India Shining? An Inevitable Power Outage

by Kartik Misra

Did you hear about the time when 600 million people had no electricity for two days? No? Well neither did they. While the largest blackout in history has certainly upended the narrative of a rising India that is proliferating in the West, Indians took the outage in stride as one of many that have occurred before this one and are likely to continue in the future. In the end, the massive outage was not a surprise–just another result of the policy stagnancy that has upended the country’s economic miracle in the last couple of years.

The Indian electric infrastructure and the agencies running it form a smorgasbord too intricate to discuss in great detail here. Needless to say, the aims of various bodies overseeing the system are not always aligned. Add to this an infrastructure of ancient vintage and you can start to understand why the electricity outage was not a surprise for anyone in India and thus elicited only token outrage from the affected Indian public till someone pointed out the international uproar; at which point, the necessary embarrassment was expressed.

The most important thing to understand about the Indian electricity system is that it is mismanaged from both a policy and physical infrastructure perspective. The state and central governments have parallel structures of construction and regulation of the power infrastructure. Historically the states have retained control of their power infrastructure. This is because free/subsidized electricity, especially for farmers, is a big vote generator for state politicians. This has led to a vicious cycle of under-collection and grave revenue losses at the state level, thus starving investment to upgrade or build new electricity infrastructure. In parallel, India’s central government has built up national power companies like the National Thermal Power Corporation (NTPC) and Power Grid Corporation of India (PGCI) among others to build its own power plants and transmission networks. These companies have achieved relative success in establishing a national grid (The southern states still have their own regional power grid that has not been fully integrated into the national grid). But even after these infrastructure upgrades the actual power supply has not kept up with demand owing to the shortage of fuels like natural gas and coal needed to run power plants, mainly due to established subsidy structures.

This brings us to the”world’s largest” power outage of July 31 to August 1, 2012. This year, India has endured higher than average temperatures in the summer as well as a significantly weak monsoon, leading to a drought in many northern agricultural states. A surge in power demand due to increasing water pump usage (to access the underground water table because of the dearth of rain) and general increase in consumer demand as a result of the heat have led to a situation of high load and low supply. Since this is a regular occurrence in India, there is a built-in policy mechanism that establishes each state’s quota when there is a supply-load mismatch. Unfortunately there is no overriding automatic mechanism that achieves this quota and given low rainfall it was politically difficult to ask farmers to stop using water pumps; therefore, multiple states violated the quotas that they were assigned, leading to a massive blowout of the national grid system. Government policy was not, however, the only reason for this failure. It turns out that for a national grid like India’s to operate in conditions of chronic shortage it is also important to have backup power. Because of aforementioned fuel shortages this is often left to hydropower, which was not available in this instance due to lower river flows, another result of scant monsoon rains.

These problems do not mean that the electricity grid is not changing. Most manufacturers that have set up shop in India have their own dedicated power. Others only set up in states that can provide them with uninterrupted power. The state of Gujarat, which has been at the forefront of attracting investment, has completely revamped its electricity board and instituted market based tariffs for most of the electricity customers. Due to industry reforms, the state has excess power that it supplied to other regions during the time of the crisis. Other states are studying the successful policies that have been enacted in Gujarat and have led to almost a decade of uninterrupted power. The most encouraging developments in Gujarat have been that rural populations are slowly beginning to ask for a reliable power supply, not just free power. Such a change in attitude nationwide would be instrumental in reforming electricity pricing policy; much more so than a two day power cut that was felt everywhere but at home.

About the Author

Kartik Misra is a recent graduate of the MALD program at the Fletcher School of Law and Diplomacy. As a senior analyst at the advisory group at Energy Intelligence he consults on issues involving energy and political risk globally.

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