Sweltering India runs out of energy
Source: Hueiyen News Service / Siddharth Srivastava

Imphal, June 28 2012: Power outages in India, now enduring the peak demand of hot summer months, are running to as long as eight to 10 hours in northern cities, including the capital, and while large parts of the country continue to be off grid rural areas with access to electricity can be without power for over 20 hours at a stretch.

The Uttar Pradesh government this week ordered that electricity be cut off at malls and shopping centers in the evenings, before apparently backtracking in the face of angry traders who put up defiant protests, clashing with police.

Billions of dollars have been invested by power producers to create new capacity over the past few years, but numerous factors linked to populist politics, over-zealous implementation of environment norms, transmission losses, pilferage, free power to agriculture and bureaucratic tardiness have resulted in under utilization of existing capacity.

In short, India can produce more power if it wants to, but is unable to.

One bottleneck is coal, the majority of which is mined by state-owned Coal India Ltd (CIL).

The bulk of Indian power is produced at coal-fired thermal plants, but CIL has not been able to increase output to meet the country's needs.

The environment ministry has declared many of the company's mines to be in "no go" zones, while the bulk of CIL's coal supply comes from areas in eastern India where Maoist rebels are active.

It also has to rely on another government institution, the slip-shod Indian Railways, to move the coal.

Coupled with in-built delays and indecision within the government, CIL's output growth has been near stagnant over the past three years, with the result that more than one-third of India's coal-based thermal power plants are running on critically low levels of fuel stocks this season.

Estimates suggest that if CIL continues to falter in supplying coal, India's target for adding new power capacity for the 2012-17 period will need to be slashed to 45,000 megawatts from the proposed 76,000 MW.

New Delhi has already scaled down its capacity addition target for the next five years by 25,000 MW to 75,000MW from conventional sources.

The coal ministry, meanwhile, has projected that India's annual coal demand could rise over 40% by March 2017 to nearly 1 billion tonnes while domestic coal output may increase by less than 30%, leaving a gap of around 300 million tonnes that will have to be met by imports.

India's power woes do not stop there.

Electricity generators such as NTPC, Tata Power and Adani have the option of buying coal from the likes of Indonesia, Africa and Australia, but overseas prices are too steep compared with the artificially depressed domestic prices set by the government.

Simple economics would dictate that higher cost linked to importing coal cost would be reflected in consumers's electricity bills - but that is not possible as the power rates are again kept low by the government which fears a political and public backlash if it lifts tariffs.

So power producers are not able to generate power - and even if they could already heavily debt-burdened distribution companies can no longer buy dear and sell cheap.

In consequence, companies and individuals who can afford to rely on diesel for electricity.

Millions of liters of diesel are guzzled in the summer months to keep the shopping malls, high-rise condominiums, offices and commercial establishments running.

As India does not produce enough of its own oil, the bulk of the diesel is imported, draining foreign exchange, creating balance of payments problems and weakening the rupee - which drives up the cost of imported products such as oil and coal.

The government continues to subsidize diesel to protect among others the transport sector - which adds to the ever-rising fiscal deficit, which again helps to fuel inflation.

It is no surprise that rating companies such as Standard & Poor's have cautioned that India's investment climate could be pegged at "junk'' levels.

Meanwhile, in the sweltering streets and fields of India, the poor die of heatstroke, a savage reminder that the structural infirmities built into power generation ostensibly to protect the poor are actually harming the impoverished the most.

While India pushes to increase its use of renewable and nuclear power, it is the thermal power energy chain that needs some serious attention and reform. (Siddharth Srivastava is a New Delhi-based journalist) .

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