Blackout nation

Power cuts in India show that a lack of reform is beginning to hurt ordinary people

Aug 4th 2012 | 

FOR an aspiring economic superpower, there can be few more chastening events than electricity cuts as massive as those that struck northern and eastern India this week. An area (including the capital, Delhi) in which more than 600m people live faced blackouts over two days. Infrastructure, from traffic lights to trains, stopped working. Hospitals, sanitation plants and offices ground to a halt. Airports and factories had to rely on backup generators, often fuelled by truckloads of diesel.

The impact on India’s economy goes far beyond lost output. The blackout will badly damage the country’s reputation, and highlights the rotten infrastructure that is hobbling its efforts to catch up with China.

The cause of the blackouts is murky—an overloading of the national network that links together regional grids is the most likely explanation (see article). By most accounts engineers did a heroic job of patching things up. But the power industry, which must double its output roughly every decade if India is to grow fast, has long been a disaster waiting to happen. A pile of private capital has been attracted to build new power stations. But the rest of the supply chain is a mess.Does anyone have a spare battery?

At one end, not enough cheap coal is being dug up and gasfields are sputtering. At the other, the national transmission grid needs investment. Meanwhile the “last mile” distribution companies, largely state-owned, that buy power and deliver it to homes and firms, are financial zombies. Much of their power is pinched or given away free. Local politicians put pressure on them to keep tariffs low, which leads to huge losses. Squeezed between a shortage of fuel and end-customers who are nearly bust, those private generating firms are now cutting back on vital long-term investment in new plants.