The two catastrophic power outages in India within 24 hours encapsulate better than anything the challenges the Indians face if they are to fulfill their potential to become a leading world economy.
Major power blackouts are not unknown in the developed world. The 2003 power failure that blacked out 55 million people on the eastern seaboard of North America is popularly blamed on the failure of a 20 cent transistor. However, power cuts of one sort or another are the norm in both India and Pakistan. The only factor that makes the latest two failures stand out is that it is estimated that more than 600 million Indians were affected, fully half of the country’s population.
When outages of this size occur, it is clear that the authorities are faced with a scandal of unacceptable magnitude. An initial investigation suggests that three separate failures within India’s decrepit power distribution caused the system to collapse. The first outage overnight on Monday was only overcome, thanks to emergency supplies from India’s tiny Himalayan neighbor, Bhutan.
The problems in India’s power sector run deep. After years of underinvestment, governments, including that of premier Manmohan Singh, have been making Herculean efforts to catch up. The difficulty is that even as India has added more generating capacity, the demand for power has romped away from what is available. The challenge facing power generators is the greater because, with state-imposed pricing, they are not able to earn sufficient profits to invest in new infrastructure.
Singh has been trying to bring investments totaling $400 billion into the power-generating sector, to see if capacity can for once get ahead of demand. Wealthy Indian companies are not about to commit that sort of money to their homeland. They are too busy investing profitably overseas where regulations are clear and arbitrary and corrupt official decisions generally rare. Nor are foreign investors likely to step up to the plate, since large international companies have been hit with massive retrospective tax bills or have had their contracts declared null and void by the government. Multi-billion dollar investments are highly unlikely to be directed into the toxic regulatory fog through which foreign, and indeed many domestic businesses, are forced to find their way.
Corruption and gross incompetence throughout some of the highest levels of federal and state politics and their attendant bureaucracies have meant that the earnest efforts of reformers have made little headway.
Perhaps the humiliating power failures of Monday and Tuesday and the strong likelihood of more such massive disruption to come will act as an effective wake-up call for India’s complacent and bumbling power sector leadership. The country has to sort out its power generation mess, and sort it out quickly. New Delhi will earn international admiration if it acts speedily and decisively. If, however, it continues to flounder in the face of a substantial but nevertheless achievable challenge, it will harm its reputation and its likely emergence as one of the world’s newly dominant economic superpowers.