Saturday, Oct 25, 2014

Blackouts cast shadow over PM Narendra Modi’s economic recovery

Financial metropolis Mumbai was plunged into darkness for most of Tuesday, amid a row between private generators and regional distributors. (Reuters) Financial metropolis Mumbai was plunged into darkness for most of Tuesday, amid a row between private generators and regional distributors. (Reuters)
Reuters | New Delhi | Posted: September 5, 2014 1:29 pm

Narendra Modi took decisive action as chief minister of Gujarat state to secure round-the-clock supplies of electricity. Now, as prime minister of India, he is under attack for failing to avert a national power crisis.

More than half of India’s thermal power stations have less than a week’s supply of fuel – the lowest levels since mid-2012 when hundreds of millions of people were cut off in one of the world’s worst blackouts.

Coal stocks at thermal stations have hit critical levels as payment disputes escalate, unleashing power cuts that could choke off an economic recovery before it takes hold and hurt Modi’s prospects at forthcoming state elections.

Financial metropolis Mumbai was plunged into darkness for most of Tuesday, amid a row between private generators and regional distributors that is symptomatic of an industry mired in debt and arrears of at least $100 billion.

It’s a headache for Modi that experts say will only get worse. His government is resisting political pressure for a bailout, just two years after a rescue by the last government that it denounces as a “farce”.

“The moment I start with financial assistance for one state, all the states will be asking me,” Power and Coal Minister Piyush Goyal told reporters on Wednesday as he marked a rocky first 100 days in the job.

“States have to improve their own systems. I can’t fund their coal purchases,” said Goyal, who is mediating in payment disputes in an attempt to mitigate the power crisis.

Prithviraj Chavan, chief minister of Maharashtra, has from state capital Mumbai pointed the finger of blame at Modi, who won election by a landslide in May with promises of economic reforms, new jobs and dynamic growth.

“The centre is responsible,” said Chavan, a leader of the opposition Congress party. He added that he urged Modi two weeks ago to call crisis talks on the power industry, but says New Delhi “has not taken serious note”.

Maharashtra is one of several states that are at odds with New Delhi on power and coal supplies, and will soon hold elections. Modi’s nationalist party hopes to boost its strength in the upper house of parliament, where it lacks a majority.

ACHILLES’ HEEL

Since Modi took power, coal stocks at thermal power stations that generate three-fifths of India’s power have nearly halved to just six days’ cover. Of 100 plants, 56 are now ‘critical’ with less than a week’s supply.

The shortages have arisen not because India lacks coal – it has reserves of 61 billion tonnes. Nor does India consume much power: per capita use is one-seventeenth of the U.S. level, and 400 million Indians have no electricity at all.

What India does have is a mismatch between the regulated price at which power is sold continued…

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