India's energy woes

India's Future in the Dark Following the Latest Blackouts

Electric power was restored across northern India on Wednesday after an electric grid failure on July 30 and 31 resulted in the world's largest blackout. More than 600 million people, or nearly one tenth of the global population, were affected

Oil Price,

5 August, 2012

As the country's economy and population continues to rapidly expand, the energy crisis has sharpened fears about India's ability to invest in the infrastructure needed to support it.

“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 incident trapped over 200 miners underground and brought more than 500 trains to a halt, leaving thousands of passengers stuck for nearly an hour inside the capital's Metro line. Major industries and airports were unaffected, relying on backup generators in a country prone to outages.

Although officials say they are unsure what caused the blackout, some blame individual states for drawing too much power from the grid, defying regulations.

“We are powerless to enforce grid discipline like they do in developed countries of the world,” said a Power Ministry official to the Washington Post. “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.”

Although Indian consumers receive heavily subsidized electricity and farmers get free power, officials claim that much of the free power is illegally diverted to factories, leaving the grid overburdened and electric 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.”

India has a power deficit of 8 to 12 percent, while a quarter of the population, 300 million people, have no access to power at all. Although the country has significant coal reserves, mines have been held back from opening due to disputes over environmental and land permits. A lack of investment in technology has prevented output from keeping up with demand, and the country now faces a frightening scenario.

Unable to keep up with the consumption-led boom in recent years, the failure to invest in India's infrastructure has slowed the country's economic growth to about 6 percent.

Power struggle in India as blackouts set to rise

Business Report,

6 August, 2012

Every evening before Indian executive Sushmita Rao leaves her Delhi office, she phones her maid to switch on the air conditioner so her apartment is refreshingly cool when she reaches home.

“I work in an air-conditioned office and I suffocate if my place isn’t cool,” said Rao, one of hundreds of millions of Indians who went without electricity last week in the world’s worst-ever blackout.

The monster grid failure was blamed on greedy states consuming more than their allotted power quotas as they sought to meet demand spikes.”

Part of the demand surge comes from Indians adopting electricity-guzzling lifestyles, which adds to the strain on the grid from industrial users and businesses.

“As India’s middle class broadens, there’s a heavier burden on energy demand as people buy appliances for a better quality of life,” said Will Pearson, a global energy analyst at Eurasia Group.

Experts warn that blackouts such as those that knocked out power for half of India’s 1.2 billion population this past Monday and Tuesday, could be the way of the future unless the government fixes the creaking electricity sector.

“We’re growing through a major societal transformation… we will need more and more power to fuel our industries, consumer goods, our malls, our offices,” said Arvind Singhal, the chairman of retail consultancy Technopak.

“Unless planners recognise this, we’re going to see many more failures.”

There are 470 million people in what consultancy PwC calls the “emerging middle class” – those sandwiched between the lowest income group and the middle class.

Though they earn modest sums, collectively they have large purchasing power, PwC says.

The middle class numbers 160 million according to India’s National Council for Applied Economic Research – bigger than the populations of Russia or Japan – and is seen rising to 267 million by 2016.

Air conditioners, microwaves, toasters and washing machines are possessions that distinguish India’s upwardly mobile and have become increasingly available and affordable since pro-market reforms of the 1990s.

Consumer attitudes in India to air conditioners have “witnessed a paradigm shift” in recent years from luxury product to domestic necessity, consultancy TechSci noted, forecasting the market will expand annually by 14 percent for the next five years.

Indian summers see the mercury rise above 50°C in many areas, and these are followed by the sticky, humid monsoon season.

Ad manager Rao is one of an increasing number of Indians who work in air-conditioned offices, shop in air-conditioned malls and dine in air-conditioned restaurants.

Rao, who lives alone, says she has a washing machine, two TVs, air conditioners in every room, an entertainment system, laptop, hairdryer and a host of other electronic devices. “I use a lot of electricity but it’s my lifestyle – I like to be comfortable,” she says.

Experts say last week’s blackouts served to focus minds on how India will meet the growing needs of its citizens, industry and businesses.

The power failure was “a wake-up call”, says Technopak’s Singhal. “This country already has 900 million mobile phones – it sounds like a small thing – but these all need to be charged every day.”

Power cuts are a daily occurrence in India which runs a peak-hour electricity shortfall of about 12 percent – despite the fact that about a third of Indians have no connection to the grid.

As of 2009, just 66.3 percent of Indians had access to electricity, compared with 98.3 percent for Brazil and 99.4 percent for China, according to the latest world development indicators.

“It is imperative our basic infrastructure requirements are in keeping with India’s aspirations,” said Chandrajit Banerjee, the director-general of the Confederation of Indian Industry