Lights out

Had it occurred just the day before, even the wildest optimist amongst us would have agreed it was an ominous sign of what the year had in...

Had it occurred just the day before, even the wildest optimist amongst us would have agreed it was an ominous sign of what the year had in store. That the massive power blackout all over north India foretold a year of power shortages and, possibly, even power riots. Well, the strange quirk of the calendar apart the entire northern grid collapsed on January 2 instead of January 1, the signs are as clear as they are dark 8212; India is in the mids and not just heading towards, a major power crisis. And while political leaders tried to blame each other for the crisis 8212; Punjab8217;s rampantover-drawing of power from the northern grid caused the collapse, said one cabinet minister, while others rightly pointed out it wasn8217;t the only one 8212; the roots lie in the completely distorted policy of subsidies of the last 50 years.

While this is clearly not the place to go into a lengthy dissection of the travails of the power sector, an indicator of how serious the problem is the fact that state electricity boards are likely to end the year with combined losses of a whopping Rs 22,350 crore, up more than five times from the last decade. And returns on capital invested will be a negative 31 per cent this year. So, the next time you hear that the power sector suffers from a lack of investment 8212; during peak demand hours, India suffers a shortage that equals around a fifth of supply 8212; just laugh. For this year8217;s losses alone are enough to fund the setting up of around 7,000 MW of spanking new capacity, or around a twelfth of existing capacity 8212; add to this, the amount that could have been funded from the losses of each of the previous years, and you8217;re talking of enough new capacity to meet the needs, not just of India, but perhaps even Pakistan, Nepal, Bangladesh and Sri Lanka, with a bit to spare for China. As a result of thesehuge losses, the state electricity boards SEBs are not able to pay for the power they buy. Which is why, even if a new power plant was set up such as Enron8217;s Dabhol, the Maharashtra State Electricity Board doesn8217;t buy the power even while the state has huge power shortages! The cycle doesn8217;t stop here, it gets more vicious. Since the SEBs are bankrupt and cannot possibly pay generators, the central government has to give some kind of guarantees and counter-guarantees like they did to Enron if private power producers are to come up. Ironically, though, even when they do, the SEBs can8217;t afford the power anyway.

So what8217;s the solution? Clearly, we have to move towards cost-based tariffs but, contrary to what the SEB staffers tell you, this is not the main issue. Today, at least a third of all power produced gets stolen with the connivance of SEB staff, bureaucrats and politicians. Naturally, that8217;s a massive vested interest against power sector reforms. That8217;s why, for instance, even after Haryana signed a loans-for-reforms programme with the World Bank a few years ago, it continues to go slow on it. Under the circumstances, the next blackout is probably around the corner and it8217;s likely to last a lot longer than this one did.