NEW DELHI — The worst blackout in India’s history spread to more than half the country Tuesday, as an electrical grid collapse in 14 states deprived at least 600 million people of power, many for a second day.
The blackout, the largest in global history by the number of people affected, dramatically underlined the concerns industry leaders have raised for years – that the nation’s horribly inefficient power sector is dragging on the economy and could undermine its longer-term ambitions.
India's energy crisis cascaded over half the country Tuesday when three of its regional grids collapsed, leaving 620 million people without government-supplied electricity for several hours in, by far, the world's biggest blackout.
More generally, it renewed concerns about India’s failure to invest in the infrastructure needed to support its rapidly growing economy, in sharp contrast to neighboring China. It also destroyed one myth about the country – that its entrepreneurial spirit and vibrant private sector could somehow deliver a brighter future without a dramatic improvement in the way the country is governed.
“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 blackout, which hit the northern and eastern parts of the country, brought more than 500 trains screeching to a halt, left thousands of passengers stuck for nearly an hour inside the capital’s Metro line and more than 200 miners trapped underground in the east of the country.
There was gridlock on many streets of the capital as traffic lights stopped working. Bank ATMs also failed, but airports and major industries were unaffected, switching instantly to backup generators in a country used to power outages.
As well as a basic lack of investment in infrastructure, the crisis also has its roots in many of India’s familiar failings — the populist tone of much of its politics, rampant corruption and poor management within its government and public sector, weak law enforcement and a maze of government regulations that restrict many industries.
Officials said they remained mystified about what had caused the blackout on Tuesday, although a similar failure on Monday was blamed on individual states in India drawing too much power from the grid, in defiance of the regulations.
“It is open law-breaking that goes on all the time in India,” said a Power Ministry official who declined to give his name because of the sensitive nature of the subject. “This time it went beyond limits.”
The official said the national coalition government was unable to rein in powerful state chief ministers on whose support it often depends.
“We are powerless do enforce grid discipline like they do in developed countries of the world,” he said. “There are political constraints. We are even afraid the name the [offending] states. But what happened yesterday and today is a warning for all of us.”
‘Politically correct prices’
Most Indian consumers receive heavily subsidized electricity, while farmers get free power, supposedly to pump groundwater to irrigate their land. But officials say much of the free power is illegally diverted to supply factories. That has left the grid overburdened and electricity distribution 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.”
Sajjid Chinoy, India economist at JPMorgan in Mumbai, put it more simply: “When you don’t have economically viable pricing, you will not have economically viable power generation,” he said.
India suffers a power deficit in peak periods of 8 to 12 percent, and power cuts of eight hours a day are common in many parts of the country. And 300 million Indians, or a quarter of the population, have no access to electricity at all.
Even though India has the world’s fifth-largest reserves of coal, disputes over environmental and land permits have prevented many new mines opening, while a failure to invest in technology has also prevented output from growing to keep up with demand.
Existing mines have strict limits on how much coal they can extract, supposedly set to safeguard the environment but in practice simply arbitrary, said U. Kumar, an expert on coal, who advises some of India’s top industry leaders. A six-month-old Coal Ministry proposal to raise those limits by 20% as an emergency measure has “fallen on deaf ears,” he said.
As a result about 10 percent of power plants have no coal supply right now, Kumar said. “We are going to face a frightening scenario. It is going to very difficult to meet the demand of our people.”
To meet some of the shortfall, India has also been forced to import expensive coal from abroad, but it is politically unable to pass those higher costs on to consumers, bankrupting the sector still further.
Losses in electricity transmission and distribution are also among the world’s highest, 24-40%, because of inefficiencies and theft.
Constraint to growth
Indian economic growth has slowed to around six percent, while inflation is in double figures. That is a sign, said Chinoy, that investment by the public and private sectors had failed to keep up with the country’s consumption-led boom of recent years, inhibiting the economy’s ability sustain rapid growth without pushing up prices.
“The biggest constraint to India’s growth potential is lack of capacity,” he said, “and the biggest, single constraint to growth is the lack of available and adequate power supply.”
Earlier Tuesday, a senior power official in the northern state of Uttar Pradesh, Avinash Awasthi, was transferred for failing to prevent Monday’s blackout. But officials found no obvious scapegoat for the second day’s blackout.
“We are absolutely clueless why this has happened again today,” said Shakti Sinha, an official in the power department of the Delhi government. “Yesterday we knew it was overdrawing of power, today it looks like a technical fault. The system failed somewhere.”
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