June 02, 2020
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Everything We Own

Everything We Own
  • Whether it buys any power from Dabhol or not, MSEB has to pay for Dabhol's generating capacity and fuel.
  • If MSEB fails to pay, the Government of Maharashtra (GoM) promises to irrevocably and unconditionally pay DPC its dues.
  • If GoM defaults, the Republic of India counter-guarantees the payments due to DPC.
  • In this case, the Government of India (GoI) asks the RBI to deduct this from the constitutionally sanctioned share of revenues due to Maharashtra.
  • The Indian Constitution limits the power of the State to give guarantees to limits fixed by legislature, and limits total exposure to the amount of the Consolidated Fund.
  • There is no constitutional provision to guarantee revenues to a third party, much less revenues due to a third party that has contracted with a state corporation.
  • However, the GoM has indemnified DPC against any "invalidity, illegality or unenforceability of the guarantee". So, even if it is unconstitutional, the GoM has to pay.
  • The GoM has staked all its assets, present and future, as surety for the payments. The Republic of India has staked all assets, present and future, including those abroad, save diplomatic and military. It has waived "any right of immunity which it or any of its assets now has or may acquire in the future in any jurisdiction".
  • The total contingent liabilities amount to a total of about Rs 1,40,000 crore at Rs 47 to the dollar. Given dollar appreciation and oil price rises, this could go up to at least Rs 500,000 crore.
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