Edunology - Saumya Aggarwal

Root cause of power failure in India

The power grid collapsed because some states apparently drew more power than they were authorised to do to meet the rising demand during the summer, said chairman of the state-run Uttar Pradesh state Power Corporation Avinash Awasthi. The power deficit was worsened by a weak monsoon that lowered hydroelectric generation and kept temperatures high, feeding the appetite for electricity.


Weak Monsoon: Farmers have now started using energy-intensive water pumps for irrigation to save their recently sown crops which pushed up demand. Also, hydro-power accounts for about 20 per cent of installed power capacity but reservoirs have only 24 per cent of the water they can hold -- just about half of what they carried at this time last year.

Politics: Many state governments give farmers free or near-free electricity, triggering a vicious cycle. The policy of selling electricity to consumers at politically correct prices is making the things worse.

Coal Supply: Coal shortage also chose the right time to trigger the crisis. The industry has advocated abolishing a 1973 Act that nationalised coal mining. Changes to the law are expected to allow professional miners to scout for and mine coal.

Distribution: 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. This opportunism is hurting the economy: the government estimates unaccounted for sale of power in India, at a third of the total, costs the country 1% of its gross domestic product.

The road ahead

Introduce competition in all three areas of the business - generation, transmission and distribution - to enhance productivity and contain leakages. Create an independent watchdog that can withstand the political pressures playing on different links of the nation's power supply chain.

Finally, free up pricing to make consumers more responsible for the electricity they use. This has been the broad course of electricity reforms the world over.