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Power crisis is UPA government's moment of truth

The SupportBiz Bureau - Inputs from Ashwin Mamidi, M Rochan, Faiz Askari
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Last week over 600 million people across northern and eastern parts of India were plunged into darkness as a result of a cascading power grid collapse. This so called 'greatest power blackout in the history of mankind' is only symptomatic of the country's fundamentally overburdened and monumentally inefficient power sector. It is no secret that the economy is suffering as a result of this. The government meanwhile needs a lesson in how not to do populist policies.

Even after 'complete' retoration of power after the massive blackouts, some 300 million people lack direct access to electricity. Where there is power, it is intermittent and marred by voltage fluctuations.

The UPA II government is potentially seeing the lights go out on its 'efforts' to put the economy back on track to stratospheric growth. Infrastructure is a major reason why India lags behind other developing countries in terms of attracting investment. The other being regulatory slipknots that manage to discourage any potential investment almost head-on.

State governments in India have the delinquent habit of promising subsidized power for the agricultural sector. This is a major drag on the already overstretched power sector. As a result of this state distribution companies (discoms) are racking up losses and have no capital to purchase power or initiate efficiency measures.

Government departments are notorious for non-payment of power bills. Everybody needs to pay, and everybody is accountable. In a country as large as India, even a small percentage of negligence translates to losses on a massive scale.

Add to this, the 900-pound gorilla of power theft, something that is nonchalantly condoned in states like Uttar Pradesh in the hope of securing votes. But what explains the blatant pilferage of power during festivities, elections and general public gatherings? What about the rampant powerjacking in rural areas, to which the governments consistently turn a blind eye? Power theft is as common a phenonmenon in rural India as it is in the country's bustling cities.

Of course, this is not sustainable.

It is estimated that around 30 percent of India's power is lost in distribution wastages - amounting to around INR70,000 crore. There is hope that smart transmission and distribution (T&D) technologies can help cut the losses to a great deal while also bringing in peak-hour efficiency. But, implementation has been slow and it requires capital which the state powercos are severely short on.

Need to act, fast. One way of probably going about this would be to do what the Andhra Pradesh government did to check power theft. It introduced fast track courts to deal with such cases. The state of Maharashtra followed suit. The writing is clearly on the wall for the government, either cut out distribution losses or sustain them with massive new capacity.

Production shortages due to fuel shortages

India's breathtaking growth over the past two decades has created an unquenchable thirst for power. Government policymaking has not kept pace with this massive demand. Power plants idle away across the country over issues regarding the environment or resources. 

Around 55 percent of India's power comes from mostly inefficient coal-fired thermal power plants, 10 percent from natural gas, 20 percent from hydel, with nuclear and renewable accounting for the rest.Thermal plants are facing major coal shortages, given difficulties in sourcing coal. India has one of the largest coal reserves in the world, but cannot produce enough to keep the plants all fired up.
Coal production in India is dominated by the monopoly Coal India, which is nothing less than a dinosaur. It has failed to provide a consistent supply of coal to the power plants, with reserves running dangerously low. Age old mining techniques, graft, pilferage, creaky road transport infrastructure, land acquisition - all remain major roadblocks to ensuring the coal rakes are loaded. As of now the solution is import of coal.
Natural gas has been hailed as a major game changer, thanks to the massive KG Basin finds. But, this field has delivered less than what was anticipated. So, natural gas has to be imported. Hydropower holds great promise but faces major litigation pertaining to ecological and displacement issues.
Nuclear power, which was expected to be a game changer after the Indo-US agreement, has suddenly become a radioactive issue post-Fukushima disaster. Local politics is throwing a spanner in the works. 
If power generation capacities have to be fully realized, then the government has to ensure that fuel supply does not remain an issue. State discoms need to be thrown a lifeline in terms of cash injections and a higher price regime along with increased capital expenditure on new efficiency technologies to strengthen T&D.
Chandrajit Banerjee, Director General of the CII, said: "The power grid failure in North India was extremely unfortunate and it has impacted not just businesses but also essential services across North India. While investigations are on to find the root cause for this incident, the grid code notified by CERC should be strictly implemented and violators penalized. The increasing gap between the demand and supply of electricity has been a matter for concern. CII has consistently been highlighting that urgent steps need to be taken for addressing key issues ailing the power sector, such as improving the supply of coal for thermal power plants and reforming the state distribution utilities. Today’s outage is an urgent reminder for addressing these issues on priority."
L Krishnan, Vice President of the Indian Machine Tools Manufacturers’ Association (IMTMA), said: "There is no short term solution. The country has not invested in adequate capacity creation, in generation, in distribution. The power sector is plagued by subsidies today. The demand-supply gap extends from around 12 percent in some states to large double digit figures in other states and when a state draws more than it usually does from the grid, the entire region has to suffer. The government needs to look at reforms in the power sector. If not, we will just end up tackling situations till we tide over it."
A Vijayendranath, President of the Karnataka Small Scale Industries Association (KASSIA), said: "Problems arise when some states draw excess power from the grid. The question here is why can’t we prevent this from happening, either manually or by way of an automated process? Smaller industrial units are the backbone of our country and are as important as the agriculture sector but the latter is given free/subsidised power. We industrialists are not against this. But when power utilities fail to meter every connection i.e. every pump set, agriculture consumption figures can never be accurate. Governments at the state level should look into this because accurate metering helps check power theft and helps bring down losses suffered by utilities."