure, without windows and with a thatched roof. In front of the temple are a few T-shaped pillars. The temples of the more popular Bhootas are substantial in structure’ (South Kanara District Gazeteer, 1973, 99).

Similar in concept to Bhootasthana, but believes in the symbol of divine power of the snake which ‘takes the form of adoration of effigies of snakes (Nagakallu or snake-stones) placed on platforms under the Ashwattha (banyan) trees or in shrines and temples’ (South Kanara District Gazeteer, 1973, 98, 99). Nagabanas, thus, literally mean Snake Forests (Naga=snake, bana, nee vana=forests).

Places where devotional songs are chanted communally, often within temples or within the immediate vicinity .

Madrasas are schools for scholarship in the Muslim religious texts, often attached to Mosques or proximal.

Problematically, the judgement never even mentioned the land use study which had been prepared by the Indian Institute of Science, or its key findings (John and Harish, 1997). On the issue of the public hearing, which the petitioners had contended was never held, the judgement stated that: 

‘on an earlier occasion, writ petitions had been preferred by Janajagriti Samithi and those writ petitions came to be disposed of by noticing that it is premature in as much as clearance by the concerned authorities had not been given and it was certainly open to the parties concerned to prefer their objections to the clearance before the concerned authorities. It was stated that such objections had been filed. It is complained that the same has not been taken note of or (not) considered subsequently. An affidavit had been filed on behalf of the Union of India that there was due consideration of the objections filed on behalf of Janajagriti (Samithi) and a letter also had been sent to that effect’. 

Referring to the Writ Petition 43904/95 in the High Court of Karnataka in the matter of Janajagriti Samithi vs. Union of India, seeking a stay against proceeding with the MPC project on grounds that it was socio-economically unviable and environmentally disastrous. Justice Rajendra Babu had dismissed this petition on preliminary hearings, stating that the petition was premature as final environmental clearances had not yet been granted at the stage, in his order dated 8^th April 1996. The presently discussed Writ Petition of 28651/96 was filed thereafter, especially when MOEF or the State Government did not consider or respond to any of the concerns raised by the Samithi.

It has to be noted, however, that the Janajagriti Samithi strongly contested this position: Although the MOEF claimed to have sent this letter in their rejoinder, Janajagriti Samithi had stated, as it still does, that it had never received the same and had even sought the Ministry’s despatch records to be produced in Court, to demonstrate if the letter had, indeed, been despatched, as claimed. The despatch records had controversially not been made available. The judgement also controversially concluded that:

‘this was in extension of the public hearing that was given earlier to all those who were interested in the matter of maintenance of the environment who wanted to be heard in the matter’ (Samithi case, 155). 

Per the EIA Notification, a public hearing can be called only when there is a 30 day notice to the public by means of advertisements in at least two widely circulated local dailies, one of which must be in the vernacular. There was no such advertisement.

The judges main conclusion briefly stated that ‘none of the objections raised by the petitioners are sustainable to quash the clearance granted by the KSPCB or MOEF’, as prayed. Yet, the dubious character of the clearance was acknowledged in view of the very strong evidence provided by the petitioners: 

‘Considering the fact that certain material is available now and could not have been brought to the notice of the concerned authorities (sic) and in as much as the project is still at the initial stages of being put through, (the MOEF was directed) to take into consideration the report of the DANIDA, NEERI (reports) and the views expressed by Mr. Sagardhara on the project’ (Samithi case, 64).

It further directed the MOEF to ‘also take note of the criticism of absence of the carrying capacity study (of Dakshina Kannada region which the State Government had ordered and) ascertain whether such information is such that the action taken by the 7^th respondent (MPC) will affect the quality of human life and environment in a significant manner or extent which has not already been considered by them and decide the issue arising there in’ (Samithi case, 164). The Court specifically directed that such action ‘shall be taken within a period of three months from today’, i.e. by 29^th November 1997 at the latest (Samithi case, 165).

Even though the Court refused to accept the petitioners position that the mandatory Public Hearings had not been held, as claimed, it was, nevertheless, compelled to state that if ‘the petitioners or any other interested party so desires, they may file appropriate representations to the MOEF for its consideration. Unless the MOEF considers oral hearing is necessary, the same need not be extended to the petitioners or any other party’ (Samithi case, 165).

Within the context of a deep political debate, however, several key issues need to be borne in mind concerning the tone and nature of this controversial judgement and its directions and findings. In the opinion of Saldanha, Fernandes and Mathai, aspects of this judgement clearly and unambiguously betray a shocking attitude of the court which needs to be reflected upon. In seeking to defend and exonerate MPC and the state’s regulatory authorities, highly questionable and, in some cases, inaccurate statements and actions were undertaken. Whether through wilful ignorance or wilful intent, it would appear, from Saldanha, Fernandes and Mathai’s analysis, that the justices clearly failed to abide by two key codes of the ‘Restatement of Values of Judicial Life’ which are designed to counter any suspicion of judicial corruption (Saldanha et al, 2000). The first code, as has already been noted earlier, states that:

‘Justice must not merely be done, but must also be seen to be done. The behaviour and conduct of members of the higher judiciary must reaffirm the people’s faith in the impartiality of the judiciary ... The last (16th) code mentions that every Judge must at all times be conscious that he is under the public gaze and there should be no act or omission by him which is unbecoming of the high office he occupies and the public esteem in which that office is held’ (Venkatesan, 2000, 47).

However, there would clearly appear to be acts of omission in the Court judgement which resulted in ‘a suppression of crucial evidence’, a distortion of ‘the truth’ with ‘the Court joining the Respondents in suppressing the due rights of the communities … thus effectively violating them’ in order to explicitly benefit the interests of MPC (Saldanha et al, 2000, 31, 29, 28). Such acts of omission, argue Saldanha, Fernandes and Mathai, are severe enough to even:

‘give us scope to ask the uncomfortable question of whether there were extraneous circumstances that bound the Court to decide in the manner that it did … There really appears to be no reasoning adopted in the decision’ of the High Court (Saldanha et al, 2000, 40, 33).

Given the seriousness of these allegations and charges, it is necessary to examine the substance of Saldanha, Fernandes and Mathai’s concerns in some detail. On the issue of the High Court judgement and summing up of the flawed REIA which had been submitted and cleared: 

‘This is not so much the problem with the judgement as much as the manner in which the decision was made, the issues that were addressed, or rather left unaddressed and the tone of the decision. For instance, the Court could have taken a strong view on the facts established by the petitioners that critical evidence pertaining to the impacts had been fudged, thus affecting the rights of the communities very adversely. The EIA notification specifically empowers cancellation of clearances granted should any false or misleading data be the basis of a decision. In failing to direct action based on this powerful clause, the Court joined the respondents in suppressing the due rights of the communities, thus effectively violating them’ (Saldanha et al, 2000, 28). 

As Mahalingam has clarified, there should be no hesitation in ignoring such a clearly stated and understood clause: 

‘Section 4 of the MOEF Notification on Environmental Impact Assessment of Development Projects, dated January 27, 1994 - as amended on May 4, 1994 - states that concealment of factual data or submission of false, misleading data or engineered reports will lead to the rejection of the project proposal’ (Mahalingam, 1999, 84).

On matters relating to the public hearing, or lack of it:

‘Worthy of mention here is the attitude of the Court as regards the necessity of the public hearing in the process of siting, for instance. The High Court made a peculiarly strange observation that ‘though there is no requirement as such to hear the public (sic) … (a) public hearing … was given earlier to all those who were interested in the matter’. By completely ignoring the fact that no 30 days public notice had preceded the claimed public hearing, the High Court joins the respondents in distorting the truth, and thus denying the true right of the people to express their opinion on the matter and be heard. Further, by contorting natural right to represent as being a process part of a hearing, the Court attempts to completely deny the right to be heard by affected communities … But the status in law of the public hearing process was not the point that was before the Court. What the petitioners contended was the failure to hold a public hearing in the first place. 

What transpired was that the State Government planned, with the complicity of the company, to stage a public hearing without informing the people and selectively informing persons who they believed represented the people. The same was, fortunately, stalled and postponed to a later date. The public hearing has not been held to date and the same has been acknowledged by the KSPCB … The statement exposes just one of many reflections on the shocking attitude of the Court to this case. In the first instance, we can focus on its statement that law does not require a public hearing. There can be only two possible reasons for this statement: Either the Honourable Court was unaware of the provisions of the law or it was unaware of the status of notifications under the Constitution of India. 

The requirement for a public hearing was made through a notification under the Environment Protection Act, a statute legislated by the Indian Parliament. Secondly, vide Art. 13(3)(a) of the Constitution of India, notifications are to be considered a part of law applicable to India. The result of this uneducated remark was thus to judicially de-recognise the Rights of the Citizens of India. Rights granted to it through a legislature elected by and responsible to the people … Such an irresponsible statement  (by the Justices) that effectively wipes out basic rights of the people to be heard cannot not be considered a violation of the most basic of human rights. This, particularly, when KSPCB retracted its original statement that the Public Hearing had, indeed, been held, as claimed in its NOC, in the affidavit that it filed in response to the petition. 

Similarly, the State and the Company have consistently lied to the Court by continuously altering the details of the submission. Despite these contradictions and the evidence provided by the petitioners, the Court found it fit to note that ‘on the main issue as to the location of the project, there has been due hearing. On the other issues such as rehabilitation and environmental safeguards to be provided, there were differences amongst various authorities and to give sufficient time and attention to them on these aspects, the matter was put off and therefore we do not think there is need for public hearing at all in the matter of site clearance’. Since this accepts in the face of hard core evidence to the contrary, with the acceptance of an untruth, the decision itself joins the submissions of the respondents in being a contortion of the facts. In not dealing with the merits of the purported public hearing, the process of legal redress itself has been withheld from the people. 

Lastly, the issues of site clearance, rehabilitation and pollution control are all interconnected and part of a whole, which affected the public equally, and they could not be separated in such a manner. As such, in adopting the argument forwarded by the respondents that these were separate issues, the Court effectively refused the right of people to be heard … 

The failure to hold the public hearing was a ground to quash the clearance granted for the project. By not considering the merits of the hearing, the Court effectively did not allow the quashing of the project but (actively and in a deep political manner) took upon itself the burden of legislating, rewriting the law and deciding what could be done to make amends … It appears that the Court was reluctant to examine the merits of the purported hearing and the bulk of the arguments have been forwarded to justify the status quo. It would be fair to say that the judgement relies totally on the submissions of the respondents. This would ordinarily not have been a problem, except for the fact that it ignores vital points that were raised by the petitioners’ (Saldanha et al, 2000: 31).

On matters relating to the court’s deep political suppression of evidence: 

‘Quite in contrast to the claims of the respondents, that of the land (of the proposed MPC project site) being degraded, uncultivable, etc., the Indian Institute of Science study (clearly) revealed that 40% of the land was under thick tree cover, 40% under wetland cultivation and 10% under water bodies. The Court completely suppressed this evidence, thus allowing for the claim of the respondents, when, indeed, the site was 
one of the most fertile and ecologically diverse. Another instance of suppression of crucial evidence against the respondents involved the compliance of the conditions based on which clearance was granted … For instance, it was a requirement of the NOC that a comprehensive EIA should be conducted within a year of that clearance.

This, in effect, meant that the study was to be ready by 25 July 1996. Even as this study was not initiated a year later, a clear violation by itself, the MOEF proceeded to accord Final Environmental Clearance on 11 June 1996, once again reiterating the need to fulfil this condition. When the proceedings were held in High Court, it was clearly a year after the Final Clearance, and two years after the NOC was accorded, reasonably clear enough time to produce the EIA. The petitioners appeal to the Court to demand the production of the EIA in compliance with the conditions were ignored. 

The petitioners then produced a confidential letter written by Shri. Ron Somers, MD of MPC, on 10 January 1997, to Karnataka Pollution Control Board, wherein he stated that the EIA will not be available till such time the land was not vested in the company’s position. In effect, the petitioners had produced clear evidence of blatant disregard for the law and contempt for the court. The judgement completely fails to make any mention of this document, thus, once more, demonstrating a clear bias in favour of the respondents’ (Saldanha et al, 2000, 31-32).

Other highly disturbing actions of the Court were also identified: 

‘The Court also failed to make any comment about the NEERI report, a report that was extremely critical of the project and had raised substantial issues of concern as regards the project and based on the mandate of the Supreme Court of India. The only context in which the court found it fit to refer to it in its decision was that it did not add (sic) any new information which would affect the quality of the human environment in a significant manner’ (Saldanha et al, 2000, 32). 

As Saldanha, Fernandes and Mathai clarify, this Court judgement represented:

‘a complete misstatement of the content of the report. Another issue where the Court failed to exercise its judicial discretion was on the issue of the EIA statements. The clearance for the project was granted without the impact statements being made on the jetty project, that of the pumping of sea water, the discharge of wastewater into the sea and the transmission lines for evacuation of power from the plant. It would be apparent that, as the project would not be able to begin functioning without these projects coming through, they were an integral whole. Yet the respondents vehemently protested and claimed that they were essentially unrelated (sic) projects. The Honourable Court accepted this argument’ (Saldanha et al, 2000, 34).

It has also been argued that the Court was guilty of acting against the spirit of the ‘Precautionary Principle’, which ‘is a general principle of environmental law and is also accepted in the Indian legal system. In this case, the Court quite clearly indicated that there was no need for a procedure’ on the carrying out of a carrying capacity study ‘that could help in assessing environmental stress on the local habitat’ (Saldanha et al, 2000, 33, 34). It also adopted ‘a whole lot of double standards’ (Saldanha et al, 2000, 34). Further, and equally disturbingly, the Court failed to enforce its own directive to grant the petitioners access to key documents. This action clearly undermined the basis of the petitioners appeals (Saldanha et al, 2000).

These are outlined in detail in Saldanha et al, 2000.

Within this uncertain atmosphere, it is perhaps unsurprising to discover that Saldanha, Fernandes and Mathai were of the opinion that:

‘The hearing process was far from free and fair … It is obvious that the action of the Court to proceed in view of the justifiable stand of the petitioners counsel (that the respondents, firstly, needed to produce key documents in court which had been requested from them, before any final judgement could be made) amounts to a violation of the process of a fair hearing as the petitioners were not given an opportunity to make their case properly. 

We are of the opinion that this is, in fact, the primary fault of the judgement and hence should be held bad in law … It may be noted that the right to legal redress and the right to a fair hearing are an important part of the Declaration of Human Rights (Article 8). The process described above clearly indicates that while there was the actus of hearing the petitioners, the factum of listening was clearly absent, a case of  procedure lacking substance (in order to benefit the interests of the respondent parties). 

In failing its duty as described in this case, the Court has abdicated this onerous responsibility and, as such, is in our opinion as much a party guilty of violations of human rights as the state machinery and the company’ (Saldanha et al, 2000, 41).

16. Was the Judgement Leaked?
MPC claimed this judgement as an endorsement of its project, and ‘the judgement made news the next day, but the more startling news was of what transpired in Court even as the judgement was being read out’ (Saldanha, 1999, 1). Ron Somers, Managing Director of MPC:

‘was seen holding an impromptu Press Conference with an all-ready Press Release within the Court Hall even as the operative part of the judgement was being read out. When the petitioners obtained a copy of the release, they were shocked to realise that Somers had predicted the outcome and may have had access to the judgement (before) its delivery. The attention of the Bench was sought to such events and a visibly disturbed Mr. Justice Rajendra Babu directed the petitioners to file a memo. However, he later summoned the Samithi’s advocate (on record), Mr Krishna Bhat, to his chambers and in the presence of the MPC Company advocate (on record), Mr K G Raghavan, who was already present, suggested to Mr Bhat, with sufficient camaraderie suited for the occasion, to make do with an apology!’ (Saldanha, 1999, 11).

The offer was declined and, instead, the petitioners addressed a memorandum to the Chief Justice of India, then Justice J S Verma. In their memorandum, the petitioners recounted the incident and implored the Court for corrective action stating: 

‘We approach the most revered institution of the country seeking justice for our grievances and hold the process of dispensation of justice with the highest esteem. The least that we expect in this process is that the honour of the court is vitiated by actions that are wholly inappropriate in keeping with the highest traditions. For instance, we expect the Karnataka High Court to prevent the Indian subsidiary of an American Multi-national Company from turning the court hall premises into the venue for a Press Briefing. 

Further, we expect the Court to take the appropriate action when a Judicial Order is utilised by a private company as propaganda material to defend a project, the antecedents of which is still in public doubt. Finally, we expect the Court to avoid such a degree of pre-disposition in dealing with the matters brought before it that one of the parties to the action was able to (precisely) predict the outcome of the litigation’ (Janajagriti Samithi, memorandum, September 1997).

No action was taken by the Chief Justice of India, even as the press reported the incident. 
17. Further Contemptuous Actions
One might think that the continuous criticism and opposition to the project from local communities and public interest groups might have pressurised the regulatory agencies into conforming with the order of the High Court. The MOEF, however, failed to review the project clearances within the three month period stipulated, as directed by the Court. A massive letter petition was initiated by Janajagriti Samithi and ‘thousands of letters were sent to’ MOEF from the Dakshina Kannada region and elsewhere, urging the Ministry to comply with the ‘direction of the High Court’, particularly in reviewing the clearance decision based on the NEERI, Sagar Dhara and DANIDA reports (Saldanha, 1999, 11).

When no action was taken despite this widely supported campaign, Janajagriti Samithi appealed to the Supreme Court, pointing out the continuing contempt of the High Court direction. It also appealed against the decision of the High Court, which refused to quash the clearances in view of the evidence produced. The matter was heard during February 1998 by a ‘Supreme Court Bench consisting of (then) Chief Justice Punchi, Justice Kirpal and Justice Saghir Ahmed, who decided not to admit the appeal. This, despite a fighting argument by Senior Advocate Ms Indira Jaising, (who pleaded) that the environmental clearances granted be set aside till such time, in the very least, that the comprehensive EIA on the project’ was prepared by MPC (Janajagriti Samithi, February 1998).

Significantly, no compliance followed even after the Supreme Court upheld the High Court decision in spite of the Samithi’s continued representation of its concerns to the Government of India, directly and through elected representatives. Environment Support Group (ESG) supported this campaign by sending an appeal to over 70 independent ‘Experts of the MOEF’ (ESG, January 1999).

This campaign seems to have had an effect, at least with the ‘experts’ and the Environment Minister, Suresh Prabhu. Mr Prabhu wrote to ESG on 3^rd February, 1999, stating that he would forward the representation ‘to the concerned Division for necessary action’ (Prabhu, 1999). One of the Experts on the Thermal Power Projects Appraisal Committee, Mr Y S Murthy, however, responded to ESG’s petition some time later, and revealed that he ‘was not in a position to express ... views on the matter’ as he had, scandalously one might think, not seen the ‘( R )EIA - prepared by the project proponents – (or the) reports of NEERI, DANIDA and the views of Sagar Dhara’ (Murthy, 1999). From the Minister’s response, it would appear that the concerned ‘experts’ who should have been consulted, were, in deep political fashion, overlooked and not even approached in any meaningful manner. 

A further letter by Dr Nanditha C Krishna, also an Expert on the Thermal Power Plant Appraisal Committee, expresses deep frustration at the manner in which the Cogentrix-MPC project had been passed:

‘Unless there is transparency, I am afraid that the Ministry of Environment and Forests will have to bear the criticism for the destruction of the environment in the forest-rich region of the west coast’ (Krishna, 1999).

Other possible deep political concerns have also been raised. MPC, in seeking approval and necessary clearances for its project proposal, had officially claimed in 1996 that 75% of the project’s debt component was primarily being covered by two key lenders, the US Exim Bank and the UK’s Export Credit Guarantee Department (The Economic Times, 19 October, 1996). However, as one of the authors was informed during a meeting with US Exim officials in Washington in January 2000: 

‘It was clarified that the US Exim Bank had not committed itself to financing the Mangalore Power project of Cogentrix, contrary to repeated claims made to this effect (by MPC) in press reports. In fact, it was confirmed that no application for funding had even been submitted to date. This is a very revealing fact, for the line that Cogentrix had advanced over the years is that the project is financially backed by Exim, and press reports have suggested that this was to the extent of US $ 700 million or more ... Participants in this meeting involved three very senior officials of the US Exim bank and Doug Norlen of the Pacific Environment and Resources Center (PERC), Claudia Saladin and Emilie Thenard of the Center for International Environment Law (CIEL)’ (ESG, 14 January, 2000, 1).

Subsequent information, however, would appear to confuse matters even further. Were senior members of Exim bank correct in making the above clarification? According to a report in Hindu Business Line, a Memorandum of Understanding (MOU) appears to have been signed - in December 1997 - between US Exim-Bank Vice-Chairman, Jackie Clegg, and Ron Somers and representatives of Cogentrix and CLP concerning the project (Hindu Business Line, 2000). If this was the first MOU signed between the respective parties, this would still tend to suggest that assurances made by Cogentrix prior to this date were possibly questionable.

18. The Exit of Cogentrix from MPC
It needs to also be appreciated that deep political stances by MPC, politicians and government authorities have continued, even after Cogentrix announced, in December 1999, that it was pulling out of the MPC project due to ‘needless’ and excessive delays (Business Standard, 1999, 1). The Chief Minister of Karnataka, Krishna, has confirmed that the government is still engaged in negotiations with MPC - via the CLP and Tata group - to try and finally provide clearance for the project. Krishna, for instance, is on record as indicating that:

‘the CLP and the Tatas - who are the (new) partners in the MPC - are a formidable combination and have a good reputation ... Although Cogentrix had deserted the project, he said, the clearances were in the name of CLP and there are no legal problems’ (Prasad, 2000, 5).

Or more accurately, the Tata Electric Company (Business Line, March 26, 2000).

However, according to Mehta, such official assurances serve to mislead the general public over the matter, for they fail to alert the citizen that these initiatives - which are clearly being heavily backed by the Chief Minister - are set to actually breach the law as it stands. As Mehta notes, MPC’s MOU clearances and agreements with the government do not state that Cogentrix can assign the project to anyone else (i.e. CLP, as had been suggested by the Chief Minister): 

‘As per the MOU (whilst Cogentrix has been) allowed to enter into a partnership with a third party to execute the project with permission of the Government of Karnataka, it is to be understood that the partner can come along with Cogentrix and not without them. Moreover, in the MOU, there is no mention that Cogentrix can assign the project to anyone or its successor can execute the project. The MOU is specific to Cogentrix, USA only, and not transferable to anyone’ (Mehta, 2000, 1).

On the issue of the counter-guarantee agreement, ‘the understanding of the Government of India (wa)s to give (it) to Cogentrix, USA, and not its assignee, successor’ (Mehta, 2000: 3). According to Mehta, even the PPA which was signed between MPC and KEB clarified (under Clause 2.2) that the agreement would only stand if Cogentrix, as the major partner, remained at the helm of MPC for a period of at least 10 years:

‘In case they (Cogentrix) walk out of the project (which has been the case) then the MOU, FIPB, PPA and all agreements are null and void both legally and contractually’(Mehta, 2000, 3).

Foreign Investment Promotion Board.

Mehta further confirms that FIPB approval - which was given to Cogentrix in 1993, and restated in subsequent letters up to 18th June, 1999 - clearly mentions that:

(a)	‘The FIPB approval is in the name of Cogentrix Inc, USA - All letters are addressed to Cogentrix, USA;

(b)	FIPB permits Cogentrix, GE Capital and CLP to bring foreign equity in the project;

(c)	Cogentrix, for purposes of executing the project in India, (can) incorporate a company by name, Mangalore Power Company (MPC). The FIPB clearance is then transferred in the name of the new company to facilitate them to execute the project on the express understanding that it is the arm of Cogentrix (which will hold major equity) and (will) execute the power project through them. The letter and spirit of the transfer ... was to consider MPC as Cogentrix’s arm or vehicle to execute the MPC project. Any change in this philosophy or understanding amounts to subverting the rule/law to allow back door entry by other people in the project’ (Mehta, 2000, 1, 2).

19. Conclusion
The above analysis would appear to suggest that deep political and corrupt actions of various kinds have certainly been undertaken. Whilst some points and issues remain speculative in nature, there can be no doubt that several corrupt, deep political interventions have taken place in order to promote the project. Despite mass protests, thousands of representations, campaigns, investigative reports and findings and a number of petitions which have exposed the above issues in the High Court of Karnataka, the Supreme Court of India as well as in the public domain, the deep political system in India has, nevertheless, been able to scandalously side-step and ignore public health and safety concerns, and calls for a more democratic polity. The above findings would also appear to directly contradict claims by Ron Somers, MD of MPC, that:

‘It’s just not possible to add 1000MW to a 3000MW grid without complete transparency ... No short cuts and no false promises’ can be made by MPC (The Hindu, 27 July 1995; The Hindu, 12 August 1995).

In the case of the MPC power project proposal, what makes the issue even more pressing is the massive economic, social, environmental and public health cost which is set to take place, as people stand to be forcibly relocated and have their lifestyles altered for them, and consumers are forced to buy power at exaggerated rates. Several projected environmental impacts of the plant are also simply not being given the due concern and consideration they deserve from the Government or MPC.

This study would appear to indicate that State and Union Government departments and representatives are, to a disturbing degree, prompted by deep political and corrupt liberalisation linked ‘development’ agendas and considerations. It is also clear that undemocratic disinformation and targeting programmes and campaigns have been undertaken in order to counter ‘dissident’ initiatives and public protests against corruption-ridden projects.

The findings of this study would therefore appear to suggest that liberalisation backed initiatives of the model MPC kind have merely served to corrupt governmental and judicial systems further, and sought to constrict those very democratic spaces which, in the past, have provided at least some theoretical measure or opportunity for redress of public grievances. In the case of the MPC power project, in the opinion of Agarwal and others, tens of millions of dollars in kickbacks appear to have been injected into the deep political system. Sabhapathy’s allegations, if true, would additionally appear to suggest that significant bribes have been offered by representatives of MPC. These viewpoints, however, remain the subject of heated debate. The Supreme Court, for instance, has rejected Agarwal’s assessment. What remains clear, however, is that corrupt, deep political actions of other definable kinds - not connected to debates concerning bribes amounting to tens of millions of dollars - have certainly been undertaken. The democratic rights of citizens to expect more ‘open’ government have been frustrated through a range of corrupt and deep political interventions that have clearly been undertaken to favour the MPC project.

The exit of Cogentrix from the MPC project provided an opportunity for the newly appointed Congress Government in Karnataka, headed by Chief Minister Krishna, to address several of the key types of problems and concerns which had been identified in this paper and in a range of other articles and commentaries which relate to the state's power sector. A high powered committee of experts, headed by Deepak Parekh, Chairman of the Housing Development Finance Corporation, was appointed to probe into some of the systemic problems which confront Karnataka's power sector and to suggest remedies. 

Following two months of investigations and interactions with various agencies and IPPs, the Parekh Report, which was submitted on 26 February 2000, recommended that no escrow cover should be extended to IPPs, as the State Electricity Boards (SEBs) were not in a position to cover the risk. The Parekh Committee cited factors such as ‘poor finances of KPTCL, poor finances of the State Government to provide rural subsidy to KPTCL, poor operation, metering, billing and collection of KPTCL and anomaly in tariff due to low tariff for agricultural sector’ as reasons why Karnataka Power Transmission Corporation Ltd. (KPTCL, a new name for the State Electricity Board) should not extend escrow cover for IPPs (As quoted by Kurian, 2000). In other words, the Committee prescribed that only those IPPs that are financially viable and capable of raising resources competitively to sustain large power sector investments should be supported. Thus, by implication, it would appear that IPPs - such as the Cogentrix backed MPC - which were promoted on the basis of escrow from the State and Central counter-guarantees, would not qualify. 

In a remarkable departure from the past, the Karnataka Cabinet decided to accept the Parekh Report recommendations in toto. In addition to this, the Chief Minister personally made a commitment to ‘maintain total transparency in all areas of the power sector, including power generation and transmission, (claiming) the State was the first in the country to have set up such a high-level committee consisting of experts to suggest measures to speed up reforms in the power sector. The recommendation would go a long way in the total transformation and efficiency of the entire power scenario in Karnataka and it would serve as a role-model to other States’ (Hindu Business Line, 27 February 2000).

This stand was greeted with vigorous opposition from a section of the ruling Congress party, led by former Karnataka Chief Minister, Veerappa Moily, who demanded escrow cover for the MPC project. As he sought to argue: 

It may recalled that Mr Veerappa Moily was Chief Minister of Karnataka when the original, and most controversial, PPA with Cogentrix was initialled by the Government of Karnataka.

‘Per the projection of Parekh committee, 3,000-3,500 MW of power is required by the State in the next five years. Out of this, Karnataka Power Corporation Ltd (KPCL) expects to add 1,012 MW at an investment of Rs. 3,442 crores. Central units are expected to account for an additional 800-850 MW, adding up to a total of approximately 1,850 MW from KPCL and the Government. This leaves a gap of nearly 1,200-1,700 MW, which has to come from IPPs. This will happen only if escrow or any other securitisation comfort is given by KPTCL or the State Government to Indian financial institutions or banks which are going to finance these IPPs. Is the Government ready to finance IPPs without escrow? If they are agreeable, then the recommendation of  the Parekh committee on escrow can be accepted or it will have to be rejected outright’ ( as cited by Kurian, 2000).

Environment Support Group (ESG) contested Mr Moily's argument in a release, stating that:

'Mr Moily's argument that no private financial institution will fund IPPs in the absence of escrow cover has been dismissed by one of the most vigorous campaigners for foreign investment in India's power sector, the US Exim Bank. Credible evidence for this is the MOU signed by former MPC Director Ron Somers and representatives of Cogentrix and China Light (CLP) with the US Exim Bank Vice-Chairman Jackie Clegg, dated December 9, 1997. According to this document, the US Exim Bank provides ‘financing to creditworthy projects without the need for sovereign, corporate or financial institution guarantees’’ (Hindu Business Line, 9 March 2000).

Mr Moily did not contest the ESG statement, but it was MPC which reacted the very next day, claiming that:

‘The MOU signed between the US Exim Bank and MPC on December 9, 1997, cannot be construed to mean that an independent power project does not require escrow. The escrow mechanism is effectively a security package required … in order for a project to become bankable. The US Exim Bank and Export Credit Agencies (ECAs) will not finance a project without a bankable security package, which could be escrow by SEB or guarantor by Indian financial institutions. Even the Financial Institutions (FIs) now are not willing to finance the IPP without the escrow’ (Hindu Business Line, 10 March 2000).

MPC's continuing and vigorous demand for escrow cover, in order for it to develop a ‘bankable security package’ to secure ECA and FI support, seems to be in clear contradiction to the terms agreed in the MOU with US Exim Bank. Certain clauses of that MOU make this point clear: 

‘Whereas the Company and the Sponsors anticipate that over $650,000 and Rs. 207,498 Lakh in debt financing will be needed for the Project ... the Company and the Sponsors intend to request that the Export-Import Bank (Exim Bank) of the United States provide financing to the Company, on a limited recourse project financing basis, in support of … US exports. (Given that) Ex-Im Bank provides financing in support of US exports in order to foster job growth in the United States … Ex-Im Bank's limited recourse project financing program allows it to provide financing to creditworthy projects without the need for sovereign corporate or financial institution guarantees’ (US Exim MOU, 1997).

The lack of necessity for an escrow cover to finance the project has, more recently, been reiterated by India's Infrastructure Development Finance Corporation (IDFC). IDFC, headed by Deepak Parekh, has proposed that ‘funding … be done exclusively on a project recourse basis. That means the financiers would have recourse only to the IPPs revenue streams for meeting debt servicing payments. Consequently, IDFC would have to assume a risk on KPTCL, which is the bulk power purchaser, (provided a healthy) debt equity ratio of 70:30’ is assumed (Shivakumar, 2000).

This would mean that the IDFC considers the project to be worth financing so long as access to the project's revenue stream is available. Consequently, it dismisses the high risk ascribed to the payments problem of KPTCL, as long as the entity is free from deep political and ‘corruption induced’ interventions. Cogentrix, from the very inception of the MPC project, had claimed that KPTCL was an unreliable purchaser for energy supplied, and had, thus, managed to seek finance for the MPC project on the basis of a shocking 16:1 debt equity ratio, a completely unacceptable scenario in normal financing. It had, consequently, almost managed to promote an unviable enterprise as a viable one. This was primarily possible due to the extraordinary sops that repeated governments committed to extend the project, including escrow cover and sovereign counter guarantee.

It is, however, increasingly apparent that deep political interventions distressingly continue to favour MPC. The Central Government, for instance, continues to favour MPC by approaching financial institutions and lobbying on its behalf. The Industrial Development Bank of India (IDBI) has even received a ‘request’ to relax some conditions. As per the relaxed conditions, the ‘escrow account, or the new terminology for the same, the fall back option for the lenders, is to be activated only 90 days before the commercial date of operations. (Furthermore), export credit agencies of equipment suppliers in Europe had also sought some form of a financial security package for export credits from the Central Government’ (Shivakumar, 2000b).

It appears that, notwithstanding a long process of resistance to one of the most controversial projects initiated under the process of liberalisation in India, deep political interventions continue to influence decisions. These are aimed at pushing through various statutory clearances and supporting extremely controversial actions which serve to advance the entrenched interests of a vested few, at an enormous cost to the public at large.

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LGD 2000 Issue 1	 http://elj.warwick.ac.uk/global/issue/2001/fernandes.html	 Commentary