India's blackout carries heavy economic and political costs

For the 40 percent of poorer Indians with no electricity access, this week's blackout was nothing new. Economists say power cuts are a reminder of India's need to manage economic growth.

For Rahul Bose, who lives in Khonjonpur, an Indian village of 20 homes set in rice paddy fields, the world’s biggest power failure had little impact. 

That’s because Mr. Bose and his wife, who run a nonprofit literacy project called Suchana, stopped relying on a steady supply of electricity years ago.

In Khonjonpur, 15-hour power cuts are frequent. So, like millions of Indians, Bose relies on expensive, diesel-powered generators when the lights go out. Once the generator’s four-hour backup is exhausted, he’s learned to live without.

“The worst was a 10-day power cut,” he said by telephone. “Our local government secondary school, which has 800 students, only got an electricity connection for the first time in May of this year.” 

So it was with some interest that Bose watched as two days of power cuts plunged fully half of India – 600 million people, or twice the population of the United States – into chaos. Suddenly, India’s urban elite were experiencing the blackouts that are a way of life for millions of rural Indians. And Bose knows he is fortunate. Up to 40 percent of India’s 1.2 billion people are not hooked up to the national grid at all. 

So far, the exact cause of the simultaneous collapse of three major Indian power grids is unknown. India’s outgoing power minister, Sushil Kumar Shinde, blamed it on excessive demand. Whatever the cause, the two-day blackout has once again put the spotlight on India’s unreliable infrastructure and the country’s inability to keep pace with economic growth. Apart from giving India’s image a black eye, the debacle has increased pressure on Prime Minister Manmohan Singh's government – criticized for stalled economic reforms and sluggish growth – to tackle infrastructure problems.

“If India is to grow at 8 percent, then its energy production has to keep pace,” according to Vivek Pandit, director and head of energy policy at the Federation of Indian Chambers of Commerce and Industry (FICCI). “Right now there is a double whammy. Indian coal production hasn’t increased significantly in the past three years and international coal prices have shot up. This blackout was just a preview. Until we reform the coal sector, this situation will be repeated.”

Financial losses

And the economic cost is considerable.

There are no exact figures on the financial losses, but it’s clear that frequent power cuts affect India’s bottom line. 

Vikram Kadian runs TravelQShop, a luxury travel agency in Gurgaon, the capital city’s office park area. Half his employees couldn’t make it into work on Tuesday and those who did struggled to answer queries as the Internet shut down. 

“It certainly has an impact on our image and on our customers’ satisfaction,” Mr. Kadian said.

And every blackout – even the myriad ones that don’t make the headlines – raise capital costs. Kadian’s office fuel bill nearly doubles to $100 per month when power cuts are rife.   

“I traveled the world for several years; and when I started this business last year, everyone was going gaga over India,” he said. “Now I’m sitting here in Gurgaon where half the time there’s no power and even the roads have not been planned. I think I’d be better off in Canada. Here I pay 30 percent in tax, but what do I get in return?” 

Power minister promoted

Even as millions of commuters found themselves stranded on trains and doctors struggled to care for patients without essential equipment, Mr. Singh went ahead with a planned cabinet reshuffle that effectively promoted the man under whose watch India hit international headlines for all the wrong reasons. 

Power Minister Sushil Kumar Shinde moved to the Home Ministry, a much more prominent post, while his old portfolio will now be handled part-time by Moodbidri Veerappa Moily, the current corporate affairs minister. 

Much needed rain and cooler temperatures may have taken the edge off public anger for now. But fundamental questions remain not just about India’s infrastructure but the political accountability it needs to manage in a time of rapid growth. 

But according to Prabir Purkayastha, a New Delhi-based consultant on power issues and an engineer himself, the government has not adequately explained what happened.  

“The whole northern grid failing twice is an unusual occurrence even for India,” says Mr. Purkayastha. “Lower temperatures and rain had actually lowered demand for electricity when the grids failed, so it’s really not clear why this happened. ” 

For Bose, the educator, lack of electricity hinders his efforts to boost the education prospects of some of India’s poorest, most deprived students. India's ability to raise the standard of living and job prospects of many of its poorer citizens are key factors in determining whether the country finally emerges as a global economic power or remains desperately poor.

“We help local kids with literacy and numeracy, and we have probably the only computer in the district,” he said.  

“But without regular power, kids can’t study in the evenings. There are no schools to teach science, no labs. You can’t study engineering or medicine. It’s like India’s villages don’t exist on a map. It’s very frustrating.”