Tuesday, May 09, 2006

Paran Balakrishnan: Blackouts add to Indian summer heat

The dog days are upon us. The mercury has already soared to 44.5C in New Delhi and it isn't about to cool down in the near future. To make matters worse, Delhi's power supply is beginning to collapse, leading to power cuts of between two and seven hours daily.

Did someone describe India is an emerging superpower? They might have second thoughts after spending a few days in Delhi at the height of summer. Last week the lights went off in half the city and didn't return for hours because of an overload on a power station that supplies the capital.

Every day half-a-dozen north Indian states are battling one another and overdrawing from the northern grid, the electricity pool that's supposed to help distribute electricity efficiently between the states.

An optimist could point out that power shortages are a by-product of growth. Every year the demand for electricity is shooting upwards. That means more factories are guzzling electricity and more people are installing air-conditioners in their homes - a sure sign of prosperity.

But if you aren't quite the bubbling optimist, then the power sector could plunge you into despair about India.

That's because it highlights the blackest spot in India's weak infrastructure. And this is the one sector that hasn't seen any serious progress in the past decade as Indian growth began to speed up.

The Dabhol power station, on India's west coast, is a symbol of everything that has gone wrong with the country's power sector. The power plant was built during the heyday of the infamous Enron Corporation and it was a flawed deal from the start.

Dabhol shut down a few years ago when its sole customer, the Maharashtra State Electricity Board, refused to buy its expensive power.

Dabhol has been taken over by a consortium of state-run Indian companies. (Enron's former chief Ken Lay, who was in the witness-box a few days ago, once wrote an article in the Financial Times threatening that aid to India would be stopped if it defaulted on the Dabhol project).

Dabhol was intended as the showpiece of the Government's ambitious plan to bring private sector players and foreign companies into the power sector, till then dominated by bankrupt public sector boards that had all run up colossal losses.

The dilemma was that these boards were the only buyers of power in India and it was pretty tough to wrest money from them. So, the central Government stepped in and offered sovereign guarantees to a few select players such as Dabhol - otherwise lenders were reluctant to put up money. But that policy lost its way in a maze of complex issues and foreign companies like Cogentrix gave up on India and the policy was dustbinned.

As the Millennium dawned there was new thinking on India's electricity shortages. The problem, said the electricity czars, was actually distribution. Indian power companies are unique because electricity theft and transmission losses are somewhere between 30 and 40 per cent. By comparison T&D losses, as they are called, are only about 10 per cent in China and much less in other industrialised countries.

So, the new wisdom involved separating the supply of power into three parts - generation, transmission and distribution. A new experiment took place in Delhi and two other states. Delhi's creaking Delhi Vidyut Board (electricity board) was split into three. Generation and transmission stayed with Government companies and distribution was handed over to two private firms, Reliance Energy and Tata Power.

The idea was that the two would upgrade equipment and plug electricity theft. Now almost four years later this experiment hasn't been as successful as hoped. In the two other states, Andhra Pradesh and Orissa, too, reforms are bogged down.

Stop for a second and compare India's electricity woes with China, the country it's always matched against. Soon after India got its independence both countries were roughly in the same league.

In 1950 China generated about 1850MW of power and India 1713MW. By 1995, China had begun its great economic leap forward and was turning out 215,000MW annually leaving India in the dust at 81,171MW. By 2005 the figures were an astonishing 508,000MW for China compared to India's 123,668MW.

From the figures it's evident that India hasn't been standing still. But power generation needs to be slightly ahead of economic growth and should be rising by a minimum of 10 per cent a year if the shortages are to be wiped out. That's not happening yet. India adds about 4000MW each year compared to China's 28,000.

But, there is light (pun intended) at the end of the tunnel - even if it's not very clear how long the tunnel is. The 2003 Electricity Act (if implemented fully) could change the industry. It allows power trading so that energy-surplus states - mostly in the east - could sell power to those in north and western India where shortages are endemic and growing. The act has tried to create competition by making way eventually for multiple power suppliers in every state, which the electricity boards are trying to stall.

Politics is still working against the sector. In the past farmers got electricity at subsidised rates. Now, many states such as Punjab have made vote-winning promises and are offering free power to the rural sector.

Anyone who grumbles about power shortages should consider the case of Calcutta. Back in the '70s the city had worse electricity blackouts than any other part of India. By the late '80s all that was in the past.

How did Calcutta solve its problems? Simple. During that era, scores of large corporations fled the city because of its labour troubles and no new industries opened up there. Demand stagnated and the city's blackouts became a thing of the past.

So, it's important to think positively and remember that the endless blackouts are a sign of economic progress.

And as for the hapless residents of Delhi, everyone who can afford to is trying to cope in different ways. One option is to buy an inverter, a contraption that uses a battery to store power for limited periods and comes on during power outages. The other is expensive, noisy, diesel-powered generators that spew pollution. And so the lights aren't all going off - even at the darkest moments.

* Paran Balakrishnan is an associate editor of the Telegraph, Kolkata.

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