The Indian federal government has dismissed threats by United States-based energy company, Enron, to claim Rs 240bn ($5bn) in damages for the cancellation of contracts in connection with the $2.9bn Dabhol Power project.

A press report from PTI this week quotes finance minister Ashwant Sinha as saying, “If somebody issues a threat he is not showing the muscle. He is only showing the lack of it.” Enron Corp. Chairman Kenneth Lay had last week claimed that the liability of the central government, the state of Maharashtra and its own electricity board would be $5bn in case of a termination of the contract.

The Dabhol Power company, which is majority-owned by Enron, is in dispute with the Maharashtra State Electricity Board (MSEB) – its sole buyer of electricity. MSEB has declined to take delivery of power, which it claims is priced unrealistically.

Stating that federal government was not a party to the dispute, Sinha said that government’s involvement with project is limited to a counter-guarantee for the 740 MW Phase-I only. “The parties to the dispute are Maharashtra government, its state electricity board (MSEB) and the Dabhol Power Company (DPC). It is involved because of larger national consideration in mind and the fact that we have counter-guaranteed the first Phase,” he said.

The minister said that the government had not counter-guaranteed the 1444 MW second phase. “It (Phase-II) is an agreement between Maharashtra government and the DPC, Sinha said adding, “We have tried to bring the warring parties together. Our approach has been more constructive and solution oriented and find a generally acceptable solution to the problem.”