Video: Indian leaders unapologetic over power failure
The crisis sharpened fears about India’s failure to invest in the infrastructure needed to support its rapidly growing economy, in sharp contrast to neighboring China. It also destroyed any lingering hope that the nation’s entrepreneurial spirit and vibrant private sector could somehow deliver a significantly brighter future without a dramatic improvement in the way the country is governed.
“As one of the emerging economies of the world, which is home to almost a sixth of the world population, it is imperative that our basic infrastructure requirements are in keeping with India’s aspirations,” Chandrajit Banerjee, director general of the Confederation of Indian Industry, said in a statement. “The developments of yesterday and today have created a huge dent in the country’s reputation that is most unfortunate.”
Tuesday’s blackout, which hit the northern and eastern parts of the country, brought more than 500 trains screeching to a halt, left thousands of passengers stuck for nearly an hour inside the capital’s Metro line and trapped more than 200 miners underground.
There was gridlock on many streets in the capital as traffic lights stopped working. Bank ATMs also failed, but airports and major industries were unaffected, switching instantly to backup generators in a country used to power outages.
Along with a lack of investment in infrastructure, the crisis also had roots in many of India’s familiar failings: the populist tone of much of its politics, rampant corruption and poor management in its government and public sector, weak law enforcement, and a maze of regulations that restrict many industries.
Officials said they did not know what caused the blackout Tuesday, although a similar failure Monday was blamed on individual states drawing too much power from the grid, in defiance of regulations.
“It is open lawbreaking that goes on all the time in India,” said a Power Ministry official, who spoke on the condition of anonymity because of the sensitive nature of the subject. “This time, it went beyond limits.”
The official said the national coalition government is unable to rein in powerful state chief ministers on whose support it often depends.
“We are powerless to enforce grid discipline like they do in developed countries of the world,” he said. “There are political constraints. We are even afraid to name the [offending] states. But what happened yesterday and today is a warning for all of us.”
‘Politically correct prices’
Most Indian consumers receive heavily subsidized electricity, while farmers get free power, supposedly to pump groundwater to irrigate their land. But officials say much of the free power is illegally diverted to factories. That has left the grid overburdened and electricity-distribution companies heavily in debt.
“India’s basic energy shortage is compounded by the policy of selling electricity to consumers at politically correct prices,” the Hindustan Times wrote in an editorial. “The government-owned distribution monopolies in the states have all but lost their ability to buy power because their political bosses force them to sell it cheap, sometimes free, to voters.”
Sajjid Chinoy, India economist at JPMorgan in Mumbai, put it more simply: “When you don’t have economically viable pricing, you will not have economically viable power generation,” he said.
India suffers a power deficit of 8 to 12 percent in peak periods, and power cuts of eight hours a day are common in many parts of the country. A quarter of the population, 300 million people, has no access to electricity at all.
Even though India has the world’s fifth-largest reserves of coal, disputes over environmental and land permits have kept many new mines from opening, while a lack of investment in technology has prevented output from growing to keep up with demand.
Existing mines have strict limits on how much coal they can extract, supposedly to safeguard the environment but in practice simply arbitrary, said U. Kumar, an expert on coal who advises some of India’s top industry leaders. A six-month-old Coal Ministry proposal to raise those limits by 20 percent as an emergency measure has “fallen on deaf ears,” he said.
As a result, about 10 percent of power plants have no coal supply right now, Kumar said. “We are going to face a frightening scenario,” he added. “It is going to be very difficult to meet the demand of our people.”
To meet some of the shortfall, India has been forced to import expensive coal from abroad, but it is politically unable to pass those higher costs on to consumers, bankrupting the sector still further.
Losses in electricity transmission and distribution are also among the world’s highest, 24 to 40 percent, because of inefficiencies and theft.
A constraint to growth
Indian economic growth has slowed to around 6 percent, while inflation is in double digits. That is a sign, Chinoy said, that investment by the public and private sectors has not kept up with the country’s consumption-led boom of recent years, inhibiting the economy’s ability to sustain rapid growth without pushing up prices.
“The biggest constraint to India’s growth potential is lack of capacity,” he said, “and the biggest single constraint to growth is the lack of available and adequate power supply.”
Earlier Tuesday, a senior power official in the northern state of Uttar Pradesh, Avinash Awasthi, was transferred for failing to prevent Monday’s blackout. But officials found no obvious scapegoat for the second day’s failure.
“We are absolutely clueless why this has happened again today,” said Shakti Sinha, an official in the power department of the Delhi government. “Yesterday we knew it was overdrawing of power; today it looks like a technical fault. The system failed somewhere.”