The paper "Enron Development Corporation: the Dabhol Power Project in Maharashtra" is a good example of a business case study. The Dabhol Power project is one of the world’ s largest power plants not just in India, but in the entire world. The project was commissioned in 1995 by Dabhol Power Company (DPC). According to the case, the power project was financed by both loan $643 million and equity financing of $279 million (Harvard Business School 1997, p 1). The project also marks the largest foreign direct investment into India considering that Enron Development Corporation was the majority stake in the company.
The part I of the paper presents a comprehensive analysis of the Danhol power project case and recommendations based on the issues presented in the case. Analysis of India and Maharashtra Power Capacity and Needs India is one of the most populated countries in the world. In 1994, the country had a population of about 920 million people through this population has since grown to about 1.2 billion people considering a growth rate of 2.3% according to the case (Harvard Business School 1997, p 3).
However, of all the 26 Indian states, Maharashtra is the third largest with a population of over 79 million people. As such, the Dabhol power project was conceived out of the need to meet the demand for energy that had outpaced the available supply. The case indicates that the growth in population both in Maharashtra and India as a whole coupled with the growth of industries resulted in a huge increase in the demand for energy. The case indicates that energy supply was 18% below the peak demand countrywide. The shortage of energy supply was bad for the economy of Maharashtra and India as a whole.
It was projected that Maharashtra would experience an energy shortage of over 5,800 megawatts while the nationwide shortage would exceed 50,000 megawatts by 2001/2002 (Harvard Business School 1997, p 5). The economy of any country is spurred by the availability of energy, which is a critical resource. This is because lack of power means that no industry would be in operation, thereby bringing a country to a standstill. According to this case, the shortage of energy supply resulted in about 3.1% loss in India’ s industrial production (Harvard Business School 1997, p 5).
The problem was worsened by the lack of a national power grid. However, the case indicates that the Indian government did everything within its means to bridge the gap by contracting an inter-state and inter-regional power transmission system. Despite the increase in the supply of power, the public sector could not help address the energy shortage in the country. In response, there has been an increased need for the Indian government to involve the private sector to help address the energy problem in the country.
Analysis of the case clearly indicated that the public sector could not raise enough resources single-handedly to invest in new power generation projects to help meet the growing demand for energy in the country. Therefore, to address this difficulty, it has been necessary for the government to attract private investments for power harnessing and development. In line with this need, the Indian government recently announced policy changes that are expected to promote the participation of the private sector in power development in the years to come.
Current estimates indicate that the private sector participation will help add about 2,810 megawatts of power to India’ s power grid (Harvard Business School 1997, p 7). The addition of the power will go a long way in helping supplement the capacity development by the government.
ReferenceHarvard Business School 1997, Enron Development Corporation: The Dabhol Power Project in Maharashtra, India (A), pp. 1-15.