Collapse of the energy giant

A major development which has shaken the financial markets in several countries and caused concern worldwide in business and government circles is the collapse of the energy giant Enron. The fallout of this catastrophic caving in of a major company, which till less than a year ago was regarded as a shining example of a dynamic and successful corporation, is yet to be assessed. But, of course, this development has major implications for India,since Enron has been at loggerheads with the Government of Maharashtra and the Maharashtra State Electricity Board over the Dabhol power project for almost a year now. Several Indian financial institutions have provided a large amount as loan capital for the 3 billion dollar project, and it is not clear at all how the impending bankruptcy of Enron might affect their stakes in the project.The Enron story will form an interesting case study in business schools round the world for a number of years and for an army of students and their professors, who would analyse the reasons for the failure of a company that was the envy of its competitors till yesterday. While the Dabhol project was a small part of Enron?s problems, its collapse globally was the result of a combination of untrammeled ambition, an excessive dependence on energy trading (which the company had excelled in), the onset of California?s power crisis last year, and fudging of figures of earnings and other such irregularities by senior staff of the company, which Wall Street punished severely by downgrading the company?s stock in a big way. But the last thing that the detractors of Enron in India should do is to exult, because it is not evident yet what the country and Indian consumers might end up paying for the sins of the company and our own decision makers. The price could be very high.